Considering Kuwait

zoom

BMI reveals its Q1 forecasts for the Kuwaiti freight sector.

The most significant development in terms of Kuwait's transport system has been the rapid recovery following the Iraqi invasion in 1990 and consequent destruction of much infrastructure.

This mirrors the speed with which the oil sector resumed normal production, and the overall economy not only stabilised but also regained an impressive upward momentum.

Kuwait is a relatively small country and its trading sector - and therefore transport network - has a vibrant re-export component. Kuwait has evolved as a trade hub for its larger neighbours, particularly Iran and Iraq, which have had limitations on their direct links with the international community.

Moreover, through Iran, Kuwait acts as a conduit for trade involving Central Asia. The changing geo-politics in the region are viewed as offering potential growth areas, rather than as threats to existing trade patterns.

In common with other GCC countries (Saudi Arabia, UAE, Bahrain, Oman and Qatar), Kuwait has a relatively high per-capita income. It is estimated that GDP per capita is currently around US$17,125, providing a sound economic background for development of the transport sector.

A recent cabinet decision to allow establishment of low-fare passenger, freight and cargo airlines indicates a willingness to consider ending the monopoly of the state-owned Kuwait Airways, thereby encouraging competition in the transport sector.

However, Kuwait has a history of procrastination in relation to economic reforms, and it is unlikely that significant competitive pressures will be allowed to grow throughout the sector. Any changes will occur slowly.

Start-up Wataniya Airways (also known as National Airways) said in late August that it had signed an agreement to lease three Airbus A320s from the Dutch company AerCap.

The planes would be leased for nine years starting in 2010, Wataniya said, while not revealing the price it would pay. The new agreement meant that Wataniya was effectively doubling the size of its planned fleet from three to six aircraft. The company said it planned to launch its services in January 2009.

In May, Reuters had reported that the company's intention was to build the fleet to at least 12 wide-bodied planes by 2012.

Wataniya, backed by Kuwait Projects Company (KIPCO) and other corporate investors, was set up to compete with state-owned Kuwait Airways Corporation (KAC) and the private sector low cost carrier, Jazeera Airways. Earlier, Wataniya denied a report by Al-Qabas newspaper that it was interested in buying a stake in the loss-making KAC, which is being prepared for privatisation.

In our latest Kuwait Freight Transport Report, BMI argues that airfreight traffic is likely to grow at an annual average rate of 6.7% in the 2008-2012 forecast period.

Various factors support this prediction. Although the recent global economy will cool and the oil price boom will ease over the next couple of years, we still see Kuwaiti GDP rising by an annual average of 5.3% over the next five years.

Growing capacity and trade in high-value or low-bulk goods will all contribute to airfreight growth. Kuwait is a relatively small country and its trading sector - and therefore transport network - has a vibrant re-export component. Kuwait has evolved as a trade hub for its larger neighbours, particularly Iran and Iraq, which have had limitations on their direct links with the international community.

BMI also forecasts 3.0% average annual growth for road haulage and 6.3% for maritime cargo in the five years to 2012. We estimate an annual average pipeline throughput growth of 7.2%. We expect that the bulk of transport will continue to be waterborne and consist largely of oil and related goods.

Transit trade, particularly that involving Iraq, will comprise raw materials involved in that country's eventual re-building (aggregates, basic metals and the like) and machinery related to building and construction work. At 64.9 on a scale of zero to 100, Kuwait's overall freight rating is now above the average for the Middle East and Africa (MEA) region.

It scores well in terms of its economic risk and its record of investment in infrastructure. However, it is below the average for freight growth, the regulatory environment and for the transport intensity index.

For the 2008-2012 forecast period, BMI expects the transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 6.1%, versus 5.3% for overall GDP. The total value of transport and communications GDP will rise to $8.26 billon in nominal terms by 2012, representing around 5.2% of Kuwait's GDP.

Michelle Byrne is head of freight transport analysis at UK-based Business Monitor International (BMI).

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM