Kuwait

Infrastructure Sector
Investment Opportunity

Table of Content
No.

Content

Slide No.

1.

Industry Overview (Infrastructure)

2.

Industry and Product Scenario

4-6

Importance of Infrastructure

Use of Infrastructure

SWOT Analysis

3.

Global Market and Country Scenario of

the Industry

7-11

Total Revenue across the globe in

Infrastructure

Trend in Sales Across the World

Key Developments

10

Infrastructure- Country Comparison

11

4.

Top Infrastructure Companies of Kuwait

12

5.

References

13

Infrastructure Industry Overview

Infrastructurerefers to structures, systems, and facilities serving a country, city, or

area,including the services and facilities necessary for itseconomyto function.It
typically characterises technical structures such asroads,bridges,tunnels,water
supply, sewers,electrical grids,telecommunications, and so forth, and can be
defined as "the physical components of interrelated systems
providingcommoditiesand services essential to enable, sustain, or enhance
societalliving conditions.

Infrastructure may be owned and managed bygovernmentsor by private

companies, such as solepublic utilityorrailwaycompanies. Generally, most roads,
major ports and airports,water distributionsystems andsewagenetworks are
publicly owned, whereas most energy and telecommunications networks are
privately owned. Publicly owned infrastructure may be paid for from taxes, tolls, or
metered user fees, whereas private infrastructure is generally paid for by metered
user fees. Major investment projects are generally financed by the issuance of longtermbonds.

Hence,governmentowned and operated infrastructure may be developed and

operated in theprivate sectoror inpublic-private partnerships, in addition to in
thepublic sector. In the United States for example, public spending on
infrastructure has varied between 2.3% and 3.6% of GDP since
1950.Manyfinancial institutions invest in infrastructure.

According to researchers at theOverseas Development Institute, the lack of

infrastructure in manydeveloping countriesrepresents one of the most significant
limitations to economic growthand achievement of theMillennium Development
Goals (MDGs).Infrastructure investments and maintenance can be very expensive,
especially in such as areas as landlocked, rural and sparsely populated countries
inAfrica.It has been argued that infrastructure investments contributed to more
than half of Africa's improved growth performance between 1990 and 2005, and
increased investment is necessary to maintain growth and tacklepoverty.The
returns to investment in infrastructure are very significant, with on average thirty to
forty percent returns fortelecommunications(ICT) investments, over forty percent
forelectricitygeneration, and eighty percent forroads.

According to researchers at theOverseas Development Institute, the lack of

infrastructure in manydeveloping countriesrepresents one of the most significant
limitations to economic growthand achievement of theMillennium Development
Goals (MDGs).Infrastructure investments and maintenance can be very expensive,
especially in such as areas as landlocked, rural and sparsely populated countries
inAfrica.It has been argued that infrastructure investments contributed to more
than half of Africa's improved growth performance between 1990 and 2005, and
increased investment is necessary to maintain growth and tacklepoverty.The
returns to investment in infrastructure are very significant, with on average thirty to
forty percent returns fortelecommunications(ICT) investments, over forty percent
forelectricitygeneration, and eighty percent forroads.

Industry & Product Scenario

Importance of Infrastructure
The importance that infrastructure plays in peoples everyday lives is often taken
for granted though it is one of the biggest issues that governments across the globe
need to address in their public policies. Infrastructure investment in the development
of communications, IT, roads, schools, ports and hospitals is important to both
economic development and quality of life.
Infrastructure is a key measure of a countrys position on the global stage; it is the
second pillar that is assessed by the World Economic Forum when determining the
competitiveness of a nation (institutions, being the first).
Well designed infrastructure investments can raise economic growth, productivity
and land values, while also providing significant positive spill over to areas such as
A robust infrastructure
systemefficiency,
ensures that
wehealth.
are able to move goods and
economic
development, energy
public

services, but also people in the most effective ways possible. In order to attract
and retain quality jobs, communities need functioning infrastructure

Infrastructure properly designed can reconnect the social fabric of communities &
can inspire communities as well.

