New gateways: Developments promise to improve transport by land, sea and air

With major new development projects under way across all transport sectors, Kuwait is pouring billions of dinars into transforming its roads, ports and airports. The country’s medium-term objective is to capitalise on its strategic location in order to become the northern nexus of the Gulf, facilitating and profiting from flows of international trade across the region for decades to come. In the shorter term, Kuwait faces challenges in tackling delays and congestion that slow the flow of goods and people around the country and across its borders.

SECTOR SIGNIFICANCE: Activity in the transport sector made a significant and growing contribution to Kuwait’s economy in 2017. According to data from the Central Statistical Bureau (CSB), sector GDP rose by 11% at current prices to KD1.3bn ($4.3bn) and by 6% at constant prices to KD1.2bn ($4bn). That year the industry contributed 6.6% of non-oil and 3.6% of total nominal GDP, and 7% of non-oil and 3.7% of total real GDP. The Public Authority for Civil Aviation revealed in June 2018 that the transport, storage and communications sectors employed 69,421 private sector workers and 102 government staff at that time.

GOVERNMENT SUPERVISION: A number of different government bodies have responsibilities pertaining to transport. The portfolio of the Ministry of Communication includes transport, postal services and telecommunications, and the ministry originally held responsibility for road and maritime transport issues. Amiri Decree 115 of 2014 established the Public Authority for Roads and Transportation (PART), giving it responsibility for delivering an integrated and sustainable land transportation system for Kuwait. Its board of directors includes representatives from 11 government ministries and departments. PART was tasked with planning the introduction of light rapid transit and rail solutions. The Ministry of Public Works (MoPW) also plays a key role in commissioning, tendering and overseeing infrastructure projects. In May 2018 a review of major projects by the National Bank of Kuwait’s (NBK) economic research department reported that the MoPW was reviewing PART’s mandate for overseeing transport schemes following parliamentary questions about its role and interactions with other government agencies. The Directorate General of Civil Aviation (DGCA) was formed in 1975 when the government’s Civil Aviation Department was renamed. Its duties include air safety and the development of the aviation sector, while the Kuwait Ports Authority’s jurisdiction includes maritime traffic and control of the country’s seaports and terminals. The Ministry of Interior oversees visas, immigration and the monitoring of traveller numbers.

TRAFFIC INDICATORS: Data collated by the CSB for 2016 shows that traffic on Kuwait’s roads, and through its ports and airports increased significantly between 2007 and 2016. In that 10 years the numbers of vehicles on the roads grew by 55%, from 1.29m to 2m. Furthermore, private car numbers increased at the same rate, from 1.03m to 1.6m, and private trucks increased by 56%, from 165,252 to 258,394. The number of construction vehicles rose by 78%, from 12,594 to 22,441.

Over the same ten-year period, Kuwait’s ports saw tonnage handled increase by 51%. From 2012 to 2016 the volume of sea cargo loaded and unloaded increased by 20%, from 39.9m to 42.3m tonnes, while the throughput of twenty-foot equivalent units (TEUs) or containers, including imports and exports, grew by 21.5%, from 824,196 to over 1m TEUs per annum. The most significant increases in traffic in the ten years from 2007 to 2016 were seen at Kuwait International Airport, which has a maximum capacity of 7m passengers. The number of flights grew by 77%, from 54,773 to 96,990, while passenger numbers grew by 70%, from 6.9m to 11.76m. The DGCA revealed in early 2018 that annual passenger numbers had grown 17% since 2016, reaching 13.7m – almost double the intended maximum capacity of the facility.

INTERNATIONAL INDICES: The congestion experienced by travellers and shipping companies is reflected in Kuwait’s ranking and performance in a number of key international indices. In the World Economic Forum’s 2017 Global Competitiveness Index of 137 countries, Kuwait’s rank fell from 38th to 52nd. The index compares 12 pillars of each economy, with infrastructure and goods market efficiency being particularly relevant to assessments of its transport sector. Kuwait’s infrastructure as a whole ranked 64th, and in the sub-categories for roads, ports and airports it placed 63rd, 78th and 117th, respectively. While these aspects of the study are indicative of the physical state of the country’s road, maritime and aviation infrastructure, Kuwait’s goods market efficiency rank of 89th is more a reflection of the performance of its systems and processes. The report ranked Kuwait 103rd under the heading “burden of customs procedures”, while a survey of Kuwaiti business leaders revealed that the most common complaint, registered by 21.7% of respondents, was the ongoing presence of inefficient bureaucratic procedures.

