With $288bn of projects planned or underway, there is no shortage of potential business development opportunities in Kuwait. The country’s challenge is delivery.
Most of Kuwait’s planned projects include urgently needed infrastructure developments, following more than a decade of underspending.
To expedite the process, the government launched its ambitious Kuwait Vision 2035 investment strategy. But for the plan to succeed, it is an imperative for Kuwait to figure out how to bypass the roadblocks that have prevented progress in the past.
Despite having a clear vison for development in place and very strong financials, Kuwait’s economic development plans and capital investment projects have been delayed by a combination of political infighting and bureaucratic hurdles.
Currently, very little of what is planned in Kuwait is being brought to tender or contract award. As a result, the country’s projects market has declined every year since 2015, in terms of the value of project contract awards.
The lockdowns introduced to prevent the spread of the novel coronavirus (Covid-19), both in Kuwait and internationally, are set to make things worse in the near term, but are likely to accelerate change in a country, whose project market offers huge potential for international investors and businesses alike.
On 14 April, the scale of the impact of the Covid-19 lockdown measures and the fall in oil prices on the Kuwait economy was made clear when the IMF projected real GDP growth of -1.1 per cent in Kuwait in 2020, down from the forecast it made in October 2019 that GDP growth of 3.1 per cent in 2020.
Hugely dependent on its oil export revenues for economic growth, the impact of oil prices below $20 a barrel in April 2020 places immense pressure on Kuwait’s finances, with the country’s fiscal deficit set to rise to 11.1 per cent of GDP in 2020, along with rising debt and depletion of its financial reserves.
Once it is through the Covid-19 health crisis, Kuwait’s highest priority is to accelerate its Vision 2035 diversification and structural economic reform programme aimed at bringing private investment and new job-creating industries into the country.
Outlook for Kuwait projects in 2020 and 2021
In 2020, several major active oil schemes are due to be completed, including the $12bn Clean Fuels Project, and the $16bn Al-Zour refinery.
But the completion of these projects will leave a vacuum in the oil sector, as there are no equivalent schemes in the pipeline that act meaningfully as a replacement.
Outside the oil & gas sector, Kuwait Authority for Partnership Projects (KAPP) is eager to move forward with its programme of privately-financed PPP projects.
Kuwait’s banks appreciate the need for greater participation by local institutions in PPP projects, and increasingly see the positives in committing to long-term local project finance. But government delivery is key.
Whether the stumbling block is at a ministerial, parliamentary or lower level, Kuwait increasingly needs decisive government action, and far swifter implementation moving forward if it is to achieve its socio-economic objectives.
Despite having one of the world’s largest sovereign wealth funds, Kuwait persistently struggles to progress key infrastructure and development schemes because of schisms between the government and its elected parliament.
The lack of cohesion between the two, exacerbated by often-bureaucratic procurement processes, is hampering the country’s ability to make progress on important projects.
Outlook Kuwait 2020
Outlook Kuwait 2020 takes a close look at the major project opportunities in Kuwait over the coming five years, analysing all key sectors including energy, power and water, transport and construction.
Originally, completed in January 2020, the report has been updated in April 2020 with an additional chapter examining the impact of Covid-19 on the Kuwait market.
Outlook Kuwait 2020 provides a comprehensive guide for companies seeking to work in Kuwait. The report is a powerful resource for anyone seeking to find opportunities, understand risks and set strategy in Kuwait.