Kuwait: Infrastructure expansion

The construction industry in Kuwait is poised for significant growth on the back of major government investment in infrastructure projects and social facilities, according to data published in August. However, the continuing lack of an approved 2012 budget has effectively meant that the government cannot sign off on any new projects.

Research compiled by Ireland-based Research and Markets expects the construction sector to expand at a compound annual growth rate (CAGR) of 7.45% between 2012 and 2016, signalling that the industry has shaken off the worst effects of the global economic crisis. Growth will be partly driven by new transport infrastructure, including airport expansion and road projects, together with institutional construction such as hospitals and health care developments.

The construction sector bore the brunt of the global economic crisis in 2009, registering a 9.8% drop in activity, which reduced the CAGR for the 2007-11 period to 1%. The contraction was partially offset by a robust performance in previous years, particularly 2007, when construction expanded by 17.6%. However, infrastructure development was hit especially hard during the five-year period to end-2011, shrinking at a CAGR of about 1.3%.

The new wave of projects is expected to put infrastructure, which accounted for approximately 48.1% of the construction sector’s value in 2011, back on track, with forecasts predicting average annual growth of 8.85% over the next four years.

A number of the country’s major projects, including the expansion earmarked for Kuwait International Airport, are set to be put out to tender, while the process is already up and running for other key developments.

The state news agency KUNA reported in March that 16 international companies had expressed an interest in bidding for the airport expansion contract, estimated to be worth around KD700m-800m ($2.49bn-$2.85bn), which will include the construction of a second passenger terminal. In early August, Abdulaziz Al Kulaib, undersecretary at the Ministry of Public Works (MoPW), told KUNA that the ministry was awaiting approval from the Municipal Council before putting the project out to tender.

Government planners have also given the development of Kuwait’s roads a priority, with several major tenders awarded in recent years for new bridges and motorways. In February 2011 South Korea’s Hyundai Engineering and Construction won a KD738.7m ($2.63bn) tender from the CTC for the first phase of the Jaber Bridge project.

The government announced in July 2012 that it was opening a tender for the second phase of the bridge project, with contractors required to submit their bids by November 2012. The successful bidder is expected to be announced in December, and construction is due to be completed by 2016. Other major road projects tendered in recent years include the KD264.7m ($954.24m) Jahra Road project, which is being overseen by primary contractor Egypt-based Arab Contractors Company.

Alongside infrastructure, the recent Research and Markets report highlighted the growth potential that it saw in institutional construction, particularly health care facilities. Ongoing projects in this segment include the KD304m ($1.1bn) Jaber Al Ahmed Hospital, which, when finished, will be the largest facility of its kind in the country. Scheduled for completion in early 2013, the hospital is being built by Arab Contractors.

Meanwhile, the government has plans to build nine new hospitals to meet a rapidly growing demand for health care services as the country’s population increases. The MoPW invited bids for four of these projects, including the construction of a new 600-bed maternity hospital in the Al Sabah district that will cost an estimated $500m. The tender for this project closed on September 16, and the ministry will accept bids on the Ibn Sina, Children’s and Al Razi Hospitals until September 23. The four health care facilities are expected to cost around $2bn in total to construct, according to a report by MEED.

Other major projects include the construction of the $617.5m Kuwait Cancer Centre, which is being built by Kuwait-based Alghanim International General Trading and Contracting, and the $347m expansion of Al Amiri hospital, which is in the hands of local firm Associated Construction Company.

But although Kuwait remains the third-largest construction market in the Gulf – behind the UAE and Saudi Arabia, according to Gulf News – about $61.47bn worth of projects, out of an estimated total value of $195.99bn in projects, are currently on hold or cancelled. Political infighting and stagnation in the parliamentary process have halted progress on many infrastructure developments as currently the government cannot sign deals for any projects that require spending that was not included in last year’s state budget. Some schemes are already beginning to fall behind schedule, including two projects central to the Kuwait National Petroleum Company’s plan to overhaul its downstream sector.

Read Next:

In Kuwait

Kuwait takes steps to encourage industrial growth and export...

A new GCC accreditation for Kuwait’s laboratories, coupled with the release of more than 1000 parcels of industrial land, should boost government plans to increase industrial output by 25% in the...

In Construction

Dubai’s robust project pipeline boosts construction sector prospects

Construction demand in Dubai continues to be strong in the run-up to Expo 2020, supported by new tourism and hospitality projects, and public spending on infrastructure, although rising materials...

Latest

Beligh Ben Soltane, Chairman, Tunisian Investment Authority (TIA)

What are the expected implications of Law No. 47 of 2019, which was adopted in April 2019 to improve the business and investment climate?