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Spending Spree

Kuwait, Volume 1
05.01.2005

December's news that Kuwait was to start building a state-of-the-art container port came for many as just the latest in a string of major infrastructure projects in the country. For while the $1.2bn earmarked for the port facility at Bubiyan Island is a major development in its own right, analysts are also pointing to a huge number of other construction projects now about to sweep across the country.

"Work on the port will start early 2005," Kuwaiti Public Works Minister Bader al-Humaidi told reporters on December 6. "It will be the main port serving Kuwait, Iran and Iraq."

The port will then become operational in stages, with the first of these scheduled for early 2008. By then, the new port will have a 1.3m standard container capacity, while the project will be finally completed by 2016.

The port project is also part of the Kuwaiti government's plans to develop Bubiyan Island into a free zone, storage area, oil depot and site for recreational services.

The island is well located strategically at the northern tip of the Persian Gulf between Iraq, Iran and Kuwait. Since the US-led invasion of Iraq in 2003, Kuwait has boomed as a major conduit for its larger northern neighbour, with Iraq's ports still largely unable to meet the country's import and export needs.

As part of a state initiative, the new port will have a hefty level of government involvement. According to the state-owned Kuwait Fund for Arab Economic Development (KFAED), the government is to meet the infrastructure costs of around KD305m ($1.035bn). An additional KD40m ($137m) in equipment costs will be provided by a private company that will be set up to manage the port. Ownership of this company will be split, with 30% going to a foreign company, 30% to Kuwaiti investors and the remaining 40% going in an IPO.

The Kuwaiti authorities are not short of cash these days either. In the five fiscal years since 1999/2000, the country has boasted a cumulative surplus of some $21.5bn. The emirate is also widely forecast to see its highest income in 30 years in the fiscal year that ends on March 31, 2005, with many economic reports predicting a surplus of more than $10bn. The removal of the Saddam Hussein regime in Iraq has also added to a greater feeling of financial security, as well as military and political.

Back at the start of December, Kuwait Petroleum Corporation (KPC) CEO Hani Hussein gave some strong indicators about where all this surplus might be heading. The corporation has ambitious plans to raise output capacity from its current level of 2.5m barrels per day (bpd) to 4m bpd by 2020. This is expected to cost some $20bn - though the oil majors will naturally fund a major slice of that.

Meanwhile, a $1bn project to modernise export terminals and boost their capacity is in the final stages of bidding. And the list goes on: a project to build Kuwait's fourth refinery at a cost of $3bn-4bn is underway, while two major petrochemical projects - price tag $3bn - are also starting up in co-operation with a foreign partner and the domestic private sector, Hussein told Monday Morning early December.

Elsewhere, there is a project to build a 25 km causeway linking Subbiya in the north to Kuwait City - estimated cost $1.5bn - with this now at the final stages of pre-qualification. Work on the Sheikh Jaber al-Ahmad Causeway is due to start at the end of 2005 and will take five years to complete.

Yet the construction sector looks to be even busier still, as bids are currently being reviewed for a $2bn project to develop Failaka Island, 20 km east of Kuwait City, with an eye to developing it as a major tourist centre. Major road and railway projects are also planned, with work on two main 250 km roads, linking Iraq to both Bubiyan Port and Saudi Arabia, expected to commence in 2005 at a cost of around $1bn. A domestic railway network, part of the $5bn Gulf rail link, along with an underground metro-line, are also under serious consideration. The price tag for these two projects is estimated at around $2bn.

So plenty of work is in - and around - the pipeline. With Kuwait's regional importance still growing, and oil-based revenues still rising thanks to the windfall of the last year that has hit all the Gulf's oil producers, the sound of drills and jackhammers looks set to dominate the Kuwaiti economy for many years to come.
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