Bureaucracy stalls Kuwait's projects market

26 July 2011

Slow decision-making and tendering processes are holding back the emirate’s projects sector

Although Kuwait has remained relatively unscathed by the political unrest that has swept through the region in 2011, a reshuffle of the cabinet combined with protracted bureaucracy has resulted in spending on construction and infrastructure for the first half of the year dropping by 29 per cent compared with the same period last year.

A total of $2.2bn-worth of construction and infrastructure contracts were awarded in Kuwait during the first half of this year, compared with the $3.1bn awarded over the same period in 2010. It is not all bad news, however. The value of contract awards in 2011 to date is still significantly higher than the $1bn and $552m awarded in the first two quarters of 2008 and 2009 respectively.

Kuwait construction and infrastructure awards $bn
Source: Meed Projects

In the first quarter of this year, 23 per cent of the total construction and infrastructure awards were in the private sector, compared with 100 per cent state-backed projects in 2010.This can be explained by the slow progress of government schemes. The state’s project pipeline remains convoluted as politics and bureaucracy continue to hamper the progress of mega projects.

An example of a major government infrastructure scheme that has suffered from slow progress is the estimated $2.6bn Subiya causeway project, which will link Kuwait City with the Subiya promontory. The low bid by a consortium led by South Korea’s Hyundai Engineering & Construction Company was approved in February, but no formal contract award has been made due to political wrangling over the project.

Despite a relatively low level of construction and infrastructure contract awards in 2011 to date, Kuwait has a major pipeline of projects planned.

The government is planning to invest a considerable amount in social infrastructure schemes in the coming years as the country’s population is expected to rise to 5.3 million by 2030 from 3.2 million currently.

In July, Kuwait’s University received bids for $1.2bn-worth of construction contracts on its planned new $3bn campus at Shadadiyah. Several further major construction projects on the scheme are expected to be tendered before the end of the year. In the healthcare sector, the state is planning to spend $8bn on building nine new hospitals and upgrading existing facilities.

The state housing authority is also pushing ahead with large-scale housing projects. The Public Authority for Housing and Welfare awarded $246m-worth of construction contracts in the first two quarters of the year and is planning to develop 19 housing projects in the emirate worth a total of $17bn.

In the transport sector, Kuwait is planning to spend $3.5bn on upgrading its airport and $7bn on a four-line metro network. The state is keen to encourage the role of the private sector in its development plans and has set up the Partnerships and Technical Bureau to preside over 32 public-private partnership (PPP) projects worth a total of $28bn over the coming years.

According to regional projects tracker MEED projects, Kuwait has a total of $170.8bn of projects planned or under way, but only $32.7bn-worth of these have been awarded. With a large pipeline of projects and an oil production rate of close to 3 million barrels a day, Kuwait’s projects market still offers a lot of potential. However, the decision-making and tendering processes will need to be streamlined if this potential is to be realised.

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