Kuwait’s announced plans for almost $200bn in projects in the next five years. The question is no longer solely about its commitment; it is also about its capacity to deliver
Kuwait is preparing to celebrate the two most important moments in its history. The expulsion of the Iraq army and the end of almost seven months of occupation and terror will be marked at the end of February. The flags will be out again on 19 June for the 50th anniversary of full independence from the UK.
Independence and liberation have shaped the character of contemporary Kuwait. But its future will driven by a third factor that could be equally momentous: The start in 2011 of the first in a series of enormous projects essential for a new Kuwaiti era of growth and prosperity.
Kuwait needs massive investment to deal with a population explosion that could double the number living in the country to 7 million by 2030
As the MEED Kuwait Projects 2010 Conference was told at the end of November, the government has announced that $100bn-worth of major projects will be started in the next five years in the first phase of a long-term drive to modernise and expand Kuwait’s infrastructure. The total value of big projects that have been approved, or may soon go ahead, is significantly larger.
The Kuwait Petroleum Corporation (KPC) told the conference that its investment programme alone for 2011-15 is $90bn. The Electricity & Water Ministry aims to invest about $10bn in the same period while the Ministry of Public Works is pressing ahead with a capital programme at least on the same scale. The biggest expansion in Kuwait airport’s history is beginning and huge projects are to be financed through Kuwait’s private-public partnership (PPP) programme. Then there is private-sector investment in housing, commercial and tourism projects and manufacturing.
Total capital investment in the next five years could be close to $200bn – more than Kuwait’s forecast 2010 GDP.
Sceptics say the division between parliament and government and bureaucratic obstacles will delay capital investment and question the viability of the PPP plan. They have a point. PPP, a type of privatisation, is a contentious issue in a country where private profit is associated with corruption.
But Kuwait needs massive investment to deal with a population explosion that could double the number living in the country to 7 million by 2030. There is now no choice. Without more power stations, water desalination capacity and sewage treatment plants, basic services will fail. Without new roads, traffic in Kuwait will grind to a halt. Without a mass transport system, daily life will, in due course, become almost impossible.
There was consequently genuine urgency in presentations at the MEED conference. The Electricity & Water Ministry detailed a plan to build 10,000MW of new power capacity and almost 75 million gallons a day (g/d) of water desalination capacity by 2020. Talk of solar power stations and nuclear power was taken seriously. The Public Works Ministry said it had plans for eight new hospitals and forecast a total of 5,000 new hospital beds would be built by 2030.
The PPP programme combines scale with a radical new-approach private-finance initiative. The Partnership Technical Bureau, a division of the Finance Ministry set up in 2009 to deliver the programme, set out details of its initial projects. They include a new power and desalination station; a metro system for the city of Kuwait; a 511-kilometre-long passenger and freight railway line; a 600,000 cubic-metre-a-day sewage treatment plant; and a 500-bed rehabilitation hospital, Kuwait’s first build-own-operate healthcare project.
At a time when banks and investors are reluctant to lend, these projects look challenging, but Kuwait itself has the money. Deposits with Kuwait banks totalled more than $90bn at the end of September. This is probably no more than half the financial wealth owned by Kuwaiti individuals and businesses. If investing in Kuwaiti PPP projects looks attractive, domestic investors could provide most of what is needed to make them work. It’s down to the technocrats and modernisers to convince parliament and the wider Kuwaiti public that PPP will deliver benefits for all.
At a time when banks and investors are reluctant to lend, these projects look challenging, but Kuwait itself has the money
But there is little doubt that at least some of Kuwait’s big projects will start in 2011. They will include the Kuwait Petroleum Corporation clean fuel project (CFP), which will entail completely restructuring the oil refining industry. The plan calls for the Shuaibah refinery to be closed and scrapped and for the Mina Abdullah and Mina Ahmadi refineries to be comprehensively upgraded. The budget is more than $16m, which makes it the most expensive single energy project in the Gulf after Qatar’s $20bn Pearl GTL complex, but its complexity is probably greater. The CFP will involve work on three separate sites in a built-up area. Bidding for three monster EPC contracts that will deliver the entire project is due to open next year.
The second is the Sabah Al-Salem University City, which is to be built in Kuwait City’s southern suburbs. Covering an area of more than 3 square kilometres, the city will accommodate 50,000 students. This will make it the largest greenfield university in history, even outstripping in scale Riyadh’s Princess Noura University, which will have 40,000 students. Plans call for more than 20 architect-designed buildings and a mass of supporting facilities, including parking for 30,000 cars, which on its own must be a record. The budget is KD1.6bn ($6bn). If the hospital that will complement the medical campus is added, the budget could be more than KD6bn ($7bn).
Minds are therefore turning to the challenge of delivering projects on a scale that is unprecedented in Kuwait and almost unparalleled anywhere in the world. The Kuwait construction industry has only some of the requisite skills. There are serious deficiencies in its capacity to store and transport the materials these projects will require. And there is nowhere near enough housing for the hundreds of thousands of workers that construction companies will hire to work on them.
Minds are therefore turning to the challenge of delivering projects on a scale that is unprecedented in Kuwait and almost unparalleled anywhere in the world
Experiences in Dubai during its construction peak in early 2008 suggest that action taken to anticipate and remove bottlenecks in the project supply chain will deliver massive dividends in the form of lower costs and fewer delays. That is why those planning to participate in the great Kuwait projects boom should think now about how they will deliver the projects they plan to build in the future.