Industry & Product Scenario

Use of Infrastructure Industry
Infrastructure to describefixed assetsthat are in the form of a large
network, in other words, "hard" infrastructure. Infrastructure as the
network of assets "where the system as a whole is intended to be
maintained indefinitely at a specified standard of service by the
continuing replacement and refurbishment of its components.
Civil defenceplanners anddevelopmental economistsgenerally
refer to both hard and soft infrastructure, includingpublic servicessuch
asschoolsandhospitals,emergency services such as police and fire
fighting, and basicfinancial services.
Militarystrategists use the term infrastructure to refer to all building
and permanent installations necessary for the support of military
forces, whether they are stationed in bases, being deployed or engaged
in operations, such as barracks, headquarters, airfields,
communications facilities, stores of military equipment, port
installations, and maintenance stations.
Urbanormunicipal infrastructurerefers to hard infrastructure
systems generally owned and operated bymunicipalities, such as
streets, water distribution, and sewers. It may also include some of the
facilities associated with soft infrastructure, such as parks, public pools,
schools, hospitals and libraries.
Green infrastructureis a concept that highlights the importance of
the natural environment in decisions aboutland use planning.In
particular there is an emphasis on the "life support" functions provided
by a network of naturalecosystems, with an emphasis
oninterconnectivityto support long-termsustainability.
In other applications, the term infrastructure may refer
toinformation technology, informal and formal channels of
communication, software development tools,politicalandsocial
networks, or beliefs held by members of particular groups. Still
underlying these more conceptual uses is the idea that infrastructure
provides organizing structure and support for the system or
organization it serves, whether it is acity, anation, acorporation, or a
collection of people with common interests.

Industry & Product Scenario

SWOT Analysis
Opportunities

Strengths

-Growing Competition
-Major growth through
outscoring opportunities
-Growing number of overseas
investment

-Demand for domestic

industrial growth
- Avail of Low-cost, Skilled
Human Resources
-Increasing investment in
real assets (Capacity
Expanding) across Industrial
sector.

Threats

Weaknesses

- Competition
-Poor working condition

-Outdated labour laws

-Nascent Regulatory
systems to check misuse of
market power by firms.
-Inadequate and poor quality
infrastructure cost and time
delays.

Global Market & Country Scenario

Kuwait is promoting unprecedented levels of infrastructure
development activity aimed at realizing its long term vision of
diversifying the economy and transforming Kuwait into one of the
leading hubs for financial trade and logistics in the Middle East.
The Third Kuwait Master Plan focuses on improvement of the
countrys infrastructure with the Kuwait development plans prioritizing
infrastructure needs of the country with an earmarked budget of USD
103 Bn for projects across different sectors, such as roads, ports and
airport infrastructure, water, power and social infrastructure, a metro
and national rail network, etc. These initiatives are expected to provide
opportunities for foreign investment in Kuwait.
The planned upgrades to Kuwaits aviation infrastructure are
expected to support Kuwaits initiatives to position itself as a
commercial hub. There exists potential to provide specialized facilities
management (FM) services to maintain Kuwaits airport facilities at par
with global standards and benchmarks.
The Ministry of Electricity and Water (MEW) anticipates an
investment of approximately USD 25 Bn to meet the electricity
production capacity targets of 25,000 MW set for 2025. The private
sector is expected to play a major role, leading to long term
opportunities for foreign investors

Global Market & Country Scenario

Total Revenue across the Globe
Infrastructure development is critical to delivering growth, reducing
poverty and addressing broader development goals. To contribute to
these impacts, the World Bank Group (Group) has made a sustained
effort to scale up its support for infrastructure since 2003. In FY10, the
Group emerged as the largest multilateral financier for infrastructure
transport, water, energy and information and communications
technology (ICT). It now represents 43 percent of the Groups
assistance. Several external trends are shaping the infrastructure
agenda of the future. Lack of access to basic infrastructure services
continues to undermine living standards in low-income countries (LICs)
and some middle-income countries (MICs). Aspirations for growth are
fuelling the expansion of infrastructure networks across countries.
Furthermore, the more systemic development challenges of todays
worldfrom social stability, to rapid urbanization, climate change,
technological changes and globalized issues such as food and energy
crisescall for more complex and interconnected infrastructure
solutions (Figure 1). Tackling these second-generation issues will
require actions by and across sectors. These actions can potentially
accelerate growth and shift clients towards a more sustainable
development trajectory. In 2010, the Group positioned support for
infrastructure as a strategic priority in creating growth opportunities
and targeting the poor and vulnerable. Maintaining the Groups level of
engagement in infrastructure in both LICs and MICs and responding to
their very diverse needs with Group resources subject to medium-term
constraints will require a balanced approach with a significant level of
ambition in terms of adaptability, innovation and leverage. In following
this approach, the public sector will remain central to the delivery of
infrastructure services as a provider or enabler.

