KFH maintains positive outlook for construction industry

The Kuwaiti Finance House, in a fresh report, has maintained a positive outlook for the Kuwaiti construction industry, on the back of strong domestic demand in the economy and a pick-up in government capital spending.
   "While we remain fundamentally cautious about the country's medium-term investment outlook, we note that higher growth in bank lending over the last few months of 2013 and signs of progress on some of Kuwait's development projects have improved growth prospects," the KFH said in its latest report.
   Since the election of a new parliament in July 2013, the government has attempted to move forward on long stalled infrastructure development projects and implement increases in public capital expenditure. This seems to be paying off; looking at government expenditure on construction, loans for private sector construction projects and remittances sent by Pakistani workers, "we note that there has been a generally improving picture across the board, in line with estimates that the industry grew by 3.9% y-o-y in 2013.
   "As such we maintain our outlook for the country's construction sector for 2014, which should see real growth of 5.7% y-o-y," despite having one of the more developed public-private partnership models in the GCC, which should give the market an edge in the highly competitive and lucrative region.
   It was announced in mid-December 2013 that Kuwait is set to finalise USD1.4bln worth of financing from a consortium of lenders as part of the country's first public-private partnership (PPP) for the first phase of the 1.5GW Al-Zour North power plant and desalination facility. In February, the Kuwaiti parliament voted to probe the tender, after accusations of irregularities awarding the contract.
   In another development there are plans to offer shares in three of Kuwait's largest planned projects by the end of 2014, as announced by the Partnerships Technical Bureau (PTB), and the organisation in charge of Kuwait's Public Private Partnership (PPP) programme.
   The three ventures will be the Al-Abdaliyah solar power plant, Al-Zour North power plant (second phase), and the Kabd solid waste recycling plant. Project companies are to be established for the assets by the selected bidders and it is expected that a 60% stake in the project company will then be publically offered.
   Of the shares being publically offered 40% will be open to foreign investors, 50% to Kuwaiti nationals, and 10% for government bodies.
   There is plenty of potential in the Kuwaiti market, should investor interest remain and the government carries out its proposed spending plans. The government's 2014/15 budget is expansionary, with expenditure growth of 3.2%, to KWD21.9bln (USD77.3bln). Although lower average crude prices and near-flat non-oil revenue growth could lead to a decline in government income, Kuwait should benefit from a moderate increase in oil production and exports. This budget is supportive of government is plans to invest USD75bln in several energy, power and housing projects in the country by 2016.