Kuwait’s construction market set for strong 2013

05 December 2012

Foreign contractors are increasingly looking towards Kuwait for work opportunities

Kuwait’s projects market is set to continue its strong recent growth into 2013, with government clients having received bids for construction schemes worth more than KD501m ($1.8bn) since mid-November.

In spite of the recent political protests and the dissolution of parliament in recent months, state clients have pushed ahead with tenders and received bids for several major construction and infrastructure projects.

The Public Works Ministry has been one of the most active clients, having received bids for three hospital projects worth a total value of KD423m. The largest of these is the new children’s hospital. Lebanon’s Arabian Construction Company (ACC) submitted the low bid of KD179m for the tender. Its price was almost 2 per cent lower than the KD182m bid submitted by Belgium’s Six Construct, the second-lowest bidder.

The bid list shows that foreign contractors are turning to Kuwait’s ambitious projects pipeline to try to win work. In early November, Six Construct submitted the low bid for the estimated $611m new Al-Razi hospital. The Public Works Ministry also recently received bids for the KD125m new maternity hospital and the KD119M Ibn Sina hospitals.

The opening of the tenders for the medical projects follows the ministry’s October award of the contract for the long-awaited $2.6bn Subiya Causeway, a project regarded as crucial for stimulating the growth of Kuwait’s real estate sector.

Other state clients have also been busy. Kuwait’s Public Authority for Industry has opened tenders for a major infrastructure scheme. The government client received bids from eight companies for the contract to build infrastructure at the Shadadiyah Industrial area in Kuwait City. The local Mushrif Trading & Contracting submitted the low bid of KD84.8m.

The recent tender activity caps an impressive finish to 2012 for Kuwait’s projects market, which has often failed to lived up to its potential in recent years. By the 4 December, the $6.7bn-worth of construction and infrastructure awards in Kuwait had increased 34 per cent on the $4.4bn-worth of contract awards for the whole of 2011. In particular, Kuwait’s construction sector has had a strong end to the year. More than $3.8bn-worth of construction deals have been awarded in the third and fourth quarters, 32 per cent more than the same period in 2011 and 2010.

In addition to the projects that have opened recently, there are several other major projects expected to be tendered in the coming months. This includes the first major construction package on the planned $3bn new terminal at Kuwait International airport, scheduled be tendered by the end of the year.

To further boost the projects market, the government is keen to attract private investment in its infrastructure programme. From 2006 to 2011, more than $50bn-worth of contracts awarded in Kuwait were by state entities, with only $5bn awarded by the private sector. This has continued in 2012, with only 5 per cent of the total $6.4bn-worth of construction contract awards emanating from the private sector.

The Partnerships and Technical Bureau (PTB) was created in 2008 to implement the planned $28bn public-private partnership (PPP) programme. To date, there has been little progress made with the programme, with Kuwait’s parliament voting to scrap plans for the country’s first independent water and power project (IWPP) in June. In an effort to make progress with the PPP programme, the PTB has invited consultants to bid for a contract to win an in-house consultancy role to assist in the implementation of the ambitious scheme.

In addition to the stalled $2.7bn Al-Zour North IWPP scheme, the PTB is also planning to develop the $7bn Kuwait metro and 500,000-cubic-metre-a-day (cm/d) Umm al-Hayman Wastewater Treatment Plant (WWTP) among various housing, tourism and hospital schemes.

If the PTB is able to implement these projects and government clients are able to avoid political distractions and continue to award contracts, the Kuwait market will emerge as one of the region’s most lucrative in 2013.

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