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Construction sector remains catalyst for economic growth
April 1, 2017, 4:13 pm
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The latest Construction Intelligence Center (CIC) reveals that the construction sector in Kuwait is likely to continue being the main ingredient spurring economic growth in the country. The report titled ‘Construction in Kuwait – Key Trends and Opportunities to 2020’ and published by Timetric, a leading provider of online data, analysis and advisory services on key global financial and industry sectors, notes that Compound Annual Growth Rate (CAGR) for Kuwait construction sector will be 6.44 percent for the period 2016-2020. This growth will be mainly from government initiatives and public-private partnership projects that aim to boost infrastructure development and enhance production from the country’s oil and gas industry.

Reinforcing the Timetric report, a new study by Business News for Construction (BNC), a primary source for information on the construction industry in the Middle East, shows that over KD15 billion (US$50bn) worth of projects are in the initial stages of construction in Kuwait. Moreover, 11 projects under the concept or design phases are worth KD300 million ($1bn) or more, and have a combined estimated value of KD10.3 billion ($33.8bn), the BNC report disclosed.

The combined estimated value of all 722 active projects in Kuwait is KD71.5 billion ($234bn), with the urban construction sector listing the highest number of projects, representing nearly 73 percent of all construction activities in the country. An estimated KD9 billion ($29bn) worth of building projects, including the South Saad Al Abdullah New City KD1.22 billion ($4bn) and the Nawaf Al-Ahmad City KD910 million ($3bn).

Urban constructions aside, most of the remaining mega-construction projects, either on the anvil or already being implemented, are in the hydrocarbon industry. In fact, over a third of all project investments in the country are currently in the oil and gas sector. As part of its five-year development plan for the period 2015-2020, the government is investing over KD30 billion ($100bn) to improve the efficiencies of upstream and downstream hydrocarbon.

Petrochemical Industries Company (PIC), a subsidiary of state-owned Kuwait Petroleum Corporation (KPC), has awarded a contract to Foster Wheeler for the integration project between PIC’s proposed grassroots Olefins III-Aromatics II complex and another KPC subsidiary, the Kuwait National Petroleum Company’s (KNPC) 615,000 barrel per day Al-Zour refinery complex, now under construction in southern Kuwait.

The integrated Olefins III – Aromatics II project, which is expected to need an investment of KD2.4 billion ($8bn), is part of KNPC’s Clean Fuels Project, which aims to upgrade, expand, and transform the 270,000 barrel per day Mina Abdullah Refinery and 466,000 barrel per day Mina Al Ahmadi Refinery into an integrated 800,000 barrel per day merchant refining complex at an estimated cost of nearly KD4 billion ($13bn).

Beyond public spending to support construction projects in the oil and gas industry, emerging sectors such as healthcare, education, transport, tourism and travel, are other main growth drivers of the construction market in Kuwait. In the hospitality and tourism sector, the Kuwaiti Government is investing over KD300 million ($1bn) aiming to attract 440,000 overnight visitors by 2025 (up 60% from 2015), and creating 30,000 jobs over the next ten years.

The construction projects align with Kuwait's Vision 2035 plan, which aims to transform Kuwait into a financial and commercial hub in the Gulf region. The Vision 2035 plan also identifies developing the country’s road, railway, port and airport infrastructure as key drivers of future growth.

The country is currently exploring the details of constructing a KD6 billion ($20bn) urban metro system and a KD2 billion ($6.6bn) railway line as part of the proposed GCC regional railway system. However, the 160-km, 4-line metro network with nearly 70 urban and suburban stations has faced a series of delays. In late 2015, the newly created Kuwait Authority for Partnership Projects (KAPP) announced that the project was now back on track with the government owning 10 percent and 50 percent sold through an initial public offer. The remaining 40 percent will be held by the private developer of the project.

In January 2015, Kuwait’s Municipal Council also endorsed plans for the Kuwaiti section of the trans-GCC line, which will connect Al Abdali on Kuwait's border with Iraq along a corridor to neighboring Saudi Arabia, where it will then link up to the rest of the regional GCC network. But, as each country faces new fiscal realities arising from lower oil prices, all six GCC nations have begun to rethink the $25 billion project’s time-line, which was originally slated for a 2018 completion.

Undoubtedly, in order to create an efficient operating environment for businesses to thrive and for the country's economy to grow, the expansion and improvement of facilities and infrastructures in multiple sectors are key. Despite delays, and shortcomings in some projects under development,  this is nevertheless an excellent time for construction industry players to make business in Kuwait, concludes the BNC report.


 

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