Global Market & Country Scenario

Trend in Sales across the World
Macro risk environment shifts- No normal is the new normal - Uncertainty
is everywhere: in unexpected election results and political upheaval; in rising
protectionist sentiments; in disruptive and fast-moving technological advances;
and in geopolitical and social upheaval. Simply put, the stable conventional wisdom
that once underpinned infrastructure planning and investment seem to no longer
apply.
Competition for investments heats up- Increased flows are being driven
by institutional investors eager to put their capital to work. But it is also being
impacted by increased investment activity by multinational and sovereign sources
(such as the African Development Bank Group (ADBG)s Africa50 Investment Bank
for Infrastructure) which often prioritize objectives other than pure return on
investment (ROI) and therefore tend to distort capital market flows and returns.
Focusing on the larger benefits to unclog the pipeline- many
governments are starting to recognize that by striving to take a minimalist
approach to risk or to achieve structural and contractual perfection they have
in fact been missing the point and, in doing so, have been making projects more
complicated, less attractive to investors and slower to take to market. Simply put,
they have been putting too much focus on being clever rather than reaping the
larger rewards .
Technology rockets up the infrastructure agenda- Interestingly, much
of the demand for technological advancement is being driven by the consumers. In
the developing markets, concerns about the affordability of conventional
technologies are driving adoption of newer approaches. In the mature markets,
consumer desire for more control over their infrastructure use is driving demand
for more sophisticated services.
Security becomes a mainstream issue- Every government, regulator,
owner and operator should be worried about the security of their infrastructure.
Given the size and frequency of physical attacks, natural disasters and cyberattacks on critical infrastructure and in public spaces over the past few years, it is
clear that there is an urgent need to reduce the vulnerability of infrastructure
assets and to protect citizens and users.

Global Market & Country Scenario

Key Development in Infrastructure Sector
Kuwait's five-year plan (which runs until 2020) will be the major growth
driver in lending opportunities and profitability. The National Assembly passed
the plan in February 2015, which envisages spending of about USD116bn on
521 development projects.
The government, with a supportive parliament, has been able to progress on
long-stalled infrastructure development projects and implement increases in
public capital expenditure. Capital spending was KWD0.6bn for the fiscal year to
September, up 16% y-o-y. It is currently at 23% of the full-year budget, five
percentage points above the five-year average.
The Ministry of Electricity and Water (MEW) anticipates an investment of
approximately USD 25 Bn to meet the electricity production capacity targets of
25,000 MW set for 2025. The private sector is expected to play a major role,
leading to long term opportunities for foreign investors.
The Kuwait Government is considering alternative sources of energy to meet
growing demand. Kuwait aims to generate at least 10% of its electricity (or over
2,000 MW) from renewable sources by 2020.
The development of a national railway and metro network, with project
values of USD 10 Bn and USD 7 Bn respectively are integral part of Kuwaits
plan to upgrade the public transportation sector
Over a period of six years (2009-2014), over USD 148 Bn of infrastructure
projects were funded through project finance in the GCC. Over 72% of these
project finance transactions were in the utilities sector with KSA and United
Arab Emirates attracting 70% of total project finance lending among GCC
countries. Historically, the lack of private sector participation in infrastructure
has hindered the growth of project finance in Kuwait.
However, this scenario is set to change with the Kuwait Government
adopting PPP models especially in core sectors such as power and water.
Projects worth over USD 358 Bn are expected to be implemented over the next
15 to 20 years, presenting an attractive, high-growth market for project finance.

1
0

Global Market & Country Scenario

Infrastructure - Country Comparison
Govt.
Type

Infrastructur
e Quality
Score (By
BMI)

Saudi
Arabia

Unitary
Islamic
Absolute
Monarch
y

5.5

U.S

President
ial
System,
Federal
Republic,
Constitut
ional
Republic

5.8

Indonesi
a

Unitary
State,
President
ial
System,
Constitut
ional
Republic,
Republic

3.7

Nepal

Federal
Republic,
Federatio
n,
Republic

2.4

1
1

Top Companies in Kuwait in

Infrastructure
List of few Companies

Kharafi National

Combined Group Contracting Company

Alghanim International General Trading & Contracting Company

United Gulf Construction Company

Mushrif Trading and Contracting Company

Ahmadiah Contracting and Trading Company

Kuwait Portland Cement Company

1
2

Reference

http://www.compasscayman.com/chamber/2011/04/20/The-importance-ofinfrastructure--to-our-economic-and-social-development/

http://kdipa.gov.kw/wp-content/uploads/2016/02/KDIPA-Investment-Gui
de-2016.pdf

http://siteresources.worldbank.org/INTINFRA/Resources/Transformationth
roughinfrastructure.pdf

https://www.kpmg.com/BR/PT/Estudos_Analises/artigosepublicacoes/Doc
uments/foresight-emerging-trends-2016.pdf

http://www.photius.com/rankings/infrastructure_quality_country_rankin
gs_2011.html

1
3