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Construction Market in Kuwait Hits Hard, Recovery Difficult

Construction Market in Kuwait Hits Hard, Recovery Difficult
October 3, 2022
Construction Market in Kuwait Hits Hard, Recovery Difficult

Introduction

Kuwait has a modern road network with easy port access, making it well-connected with its borders. Kuwait's three ports handle 900K+ import/export containers with 10M+ import/export per ton. A total of 19 major road projects worth $4.9 billion are currently being implemented by Kuwait's Public Authority for Roads and Transportation (PART). 

The construction industry has clearly seen ups and downs in recent years as a result of a variety of socioeconomic and economic issues. The construction sector is in decline, with various contractors feeling pessimistic about the overall economy due to rising costs, a labor shortage, and excess demand that cannot be met.

This article looks at the key developments we find from our marketing research within the construction sector of Kuwait

Kuwait’s history of underinvesting in key projects

Kuwait has historically underperformed in the infrastructure sector, hampered by politics and a lack of central authority to assist drive initiatives forward. As a result, despite its massive oil resources and sound economic condition, the state seldom tops $15 billion in contract awards each year.

Kuwait has consistently underinvested in the construction industry, with the exception of 2014-15, when the nation spent close to $30 billion in contracts for Clean Fuels and Refinery projects, briefly making it the regional leader in terms of oil and gas activity. However, since oil prices have fallen since then, contract award levels have fallen as government expenditure has decreased. (Source: Meed)

Current developments

The government is actively building local infrastructure to boost economy and reduce traffic congestion. The Kuwaiti National Assembly halted investment and development initiatives for the Dow Chemical and Silk City Projects, which would have created millions of dollars in profits for the government. The State was forced to pay close to 2.5 billion KWD to cancel the Dow Chemical project. 

Transactions in Kuwait's home and real estate market decreased by 50% in the first half of 2022. The current global economic recession and rise in inflation are both contributing factors to the decline in real estate sales.

Labor shortage and Rising costs

The contracting firms' condition has deteriorated due to a lack of manpower and excessive salaries, which have risen from 10 - 15 KD per hour to 25 - 30 KD per hour (a 110% increase). Due to the labor shortage and rising expenses, the situation for contracting firms has gotten worse.

There is a severe labor shortage in the market, which has severely impacted businesses, particularly after building licenses were granted to the regions of Al-Mutla'a, South Abdullah Al-Mubarak, and Southern Khaitan, which resulted in a tremendous demand for labor that the local market could not provide.

The future of the construction market in Kuwait

As a market dominated by government expenditure, much will depend on both a rise in crude prices and the government's ability to cut through red tape and political concerns from the National Assembly in order to go forward with its project plans. However, given the history of issues and current market performance, there does not appear to be much hope that it will be able to do so.

Conclusion

Get our full market research report on the construction outlook and heavy equipment rental in Kuwait. Reach out to us at info@poixel.com to initiate a market research study for your business.Introduction

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