Country Reports - Kuwait

New Projects in the Pipeline

January 2018

Country Reports - Kuwait

New Projects in the Pipeline

January 2018
Although oil extraction remains the major source of Kuwait's economy, they are diversifying their economy, and the construction sector plays a major role. The construction sector saw a dip in 2008 and finally recovered in 2014, according to Mordor International. Since then several infrastructural developments have been seen in every sector- transport, power, and water etc. The output value of the construction sector in Kuwait rose at a CAGR of 5.24 percent from 2010. The construction sector in Kuwait is growing at a rapid pace now. Greater exposure to trade, attractive investment environment, competition, and diversification are factors affecting the growth of this market.

With Kuwait Vision 2035 in their mind, the government wants to decrease their dependence on oil and gas sources. The current dip in oil price is the biggest driver for the construction sector in Kuwait. Initiatives taken by the government include the passing of the Kuwait Development Plan for almost USD120 billion, which is expected to stimulate the economy and help in developing infrastructure. Some public sector institutions like KCB (Kuwait Credit Bank), KIA (Kuwait Investment Authority) etc. are funding major developments and have played a central role in shaping market dynamics. With more than 80 percent revenue coming from oil and gas, the high vulnerability of oil prices affects all the sectors including construction. Land prices in Kuwait are escalated due to greater demand and low availability of resources, leading to higher construction costs, thereby making things tough for an investor. Attempts to Kuwaitize private sector employment has been of little help. Moreover, corruption and political instability threaten the investment environment, making foreign investors look to other GCC countries. Kuwait's Vision 2035 provides many opportunities for investors as well as job-seekers. The government has ample assets and reserve funds to push growth in this sector. There have been improvements in the power and transmission systems opening up opportunities for more ambitious developers and builders. If Kuwait eases its regulations and the government gains stability, then Kuwait has many opportunities for foreign investors and they shall need foreign investments to keep up with their 2035 plans. With the country beginning to clear a backlog of major projects in energy, infrastructure and housing, the construction sector in Kuwait has seen a resurgence of activity in recent years, according to Oxford Business Group. The government's five-year National Development Plan committed to spend USD112.5bn over the 2015-20 period, and USD39.7bn worth of projects were signed off in the plan's preliminary year. The country has seen its first successful construction project completed on a public-private partnership (PPP) basis, and according to National Bank of Kuwait, there is a further USD33.1bn in PPP projects in the pipeline for schemes ranging from power and water to education, health and transport. Real Estate meanwhile accounts for 6 percent of Kuwait's non-oil GDP with the impressive scale of real estate activity apparent from satellite images showing a new city in the country's south being reclaimed from the sea over the course of 15 years. Several new communities being built by the government to provide homes for more than 100,000 Kuwaiti married couples, will provide ample new opportunities to develop residential, retail and commercial property in the years ahead.

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