One of the most important developments for Kuwait at the turn of 2010 was the recovery in oil prices to

US$70 – US$80 per barrel. The rebound has cushioned the regional impact of the Dubai debt crisis, and

should help Kuwait generate a budget surplus of KWD6bn in 2010. This would be the 11th consecutive

budget surplus recorded by Kuwait. However, this has also highlighted continued disappointment with

the level of spending in the infrastructure sector. In recent years this has been linked to the global

financial crisis, with Kuwait’s economy contracting by 2.4% in 2009. With a real growth rate of 2% being

forecast for the economy in 2010, the construction sector is failing to keep pace. Indeed, BMI expects

that growth in the industry will fall to 0.53% in 2010 and will fail to return to even 2009 levels of around

2.3% until 2013. The perception of continuing rifts between the country’s legislature and its government

– which has stymied new projects and private investments – remains one of Kuwait’s most significant

obstacles to an accelerated recovery. By 2014, the total construction industry is forecast to reach a value

of KWD0.87bn (US$3.22bn).

Both parliament and government claim to be aware of the need to increase private investment and

involvement and accelerate spending on projects. The National Assembly of Kuwait, the country’s

parliament, approved a US$129bn basket of projects in January 2010 to provide impetus to the economy.

The four-year plan is the first of its size for 24 years and aims to establish city centres, including a

US$77bn business complex called Silk City. Among the projects in the transport sector is a new metro

system, railway, container harbour and a 25km causeway.

2010-2020 may be seen as the decade for rail developments in the Gulf, reversing the traditional focus on

road transport. TheUS$25bn GCC rail network project is expected to be tendered in Q110, with

development to begin in Kuwait. A total of US$109bn is expected to be spent by Gulf Cooperation

Council (GCC) countries on rail projects between 2010 and 2020. This compares to just US$10.6bn

earmarked for road projects. Political power plays notwithstanding, there is also some evidence in Q210

that the country is working harder to attract private investment and step up infrastructure-spending, BMI

is cautiously optimistic that 2010 may well be ‘the year for accomplishing projects’, as the deputy prime

minister of economic affairs said at the start of the year.

Kuwait remains in mid table in the Middle East & North Africa’s Project Finance rankings. The major

drawback is the restrictive political environment, which makes it difficult to get new projects off the

ground. Meanwhile, although the country is relatively economically stable – and will benefit from

recovering oil prices – Kuwait has a low score for finance, reflecting the difficulty in raising capital for

major projects.