Although oil extraction remains the major source of Kuwait’s economy, they are diversifying their economy, and the construction sector plays a major role. The construction sector saw a dip in 2008 and finally recovered in 2014. Since then several infrastructural developments have been seen in every sector- transport, power, and water etc. The output value of the construction sector in Kuwait rose at a CAGR of 5.24% from 2010.The construction sector in Kuwait is growing at a rapid pace now and is projected to reach USD XX billion by 2021 at a CAGR of X%. Greater exposure to trade, attractive investment environment, competition, and diversification are factors affecting the growth of this market.
With Kuwait Vision 2035 in their mind, the government wants to decrease their dependence on oil and gas sources. The current dip in oil price is the biggest driver for the construction sector in Kuwait. Initiatives taken by the government include the passing of the Kuwait Development Plan for almost USD 120 billion, which is expected to stimulate the economy and help in developing infrastructure. Some public sector institutions like KCB (Kuwait Credit Bank), KIA (Kuwait Investment Authority) etc. are funding major developments and have played a central role in shaping market dynamics.
Restraints and Challenges
With more than 80% revenue coming from oil and gas, the high vulnerability of oil prices affects all the sectors including construction. Land prices in Kuwait are escalated due to greater demand and low availability of resources, leading to higher construction costs, thereby making things tough for an investor. Attempts to Kuwaitize private sector employment has been of little help. Moreover, corruption and political instability threaten the investment environment, making foreign investors look to other GCC countries.
Kuwait’s Vision 2035 provides many opportunities for investors as well as job-seekers. The government has ample assets and reserve funds to push growth in this sector. There have been improvements in the power and transmission systems opening up opportunities for more ambitious developers and builders. If Kuwait eases its regulations and the government gains stability, then Kuwait has many opportunities for foreign investors and they shall need foreign investments to keep up with their 2035 plans.
Key Deliverables in the Study