By Courtney Trenwith
Delays in confirming a $4.34bn deal to revamp Kuwait International proves the country is still moving too slowly to develop its infrastructure, says Courtney Trenwith
There is a saying that things come in threes. Kuwait may well be hoping that that is the case for its semi-historic airport after the government announced last week for the third time that Turkey’s Limak Holding and local construction firm Kharafi National had won a tender to build a new terminal that would more than double capacity at a cost of $4.34bn.
The expansion has been sorely needed for more than a decade but – as is the problem with the majority of potential infrastructure projects in Kuwait – political bickering has stalled any real action.
The terminal deal was first announced in 2014, before being nullified without any explanation. It was again announced in August 2015, and despite there being no public knowledge that it had again been scrapped, was for a third time announced on May 30.
The delays follow the release of an airport expansion plan in 2011, with new terminals set to increase capacity from 5 million to 25 million, with room to grow to 50 million.
While the political wrangling has continued, the airport – potentially crucial to boosting revenues to help fill a widening budget deficit (again, arguably, worse than it could be due to a lack of political will and cooperation to make quick and necessary reforms that would reduce the deficit) - has been disintegrating. It is already running at more than double its capacity, with 11 million passengers passing through last year, according to the civil aviation authority.
But while other airports have been speeding up their check-in processes and implementing efficiencies, civil aviation authorities in Kuwait last year urged passengers to arrive at Kuwait International three hours early due to the airport’s inability to properly handle the oversupply.
The government also is losing out on potentially $470m because its landing fee is still at 1980-levels of $20 per plane.
A glimmer of hope came through in March when Minister of Commerce and Industry Yousef Al Ali said the government was planning legislation to allow the private sector to manage commercial ports and the international airport, while the state would continue to own the assets.
The privatisation of Kuwait Airways also has been repeatedly announced – including with set deadlines that were never met – since 2008. But the pride attached to a national carrier and its status as one of Kuwait’s largest employers has so far prevented a sell-off.
The airline’s prospects have greatly improved under chairwoman Rasha Al Roumi, who was appointed in December 2013. Parliament agreed to a compromise that converted the airline into an independent corporation, allowing Al Roumi to place its first significant aircraft order in more than 20 years without first gaining approval from state auditors, and she has cut 1,000 jobs.
But if Kuwait’s history is anything to go by, Al Ali’s choice of words – “planning legislation” – indicates that any productive move towards privatisation of infrastructure is years away. Such legislation still needs to be written, let alone debated in parliament and eventually passed and implemented.
The aviation sector is not the only victim. Roads in Kuwait City are perpetually congested because few new lanes have been added while the population has ballooned; there have been no new hospitals this century; and there are reportedly more than 20,000 Kuwaitis on a national housing wait list.
There is some positive movement, however. Last year parliament approved a new five-year development plan for 2015-2020, budgeting about $116bn, and the National Assembly budgets committee said last Wednesday that capital spending would reach $8.9bn in 2016/17, an increase of $1.8m.
There have been a raft of new laws designed to enhance the economy, including the Companies Law, Commercial Licensing Law, the Direct Investment Promotion Law, the Public and Private Partnership Law and a revision of the Capital Markets Law.
The capital markets changes in particular should help provide investors with confidence as the country tip-toes towards privatisation.
But laws are one thing; impressions are another, and investors flying into Kuwait City may well be deterred even before they’ve had time to explore the potential opportunities. Let’s hope it really is a case of third-time lucky.For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.