Building on new-found confidence?

Away from the glare of Saddam Hussein’s regime, Kuwait is finally able to push forward with the many major projects that it has been wanting to unleash for years. Rupert Cornford sets out to determine whether growing confidence in the country’s construction ideals is justified.

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By  Rupert Cornford Published  June 24, 2006

|~|127kuwaitfocus200.gif|~|The Kuwait construction industry is starting to feel a cautious opitimism following the fall of the Iraqi regime in 2003. One project now ready to take advantage is the City of Silk.|~|A recent report on Kuwait labelled this oil-rich Gulf country as ‘emerging’. With the economy slowly waking up from the jitters of nearly 15 years’ of tension with Iraq following the 1990 invasion, the country is now said to be experiencing rapid growth after the fall of Saddam Hussein’s regime in 2003. “The construction industry in Kuwait has always been quite successful but the fall of Saddam in 2003 was like taking the lid off a boiling pot,” says Jeff de Lange, deputy managing director, Gulf Consult. “All the while he [Saddam Hussein] was there people were reluctant to spend money — and psychologically people were reluctant to take the country forward. But now that he has gone, the whole country has come alive.” Rather than ‘emerging’, it sounds more like the entire country is due to explode into a development frenzy with its new-found confidence. Following 9/11 and the growing insecurity of global investments, Kuwaitis have now started to bring their money back into the Middle East and this has generated a wealth of private investors looking to put their money into the country. Added to the fact that Kuwait sits on 10% of the world’s proven oil reserves and the government is looking more and more at inward investment, a recipe for an economic explosion certainly looks to be cooking up. So what will this mean for the construction industry? “I think you are going to see more private money involved in government projects,” says de Lange. “Hopefully things will move a little faster.” Indeed, the growth of private finance on projects has led to the growth of BOT (build-operate-transfer) contracting in Kuwait. “The vast majority of projects are still being handled in the normal way but the BOT process has become part of the construction scene in Kuwait and has been active since the late 1990s,” says de Lange. Projects financed by private developers are built, run for a concession period, which is usually 20 years in Kuwait, and then handed back to the government. It sounds like a match made in heaven. The government gets a project on its lap and the developer is able to recoup the costs of construction during the concession period. “There is less bureaucracy and it is faster to develop. It is more efficient for investors to run it,” says Emad M Al-Jaouni, business development manager, SSH Consultants, referring to the relative success of BOT in Kuwait. And it looks as though this form of procurement is set to run and run, as the government gets to grips with how to maximise the potential of the construction sector. “Every year there are BOT projects coming from many different organisations within the government, and our company has recently been successful with a developer for constructing a 33ha public park — Salmiya Park. And that’s now getting ready to enter the construction stage,” adds de Lange. “The principal of this BOT is that in exchange for providing 30ha of open space, the developer can build a shopping mall.” The US $69 million (KD20 million) park will contain a lake, cricket square, fishing lake, maze, shopping mall, restaurants and a train, which starts within the shopping mall, and has stations across the site. A tie in with Kuwait Public Transport Company will also see a combined bus and rail station at one end of the site. “People will be able to get off the bus, get on a train and travel the entire length of the park,” adds de Lange. The site preparation package is already out at tender and bids are expected back by the end of June. The owner is the Public Authority for Agriculture and Fish Resources and Gulf Consult is working on the project with developer Kuwait Commercial Markets Complex Company (KCMCC), which has signed the BOT deal with the government. Other major BOT deals currently in the pipeline include the $2.7 billion (KD800 million) Failaka Island project. Three mega consortia recently submitted their design/financial bids to develop the island into a tourist hub. Currently used for small-scale local tourism, the contract would see the island, which is located only 20km off the coast of Kuwait City, developed into a full-scale resort. The project, which is one of the largest ever tendered for in Kuwait, is illustrative of the optimistic, but slightly jittery nature of the industry. “In terms of developers, pre-qualification has taken well over a year, which has finally led to three consortia bidding,” says de Lange. “The three have been formed from about 20 who had originally prequalified for the job. These three then joined privately to form the mega consortia.” But according to de Lange, the government is keen to push forward with the project and has divided the contract into two — one to develop the island’s infrastructure, which was damaged during the Iraq occupation, and the other to develop the island as a resort. Bids for the project are expected to come back in the next two months and Kuwait’s confidence to push forward with major projects will be put to the test. Another big test for Kuwait will be the planned development of a new town in Subiya, northern Kuwait. Named the City of Silk or Madinat Al Hareer, a new town for 500,000 residents has been in the pipeline for decades. “Planners have dreams and targets, and the thing about Subiya — if and when it’s built — is that it will be the first time that a town will be established that will be totally independent of Kuwait City,” says de Lange. “So psychologically it’s a huge quantum leap. “All the development in Kuwait so far is physically and emotionally linked to Kuwait City. Even Al Khiran [Pearl City — a residential development close to the Saudi Arabia border] down in the south is at the end of the motorway that drives into the city,” continues de Lange. “There has been a natural reluctance for this quantum leap to start a completely new city.” But this reluctance may be showing signs of disappearing. According to Atkins, approval for a 1km-high Burj-beating tower on the development has been endorsed by the powers that be in the Kuwaiti government. “We’re just waiting on final approval and for a planning committee to be formally set up to front the project,” said Mike Otlet, director and head of structures, Atkins. “We’re confident we’ll get final approval from the Kuwaiti government. It’s a long process because at the moment nobody can buy land or accommodation unless they’re a Kuwaiti resident. So the parliamentary rules on development will need to be changed.” So on the face of it, with plans to develop world-record breaking towers, the confidence of the Kuwait government in its construction industry seems to moving in the right direction. But Al-Jaouni is not so sure. “I have very little information, but it may not fly,” he says of the Subiya project. “First of all, why would you want to go 1km tall? For an area that is completely undeveloped, it is premature. “In terms of master planning, Subiya Town has been on the drawing board since 1983 — it was revised in 1986/87 and now it is coming back to life, but it could take another 20 years to be developed,” he adds. Al-Jaouni goes on to say that there is an increasing demand for residential housing, and that he could see a town in Subiya being developed to some extent. “There is a demand for housing projects, specifically private housing developments, and we are starting to see satellite housing towns all over the country, especially on the borders for security reasons.” But whether the City of Silk is born into a 500,000-strong city or a smaller satellite town, the cogs that are pushing this development forward have definitely started to turn again. Another huge project in northern Kuwait is the development of a 2.5 million tonne-a-year container terminal on an island the size of Bahrain. Bubiyan Island is located off the coast of Subiya just south of the Iraqi port of Umm Qasr. It is a project that has been commissioned by a government body, the Mega Projects Agency, to cope with the expected growth in logistical movement in to and out of Iraq. Gulf Consult carried out a two-year study on the island, which, de Lange says, very little was known about. “At low tide it’s 850km2 of mud and at high tide it’s about 500km2 — and about twice a year the whole island disappears.” An interesting concept for any container terminal designer to work with. A consortium of Gulf Consult, HOK Planning Group, UK engineers Mouchel Parkman and Kuwait Institute Scientific Research has been working on the early stages of the project. “We spent a year-and-a-half just gathering data about the island trying to understand what was there physically — tides, water table, fish and animal life — and from that we were able to locate the port in the most environmentally acceptable location as possible and locate the road that will lead to it in such a way that it will act as a barrier between the northern and southern half — the northern half of the island will be a nature reserve,” adds de Lange. The design concept for the port is currently being finalised by Mouchel Parkman and the design-build contract, thought to be worth $2 billion, is due to go out later this year. As well as the port, project sources have confirmed that the road and the bridge up to the port was tendered at the end of May and bids ranged from $116 million to over $200 million. The road and bridge — a rail link is also being planned — will link the port to mainland Kuwait via Subiya in the north and provide an arterial link for the large perceived volume of container traffic moving north into Iraq. Despite the massive undertaking of this project, the government is keen to see this terminal open by 2009. So with all the factors in place for the construction industry to up the ante and genuinely compete with its powerful GCC neighbours, Kuwait is showing the signs of wanting to fully emerge from the shade and develop to its maximum potential. With the growth of hungry private investors, a renewed sense of confidence in the government and a traditionally reliable construction industry, Kuwait is looking to find its feet, benefit from the reconstruction of Iraq and define its own controlled construction explosion that will see it learn from the lessons of the UAE and Qatar, all the while keeping its feet firmly on the ground. “Kuwait was supposed to be what Dubai is now, but the occupation stopped many projects,” says Akil A Lookman, senior architect and project manager, Gulf Consult. ||**||

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