The World Bank publishes two separate reports that give indicators on transport and logistics. “Doing Business 2018” ranked Kuwait 96th out of 190 countries, and calculated that the country’s distance to the frontier was 61.23, where the optimum score is 100. Across the 10 categories, Kuwait’s lowest score was in an area of the economy with great pertinence to transport and logistics: trading across borders. By this measure Kuwait ranked 154th out of 190, and had a distance to frontier score of 54.24. The report noted that border compliance for exports took 96 hours to receive, and it took the same length of time to obtain documentary compliance for imports. Import border compliance took 89 hours, with businesses waiting up to 72 hours for export document clearance. It was also costly, with exporters paying $602 plus $191 for border and export compliance, and importers charged $491 for border compliance and $332 for import documents.

The World Bank’s Logistics Performance Index, published in 2016, ranked 159 countries. Kuwait came 53rd overall, with the following sub-category ranks: Customs (56th); infrastructure (56th); international shipments (24th); logistics quality (70th); tracking and tracing (53rd); and timeliness (55th).

CUTTING RED TAPE: In June 2017 the World Bank surveyed all countries in the Doing Business report in order to establish whether or not port authorities and Customs officials were using two specific digital methods to encourage speedy and effective clearance: a Customs Electronic Digital Interchange (EDI) system and an Electronic Single Window (SW). Kuwait was using the Global Link EDI system for all imports and exports, but it did not have an SW system installed. The World Bank observed in 2017 that using a single electronic gateway to submit online documents to every relevant government agency at once has enabled many trading nations to become more efficient and competitive. However, it noted that is not possible to install a one-off “plug and play” system that is used elsewhere in each country, and many economies are held back by lack of coordination and digital awareness among their disparate government agencies.

ROAD WORKS: As it strives to ease traffic congestion on highways, Kuwait is investing billions of dinars in road building. At the end of 2016 the country had 7620 km of paved roads, representing a 25% increase in its street network since 2007. 102 km of new roads were laid in 2016, which matched the progress made in 2015. Although there were some delays in new project awards in the second half of 2017, work continued on major infrastructure schemes, as well as on new suburban streets.

The most high profile highway scheme that is under way in in the country is the construction of two bridges that will connect Shuwaikh Port with the western tip and northern shores of Kuwait Bay. The 12.4-km Doha link will carry three lanes of traffic in each direction and create major new intersections that are expected to serve Kuwait for the next 30 years. At the eastern extreme, the Shuwaikh interchange will serve as the starting point for both new bridges. Traffic heading west will come to the Doha interchange and can then turn south on the Doha Peninsular Road to the new Entertainment City interchange. Traffic heading north from Shuwaikh will take the Sheikh Jaber Causeway to the Subiyah district, a journey that will reduce the driving distance from 104 km to 36 km. It will form a strategic highway carrying traffic from Kuwait to the site of the planned Silk City development and beyond to Boubiyan Island, drawing together the northern and southern parts of the country. Work commenced on the KD738m ($2.5bn) causeway project in November 2013 and is due to be completed by November 2018.

ROAD TENDERS: A number of the key road building projects awarded to construction companies in 2017 and 2018 were related to the development of Subiyah and the surrounding area. These include a KD212m ($703m) project for infrastructure, consisting of roads in South Al Mutlaa, and additional works tendered by the Public Authority For Housing Welfare in the first few months of 2018.

It was anticipated that an additional crossroads construction project for South Al Mutlaa would be awarded in 2018, after a KD85m ($282m) bid encountered problems obtaining credit for the scheme. Furthermore, the existing road network is being enhanced with a new KD26m ($86m) intersection at Fifth Ring Road and King Abdul Aziz Road. In the first three months of 2018, projects with a combined value of KD139m ($461m) were awarded to improve Kuwait’s Regional Road South and to complete works on the Northern Regional Road from Abdaly Expressway to Future Crossroads.

SEAPORTS: Kuwait is served by three seaports. Shuwaikh Port is 4055 metres in length, and has 21 berths. Seven of these can accommodate vessels with deeper drafts: three with 6.7-metre depths and four with 8.5 metres. Vessels with 9.5-metre depths are able to dock at high tide. Berths 10, 12 and 13 receive container ships and have gantry cranes with 65-tonne capacities. The port has 16 closed warehouses and a total area of 170,323 sq metres. Shuaiba Port is 4068 metres in length, and has 20 berths with depths ranging from 7.5 to 14 metres. Four are dedicated to container handling and are equipped with seven container gantry cranes, each with a capacity of 56 tonnes. Kuwait National Petroleum Company also operates an oil pier at the port, which has a depth of 16 metres and exports sulphur and petroleum coke. Meanwhile, Doha Port has a depth of 4.3 metres and is used by dhows, barges and coastal vessels operating between Gulf ports.

