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Infrastructure paves the way for Kuwait 2035 reforms

In January 2017, the Kuwaiti government launched an aggressive and progressive plan, calling it the “New Kuwait” or the Kuwait National Development Plan (KNDP) 2035.

The plan projects that the country will be earning around 4 times from a current KD 13.3 billion ($44bn, AED161bn) forecast for 2018 to reach KD50bn by 2035.

Part of its 2035 goals are improving several economic sectors, including adding 13 new colleges with capacity for 40,000 new students, 8,000 more hospital beds, using 15% of additional renewable energy, adding 3500 more SMEs, and 11% increase in infrastructure investments, according to the plan’s official site.

What signs of infrastructure spending are already emerging?

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Airports construction

In May, Kuwait announced that it had begun construction of a new KD 1.312 billion ($4.34bn, AED16bn) international airport, aimed at increasing passenger capacity from a current 6 million to 25 million a year in 2020, and thereby overcome overcrowding issues, as civil aviation authorities reported that Kuwait International Airport had handled twice its capacity last year, or nearly 12 million travelers.

Daily Al-Anba recently announced that Kuwait had plans for 2 new airports in the three coming years, calling the first T4, a KD60 million ($198m, AED729m) project, and the second is Al-Jazeera, a KD14 million ($46m, AED170m) endeavor.

Spending to 2020

“The KNDP targets investment of KD34bn ($12bn) through 2020, about a third of which will come from the private sector,” said a national Bank of Kuwait June report.

It said that a number of schemes were being implemented as public-private partnership projects (PPP), including the Al-Zour North and Khairan integrated power generation and water desalination projects.

“As a result of the infrastructure investment push, aggregate investment is expected to continue to see healthy growth.”

Read: Kuwait projects off to a good start this year

Oil still king

According to Kuwait’s Ministry of Finance, the country generated KD5.3bn ($17.5bn) in oil revenues until the end of August and projected that end of year results would reflect a KD12.3 bn ($40bn) gain. This figure takes into consideration a 7-8 per cent oil outputs as per OPEC agreement to cut production until March 2018, when outputs are revisited for every oil exporting country.

The ministry announced that overall revenues would reach KD13.9bn ($46bn) for 2017, when KD1.6bn in non-oil revenues were added to the mix.
The country would still face a KD6bn ($20bn) deficit, when considering that the country plans on spending KD20 bn ($66bn) in its 2017/2018 budget.

“The economy has held up relatively well under the current conditions of lower oil prices since 2014,” Nemr Kanafani, Senior Economist at NBK Economic Research, told Forbes last September.

“The country’s high fiscal breakeven oil price of around $50 makes it the GCC country with the most fiscal space, and the country needs billions of dollars to be injected into major projects, such as the Silk City, the Subbiya Causeway, Boubiyan Island container harbor and into their oil and gas facilities.”

Robust non-oil spending

A June 2017 National Bank of Kuwait (NBK) report projected up to 4 percent growth for the country’s non-oil sector in both 2017 and 2018.
“Overall GDP is likely to shrink by around 2.4 per cent in 2017, before returning to positive growth of 3.2 per cent in 2018,” it said.

The NBK report said that what helped boost non-oil performance was the state’s capital spending, which reached in Q1 this year $4.6bn the bank said, quoting MEED Projects.

“The figure is similar to the quarterly average in 2016. Another KD6.2 billion ($20.5bn) in projects are in the bidding stage and could be awarded in 2017. The projects pipeline remains solid, given the government’s commitment to its development plan,” NBK said.

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