Key fact

Kuwait’s population has been growing by 2.5–3 per cent a year and is expected to rise to 5.4 million by 2030

Source: MEED

A rapid rise in Kuwait’s population is placing the country’s underdeveloped infrastructure under considerable strain. Over recent years, the population has grown 2.5-3 per cent a year and this is set to continue. By 2030, the number of Kuwaitis is expected to have risen to 5.4 million. To keep pace with the increase, the country needs to undertake a substantial number of large-scale projects to develop its social, transport and utility sectors over the next five years.

With an oil production rate of about 2.2 million barrels a day and estimated reserves of more than 100 billion barrels, Kuwait can afford to fund its $104bn five-year infrastructure development plan announced in 2009. The challenge lies in the delivery of projects.

The state’s political system continues to hamper its ability to gain consensus and push ahead with important projects. Bureaucratic tendering processes and inefficient decision making have resulted in several multibillion-dollar schemes being delayed or cancelled. This long-standing issue will need to be addressed if Kuwait’s projects market is to meet its potential.

Kuwait hospital projects

As part of plans worth an estimated $8bn to expand the country’s social infrastructure, the government will upgrade nine hospitals and build eight new facilities.

The Health Ministry has issued tender documents for three of the hospital expansion projects. Firms have until 9 August to submit bids for the contracts to expand the existing Al-Amiri and Al-Razi hospitals and build a 600-bed cancer centre.

We are watching the [national] university very closely. There are some big tenders coming out of there

Local contractor

The US/local team of Hill International and System Development & Project Management is providing project and construction management services for the expansion schemes.

In addition to the Health Ministry’s plans, the Public Works Ministry intends to build eight new hospitals to add 5,000 beds to the state’s healthcare system. The ministry is planning to build four hospitals at the Al-Sabah medical area in Shuwaikh, located just west of Kuwait City. The new Al-Razi hospital and Ibn Sina hospital projects will both add 600 beds. Kuwait is also planning to build an 800-bed hospital at Al-Jahra, a 600-bed unit at Al-Amiri and a 1,000-bed hospital at Al-Adan.

In June, Kuwait’s Partnerships Technical Bureau (PTB) invited companies to express interest in a project to design, build and finance the proposed 500-bed Physical Medicine and Rehabilitation hospital, the region’s first public-private partnership (PPP) hospital project. Interested firms have until 18 August to submit expressions of interest.

Several public and private education projects are also moving forward in Kuwait. The Washington-based World Bank estimates that 23.4 per cent of the population is aged between 0 and 14, making the expansion of the country’s educational infrastructure crucial.

The multibillion-dollar upgrade of the national university is one of the largest educational projects in the region. The new $3bn Sabah al-Salem integrated campus is being built at Shadadiyah, 20 kilometres west of Kuwait City, and is designed to cope with an anticipated influx of new students. The current student population of 26,000 is expected to increase to more than 40,000 in the next 10 years.

“We are watching the university very closely,” says one local contractor. “There are some big tenders coming out of there.”

Large construction contracts have already been awarded for the new university campus. In December 2010, a consortium comprising China Metallurgical Construction Corporation and the local Khalid Ali al-Kharafi & Brothers was awarded a KD142.1m ($503.5m) contract to build the College of Engineering and Petroleum.

The tender process has become convoluted … with individual ministries starting to tender their own work

Kuwait-based contractor

In February, a consortium of the UAE’s Arabtec Construction and the local Combined Group Contracting Company was selected to build the KD120m Faculty of Arts and Education. The university recently received bids from contractors for the College of Science and Faculty Club and the College of Business and College of Women projects.

Eagerly awaited contract

It is the contract for the proposed medical campus and 600-bed university hospital that is most eagerly anticipated. The university has prequalified consultants for the main design contract and is expected to invite prequalified firms to bid for the consultancy contract later this year.

“These are the ones that every consultant in the region and beyond is looking for,” says Adam Holland, director of architecture and engineering services at Kuwait-based consultants KEO International, which is currently working on two privately funded higher education projects.

“One is the Kuwait Institute for Science and Technology and the other is for the Kuwait Maastricht business school, which is a branch of the Dutch Maastricht Business School.”

A comprehensive transport infrastructure plan will also be rolled out over the next five years. Some of the major projects planned include a $10bn national railway, a $7bn metro network and $3.5bn-worth of investment at Kuwait International airport.

The metro is being developed under a design, build, finance, operate and maintain contract as part of Kuwait’s PPP programme. When complete, it will comprise four lines and have 171km of incline sections, 72km of elevated track and a 115km tunnel. About 60km of the metro will be underground.

A consortium led by UK-based Ernst & Young has been appointed as the transaction adviser for the project and is currently carrying out feasibility studies. The PTB is hopeful that the main construction contracts will be tendered by the end of the year.

Rail network in Kuwait

In addition to the metro, Kuwait is pushing ahead with plans to build a passenger and freight railway that will form part of the GCC railway network. The PTB is currently evaluating proposals and is expected to appoint an adviser in the next month. The proposed railway will skirt the edge of Kuwait City and contain a minimum of four interconnections, which will feed into the metro network.

The expansion of Kuwait International airport will also offer the region’s contractors an opportunity to win work, with about $3.5bn-worth of projects in the pipeline.

The Directorate General of Civil Aviation in January prequalified companies for package three at the airport and is expected to issue tender documents in the coming months. Package three involves building a 4.5km runway, reconstructing and extending the existing eastern runway and building primary and secondary access roads and taxiways.

The expansion project also includes the construction of a $747m terminal, capable of handling up to 13 million passengers a year. The main construction contract is scheduled to be tendered in 2012.

Alongside implementing the country’s transport PPPs, the PTB is changing the way Kuwait structures its project financing deals in other sectors. It has set a bid deadline of 27 September for the contract to build the country’s first independent water and power project (IWPP). If successful, the government is expected to adopt the IWPP model for all of its future power and water schemes and is already planning more facilities at the same site.

However, Kuwait’s form of democracy continues to hamper its projects market. The political schisms within the Gulf region’s oldest parliament make it difficult for political consensus to be achieved. The cabinet was forced to resign on 31 March amid the regional turmoil – the sixth cabinet to resign in the past five years. Three parliaments have been dissolved in the same period.

“The tender process has become convoluted in recent years, with individual ministries starting to tender their own work,” says a Kuwait-based contractor. “This has resulted in consultants and contractors having to prequalify over and over again with different organisations and it is a lot of extra work.”

The $77bn Madinat al-Hareer (Silk City) scheme proposed for the Subiya promontory, just off mainland Kuwait, is an example of a megaproject that has failed to move forward due to political wrangling and bureaucratic decision making.

The original masterplan for Subiya was drawn up 20 years ago and, in January, MEED reported that Canadian firm Malone Given Parsons, in association with the local Gulf Consult, is to redraw the masterplan for the northern region scheme. The team is working on reconciling the original Subiya design and the Silk City proposal put forward by UK-based Eric Kuhne & Associates almost five years ago.

The $15bn Ras al-Zour refinery project is another scheme that has suffered from continuous delays at the planning stage.

Reform required for tender process

Kuwait has the potential to offer the region’s construction sector huge opportunities over the next few years. But for its projects market to reach its full potential, the government will need to reform its decision-making and tender processes.

Consultants and contractors remain reluctant to enter the market for fear of delayed project schedules due to Kuwait’s political system. Until parliament can agree on a smoother way of governing the state, Kuwait is in danger of stalling progress on a much-needed development programme that has the potential to lead the Gulf projects market.