Maritime trade is a central focus of the New Kuwait 2035 vision, and Mubarak Al Kabeer Port on Boubiyan Island is expected to be a major regional hub after its scheduled opening in 2019. With an anticipated final investment of KD1.2bn ($4.0bn), Mubarak Al Kabeer Port will have 24 berths and a capacity of 8.1m TEUs. In March 2018 Kuwait Investment Forum was advised that Mina Mubarak Al Kabeer was 51.5% complete. Kuwait is not the only country in the Gulf investing in considerable increases in port infrastructure. In particular, Dubai is planning new capacity of 3.1m, 1m and 4m TEUs at Jebel Ali’s Terminal four, two and three, respectively. A study by Eleonora Ademagni of the Aspen Institute in Italy states Iran also plans to expand its major container facility, Shahid Rajaeed Port in Bandar e-Abbas, from 4m TEUs to 6m TEUs. By the end of 2019, Iraq’s Port of Umm Qasr will invest $250m to increase its container handling capacity, and at the February 2018 Kuwait International Conference for Iraq Construction, potential investors were presented with extensive plans for southern Iraq. Iraq’s National Investment Commission told delegates that the $6bn Iraqi Grand Port of Al Faw project at Basra would be completed in three phases between 2018 and 2038, and that the facility would eventually allow for 70m tonnes per annum of containers and 40m tpa of unpacked cargo. These moves reflect a broader global trend. “Shipping is a global industry, where trends have been moving towards increased efficiency through larger ship capacity, technical advances, and increased availability of data,” Bader Al Kashti, chairman and managing director of the Kuwait Oil Tanker Company, told OBG. “The global nature of the industry also means that companies are constantly investing to keep pace with safety and environmental requirements as they are updated”.

AIRPORT EXPANSION: Kuwait’s overcrowded international airport has been the focus of several expansion projects. In August 2018 a support facility, Terminal 4, opened as a stop-gap measure while work on the new $4.3bn Terminal 2 continued. Terminal 4 will be used exclusively by the national carrier Kuwait Airways. The KD52.89m ($175.4m), 55,000-sq-metre facility has nine gates and 2450 parking spaces. Plans to build Terminal 4 were announced in 2015 when it became clear that the country could not wait for the major Terminal 2 project to be completed. Work on Terminal 2 began in 2017, and is being completed by Turkish company Limak and Kuwaiti firm Kharafi International. Construction is expected to take four years and will increase capacity to 13m, with provision to grow to 25m in the future. Sheikh Salman Al Humoud Al Sabah, director-general of the GDCA, told the Kuwait Investment Forum in March 2018 that more than $25bn is projected to be invested in the aviation sector in the years to come.

In addition to the construction of Terminal 2, a 3m-sq-metre temporary cargo facility called Cargo City will be built. Increasing volumes of cargo are driving demand for the new location. “We are looking forward to the expansion of the airport’s facilities, because we hope it will lead to increased capacity and a reduction in delays, which will enable us to improve the services we provide to our customers,” Sheen Thomas, Sales Manager, Hellmann Worldwide Logistics, told OBG. Sheikh Al Sabah also announced that beyond the expansion of the existing facilities, a completely new $12bn airport with a capacity of 25m passengers would be built in the north of Kuwait. He reported that in the shorter term, national carrier Kuwait Airways had invested $5bn to modernise its fleet, purchasing 10 Boeing 777s for $2bn and leasing 15 A350s for $3bn. According to local media reports in 2018, the state-owned airline had losses of KD47.426m ($157.2m) in 2016.

The private airline Jazeera completed its own terminal (T5) at KIA in mid-2018. The new 4750-sq-metre terminal has a capacity of 2.5m passengers and parking for 350 vehicles. In 2017 the company saw revenues climb by 7.3% to KD56.6m ($187.7m) while net profits fell by 23.7% to KD8.2m ($27.2m). Another private Kuwaiti airline, Wataniya Airways, invested $2.7bn ($9.0bn) in 2017 in a fleet of 25 Airbus A320neo aircraft. In June 2017 the DGCA granted Wataniya a licence to operate from Kuwait Airport.

OUTLOOK: With the opening of its new causeways, port and expanded airport, Kuwait’s ongoing investment in its land, sea and air infrastructure should yield positive results by the early 2020s.

Each of these new facilities has an important role to play in the country’s long-term goal of diversifying, moving its economy away from oil and reinventing itself as a vibrant trade centre in the northern Gulf.

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The Report: Kuwait 2018

Transport & Logistics chapter from The Report: Kuwait 2018

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