Kuwait needs to simplify regulations and procedures

Growth in Kuwait will be mainly led by the financial (with Islamic banking towards outperforming traditional markets), real estate and construction sectors. However, Kuwait still needs to spend more on its projects, as is happening in the United Arab Emirates and Saudi Arabia.

Every dollar spent will generate $60, Faisal Hassan, Head of Research at Global Investment House, indicated.

Kuwait's real GDP remains one of the highest in the world, with numbers showing steady growth, rising from three per cent in 2002 to 11.3 per cent in 2006. Kuwait enjoys also a per capita GDP that is considered high by global standards ($32.015 in 2006).

Poor talent

Figures from Kuwait National Petroleum Company (KNPC) suggested that global oil demand will rise to 115 million barrels per day worldwide in 2030, with the Middle East supplying 70 per cent of the growing demand. To meet this demand, companies are looking at alternative resources and methods, such as oil sands and ultra deep arctic water, for cleaner production - hence the additional costs and more refining capacity that will force the Middle East to invest some $180bn.

Kuwait plays a big part in this, being one of the top dependant economies on oil in the region, and the challenges the country faces lie in meeting changes in product demand and climate, not to forget the lack of enough experienced workforce.

Addressing these issues, KNPC is implementing a number of projects that includes the KD4bn New Refinery Project, set for completion by 2012 with a capacity of 615 million barrels per day (bpd), the Clean Fuel Project that will push crude processing capacity to 1.4 million bpd once completed by August 2011, and a KD222m gas train to be completed by April 2010.

Hashim Al Rifaai, Chairman and Managing Director of the Oil Development Company, pointed to the fact that GCC oil and gas projects have tripled in less than two years (2004-2006) driven by the weak dollar, high oil prices, inflation, and a talent shortage. Al Rifaai said that 60,000 engineers will be needed in 2010, because three quarters of personnel working in this field will retire in 15 years.

Build-operate-transfer

One hot topic addressed in the conference was BOT (build-operate-transfer) as an effective tool in financing private projects. The approach was adopted by Kuwait Municipality from 1991 onwards and resulted in developing the Kuwaiti Corniche landscape with such projects as Souk Sharq and the Marina Mall.

Later on, other governmental bodies followed Dubai Municipality in implementing BOT in some big projects, including a golf course, aviation terminal, Al Ahmadi Township, and Failaka Island. But developers were hit with problems, particularly around the cost of completing such projects and the short leases they were given to operate the development before transferring it to the government - many found the figures did not add up and it was difficult to make a profit.

BOTs have now been suspended, but a new draft law has been issued to clarify regulations and increase the time period to between 25 and 40 years, depending on the project type. BOTs are expected to start again soon, with some picking up where they left off and other requiring new contracts.

Dr Amr Merdan, Chief Planner at Kuwait Engineering Group, gave an overview of the Kuwait Masterplan 2005-2030, which focuses on integrating the different Kuwaiti economic sectors. Merdan said that expansion of the metropolitan area is limited within the masterplan, so the traffic and transport capacity would remain constant. He also expected the population to reach 5.36 million in Kuwait by 2030, with Kuwaitis making up only 40 per cent.

However, that hasn't stopped officials looking at other mode of transport, such as making greater use of rail networks and introducing personal rapid transport systems - similar to a monorail carriage but much smaller and making only one stop - the requested destination. Being personal, they would be a replacement - or more a likely an alternative - to the car.

Subiya Causeway

We have seen Dubai grab attention with a number of large mega projects, but Kuwait is in the early stages of its own - the KD21bn, carbon neutral City of Silk. Based on a development plan of a construction project in Belfast, Northern Ireland, the project will not be finished until 2030. Its centerpiece will be a 1001m tall tower - one of the tallest towers in the world once completed in 10 years. It will provide homes for 700,000 people and create 300,000 jobs.

The $2.2bn Subiya causeway, implemented by engineering consultants Cowi and the Kuwaiti Ministry of Public works, will provide access to part of the City of Silk across Kuwait Bay.

The Causeway is set to be 36km long and be constructed by 38 consortia, including the Bin Laden Group. Work on the project will commence in five months, having already been delayed for four years due to a re-design process that took the main navigation line from 120m span and 23m headroom from the sea to the bridge to 700m span and 60m headroom, then back to the first design again. It will take three years to build once work starts.

Being one of the gulf's richest countries, Kuwait has opportunities to diversify away from being oil dependent. But this won't happen unless the government sets in place some essential procedures and regulations.

This includes providing a viable investment climate, leading the way through privatisation, setting up its regulatory and compliance authorities at local and regional levels, mobilising domestic capital into its developments, and most of all simplifing its rules and procedures.

But with its political situation now stable, there is a general feeling in Kuwait that its time is now coming.

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