Analysis Construction Kuwait’s building towards its $100bn ambition By Andy Sambidge April 25, 2023, 3:17 AM Kuwait Ports Authority Shuwaikh Port in Kuwait. Work has started on its $160m redevelopment Development a core part of Vision 2035 Turning to public-private partnerships for finance Asian companies such as Hyundai have already won big projects Work has started on the first phase of Kuwait Port Authority’s $160 million redevelopment of Shuwaikh Port as the country steps up its multi-billion-dollar infrastructure strategy. The port expansion has been awarded to a joint venture of South Korea’s Hyundai and Kuwaiti Gulf Dredging & General Contracting, as the government increasingly turns to private investors to ease the financial burden. While the value of projects awarded in Kuwait fell to $2.8 billion in 2022, well below the previous five-year average of $5.6 billion, the planned infrastructure investment programme is valued at more than $100 billion. Saudi public-private partnerships worth billions Kuwait tenders for work at new city for 280,000 residents Kuwait net zero city planned for 2034 Big-ticket developments such as Silk City, a China-backed project with an estimated cost of $86 billion, and a $10 billion national railway symbolise Kuwait’s diversification drive, offering substantial scope for international firms to increase their exposure to the country’s construction market. A strong pipeline, estimated at $27.6 billion in the bidding stage, is setting “a tone for optimism”, according to Imran Sheik Najeedbuddin, director, deal advisory and head of government and infrastructure services at KPMG in Kuwait. Infrastructure development is a central plank of Kuwait’s Vision 2035, he points out in a new KPMG report. “This would require the government to progress on stagnating projects as well as aim for higher private sector participation in national economic activity," he added. "The local private sector, in partnership with international specialists, has a bigger role to play and drive a renewed infrastructure agenda.” Sofia Bensaid, associate director at infrastructure ratings at S&P, also said during a webinar last week that she expects Kuwaiti infrastructure projects to start attracting increased interest and investment from international developers. Kuwait has started to pick up the pace with public-private partnerships (PPP), she added, but is playing catch up as it only started using them in 2014. The country has to tackle pandemic-related and bureaucratic challenges to move forward on PPP, according to KPMG. In the past, such hurdles forced projects to be shelved after procurers and bidders had incurred substantial costs. International businesses set to be 'biggest beneficiaries' Fitch Solutions, the data and analytics division of the ratings agency, expects international companies to be the "biggest beneficiaries" of the economic diversification programme set out in Kuwait 2035. "They possess the requisite technical and operational expertise to deliver infrastructure projects on the scale envisioned by the government," it said. “While still one of the smaller markets in the region in value terms, there are opportunities for foreign investors." Shamal Az-Zour Al-OulaThe Az-Zour North One plant is phase 1 of a five-stage power and water project in Kuwait. Five Japanese companies are in the running for phase 2 Fitch added: "As well as plans to introduce a greater role for renewable energy and enhance water security, we also expect solid investment in social infrastructure, including schools and hospitals, which will be supported by higher oil and gas revenues.” Asia-based companies have made big gains in Kuwait's budding PPP landscape, with Hyundai winning the contract for the Jaber Al Ahmad Al Sabah Bridge at a cost of $3 billion. Asian interest in the PPP market is also reflected in tenders for the second phase of the Az-Zour Independent Water and Power Project: eight firms have been shortlisted by the Ministry of Electricity and Water – and five are from Japan. The Kuwait Authority for Partnership Projects, established under the PPP law of 2014, is set to launch several more high-impact projects in the power, waste/wastewater and communications sectors. It is “essential” that the PPP programme is a success, according to the KPMG report. Kuwait's burden of public wages and social subsidies continues to exceed its total budgeted revenues: $67.9 billion versus $63.4 billion in 2023-24. This greatly diminishes the government’s ability to allocate funds towards infrastructure projects. Kapil Kumar, deputy general manager and head of project finance at the National Bank of Kuwait, said in the KPMG report: “It is increasingly being acknowledged that alternative sources of financing and private sector involvement are needed to fill the gap. “PPP is emerging as the preferred party for bringing in private investors to fund major projects and, perhaps as importantly, bringing in private sector expertise and efficiency to the table.”