Development in Kuwait

Kuwait is one Middle Eastern country that is on the rise in terms of economics, infrastructure, and development in general.  Most prominent is Kuwait’s rapidly increasing real-estate development; despite the state of the global economy, Kuwait’s housing market continues to boom as space is limited and demands are high.  The construction and renovation of housing units and related infrastructure began to steadily increase when the Public Authority for Housing merged with the Ministry of Housing in 1986.  But the true real-estate “boom” occurred when the Public Authority for Housing Welfare (or PAHW) established itself as an independent entity that would be replacing the Ministry of Housing in 1993. 

The PAHW receives a yearly budget of more than KWD200 million and dedicates itself to providing decent housing for Kuwait’s citizens by offering them subsidized living in the form of a plot of land, hour, or apartment.  The system is a convenient one as buyers have 20 years to slowly but surely pay off their housing loan.  The PAWH does not simply cater to individuals or families, but since it’s independent establishment has finished and sold over 70,000 units schools, police stations, mosques, and libraries.  However, the crippling problem with the PAWH is a lack of availability; the current waiting period for potential PAWH homeowners ranges from 12 to 15 years.  The limited availability is a result of funding, employment, and space issues, but the establishment’s application process is also a setback for many Kuwaitis looking to find a home.  Thus, 32,000 families are currently registered on the PAWH waiting list and burdening their government in the process (as the country’s total population barely reaches 700,000).

Due in large part to the PAWH, the real-estate market has increased by 57% in value over the course of 2007which has propelled it to a current total value of $855 million.  On a larger scale, the entire property market (not just residential sales) has seen record-breaking growth as massive oil revenues have prompted the construction of 270 new towers and five new urban centers.  Kuwait’s construction industry possesses a current value of $4 billion and has planned future investments that will hopefully skyrocket that value to $11 billion. Reasons for Kuwait’s rapid increase in infrastructure success were due to the state’s stable 4.5% annual population increase, high levels of liquidity, promising regional markets, and relatively secure political system.  However, the ongoing global financial crisis has created obstacles throughout the housing and construction markets.  The Minister of State for Housing Affairs, Dr. Moudi Al-Homoud announced last February that His Highness the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah has opted against the housing loan increase that would provide for 100,000 Kuwaiti’s.

Aside from Kuwait’s impressive real-estate growth, the state also boasts the most advanced road network in the Middle East.  Beginning in the 1950’s, the Kuwait government has intensely worked to reconstruct the narrow roads that are periodically ruined because of poor weather conditions.  When the road system was first constructed it was one kilometer in length, but now they span six kilometers long and form a 650 kilometer highway that have greatly improved traffic conditions.  Due to the evident success in the road system, the Ministry of Public Works and Kuwait Central Traffic Department are currently drafting plans to improve the state’s bridge system.

Throughout 2006, Kuwait’s construction industry rapidly grew at an annual rate of 7.5% and is expected to grow at an average rate of 5% between 2009 and 2011.  Kuwait’s infrastructural growth is almost entirely due to its oil reserves, which comprise 10% of the global total of oil reserves.  Before the global financial crisis, the unbelievable demand for oil and soaring oil prices strengthened Kuwait’s economy and allowed its government to focus its investment on infrastructure development.  It is projected that in the next five years, the government will further invest US$3 billion into their construction development with a combined US$8 billion from the private sector.  Kuwait plans on concentrating that investment on large-scale construction projects such as Project Kuwait, which hopes to increase production in the country’s northern oil fields.  Other projects include the installment of new water desalinization plants by 2012, the PAHW’s plan to construct 69,000 new housing units for Kuwaiti citizens by 2014, the US$2 billion expansion of Kuwait International Airport, the construction of a new campus for Kuwait University at Shadidiyah, and the building of a complex road system known as the “eighth ring road”.

But because the financial crisis is a reality that Kuwait cannot ignore, the government has decided to focus on the diversification and privatization of their economy in order to avoid such continued dependence on the oil sector.  Thus, the Kuwaiti government views heightened foreign investment as the key to their problems.  The Foreign Investment Law that was passed in May of 2000 has continued to benefit the country as foreign investors have been allowed to purchase up 10 100% of the companies allotted by the Kuwait Stock Exchange (excluding banks).