In the break since the last CW was published, news has emerged from Kuwait that plans for its long-awaited metro project are back on track.
The project, reportedly now worth $20bn, will have three lines covering the city, the airport, the new university and many areas in between.
The tender process for the project is set to begin soon with a view to appointing a public-private consortium to build the network in 2017 for an opening in 2020.
The metro is something of a bellwether for Kuwait’s construction industry. For a start, it is years behind schedule. The network was first proposed back in 2008, with a capital value at that time of $7bn.
However, it has since faced a series of delays as wrangling over transport policy provided an initial setback, then other start dates were announced and missed. This, and many other major projects, form part of a $130bn National Development Plan passed by the country’s parliament in 2010, but progress has been hampered by political disputes between Kuwait’s government and its parliament.
Over the past four years, many key schemes (including the ambitious $94bn Madinat Al Hareer, or Silk City) have remained on hold.
In recent months, however, there has been progress. Alongside the revival of the metro project, a new masterplan for Madinat Al Hareer has been approved and the Subiya causeway linking it to Kuwait City is another scheme being dusted off.
Encouragingly, contract awards for 2014 are due to increase by more than 150% – up to $27.7bn compared to $11.1bn last year, according to a recent Ventures Middle East report produced for The Big 5 trade show.
The award of contracts for the $12bn Clean Fuels project, which will provide substantial capacity boosts to a number of refineries owned by Kuwait National Petroleum Company, has been a major contributor to this.
Other major oil & gas projects are progressing, with the $15bn Az-Zour refinery reportedly a priority.
These are encouraging signs, but as our market report (see pp. 36-39) into Kuwait shows, there are many issues that need to be addressed. This includes tackling a skills gap which could worsen as the country’s plan to rid itself of more expats steps up, and creating a climate that is more friendly for external investors.
There is also no guarantee that the relatively peaceful period recently enjoyed between Kuwait’s government and parliament will be maintained.
In truth, it needs to if the country is to prosper. Currently, oil & gas make up around 95% of Kuwait’s exports by value and its spending on the infrastructure needed to help it to diversify has been too low in recent years.
A recent Capital Economics report (see p.8) highlighted that construction, land acquisition and capital expenditure currently only make up a fraction of its current budget (around 10%), compared to nearly 25% being spent on public sector wages. Spending on fuel subsidies and other benefits also remains high.
This is a situation that needs to be addressed if Kuwait is to enjoy a more sustainable future.