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Kuwait: Building transport and logistics hubs in GCC

Thursday, 28 January 2010 15:29

Kuwait is stepping up efforts to position itself as one of the main transport and logistics hubs in the Gulf and the Middle East, investing heavily in new infrastructure to meet the country's own needs but also those of the wider region.

The country already has an extensive port network, with six maritime cargo facilities - three for the export of hydrocarbons and the remaining three serving other trade requirements. Though there are road links with other Gulf states, and air freight services connecting Kuwait to the rest of the world, seaborne trade remains the country's main means of cargo transport.

With this in mind, the government, in conjunction with the private sector, is developing a massive new port and logistics facility, to be built on Boubyan Island in the northwest of Kuwait. The first stage of the $3.4bn Boubyan project is nearing completion, with most of the initial infrastructure in place, including bridge links to the island.

Late last year, officials announced a change to the original project - new plans that more than double the number of jetties from the initially proposed 24. The expansion takes the total to 60.

On January 26, domestic media reported that local firm Kharafi Group and South Korea's Hyundai Engineering and Construction had been awarded a $1.14bn contract for the second part of the first phase of the Boubyan island development, with the tender requiring the companies to design and build the expansion to the seaport. The development foresees a container-handling facility with the capacity to process 2.4m shipping containers annually.

Kuwait has also signed up for the $15bn trans-Gulf railway project, which will see the country linked by broad gauge rail lines with Oman, the UAE, Bahrain, Qatar and Saudi Arabia. Initial contracts for the scheme are expected to be awarded by December, with work on the 2200-km network scheduled to be completed in 2016.

According to estimates, Kuwait's share of the project cost is $1bn, which will give it 145 km of track within its borders, linking up with a planned internal rail network.

While both the rail and port projects will directly serve the local economy, they also have a wider objective, namely putting Kuwait on track to tap into potentially one of the region's largest logistics markets in the coming years - Iraq.

When the original proposals for the Boubyan Island development were unveiled in late 2004, state officials said the driving force behind building a new port was to take advantage of the expected increase in demand for inbound and outgoing goods from northern Gulf ports due to the regime change in Iraq.

Kuwait already has extensive experience in serving the Iraqi market, having been used as a forward logistics base by US and coalition forces during the 2003 war and the subsequent years of occupation. While the Western military presence is scaling down, in line with the proposed withdrawal of combat forces in August 2010, Iraq's logistic requirements are on the up, as the country increases imports of material needed to rebuild the economy and service domestic demand.

Even after the main withdrawal, which will see some 1.5m pieces of military equipment transported from Iraq, at least 50,000 troops will remain in the country, requiring logistics support, much of which will continue to come through Kuwait.

With the increased port capacity that Boubyan Island will provide, combined with a proposed main line rail link with Iraq that will also be connected to the trans-Gulf network, Kuwait will be well credentialed as a main entry point for Iraq.

However, Kuwait still has some way to go before it claims the mantle of the best logistics hub in the region. A recent report by the World Bank ranked Kuwait 36th out of 155 countries in terms of how well the movement of goods and services is facilitated through the provision of logistics services.

Regionally, Kuwait was placed third, behind the UAE and Bahrain, in the bank's Logistics Performance Index (LPI) survey, but ahead of Saudi Arabia, Qatar, Oman.

Though only just behind Bahrain, both countries are well off the pace set by the UAE, which was placed 24th on the World Bank's LPI ladder, having scored highly in the categories of infrastructure; efficiency of the cargo clearance processes, including border control and Customs; and competence and quality of services.

Kuwait is already moving to improve its performance in some of the categories covered by the World Bank report, funding the expansion of its infrastructure is of course a significant step along the way. It is likely that an upgrade in rankings will follow soon enough.

Global Arab Network

This article is published in partnership with Oxford Business Group

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Last Updated on Thursday, 28 January 2010 16:01

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