Global Arab Network | Kuwait to build multi-bullion seaport in Boubyan island

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Kuwait to build multi-bullion seaport in Boubyan island

Monday, 19 July 2010 19:41

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Kuwait occupies a strategic location at the head of the Gulf, in close proximity to the large and expanding markets of Saudi Arabia, Iraq and Iran . Over the years, the country has developed a strong reputation in the logistics sector, built on the performance of its leading companies in the sector. At present, however, its two main ports face issues with congestion and are in need of expansion should the country wish to become a leader in an increasingly competitive regional port landscape.

A recent World Bank report ranked Kuwait 36th out of 155 countries in terms of the movement of goods and services. While scoring relatively high on road infrastructure (30th), its overall ranking was dragged down by a lower ranking on the quality of its ports (69th).

Kuwait’s two main ports of Shuwaiba and Shuwaikh, with a combined capacity of 1.2 m twenty-foot equivalent units (TEUs), are both facing capacity limits, with shipping companies and export manufacturers located in industrial zones nearby complaining of delays and inefficiencies. Hamad Al Terkait, the president and CEO of EQUATE Petrochemical Company, recently told OBG, “Shuaiba is today overcrowded and everyone is vying for access to its limited port facilities. Access to the sea is crucial for the expansion of our industry.”

Average clearance for a shipment at both ports is estimated to take three days, compared to only one day in Dubai. Furthermore, the ports are relatively shallow, which means larger ships travelling with cargo originating in or destined for Kuwait must dock in Dubai and then send the cargo via land, or vice-versa.

Besides the need to serve the domestic market, Kuwait is aware of its potential to serve as a gateway for its northern neighbour, Iraq. With major reconstruction efforts and projected double-digit economic growth on the back of its underexploited hydrocarbon reserves, Iraq stands to emerge as the region’s prominent logistics growth destination in coming years.

Kuwait is particularly well placed in that it already has extensive logistics experience serving the Iraqi market. This has mainly taken the form of defence contracts with US and coalition forces, which have used Kuwait as a base for military operations. Partly as a result of these contracts, and the consequent revenue and experience they have provided, Kuwait now possesses a handful of leading international logistics companies such as Agility (formerly known as PWC Logistics), KGL Holding and Mubarrad Transport. All three firms have undertaken expansion or acquisition deals and have won projects in major markets across the region.

The phased US military withdrawal from Iraq will result in increased logistics business in the short term, through the requirement to repatriate huge amounts of troops and equipment. Kuwait will need to compensate for the eventual loss of this cargo niche in the longer term by attracting and serving commercial cargo bound for Iraq. The prospects for this look promising, however, as political stability should result in an increase in imports, particularly of materials needed to rebuild the economy, service domestic industry and meet consumer demand.
In this respect, all eyes are on plans to build a new seaport on Kuwait’s largest island, Boubyan, which is located in the country’s north-east near the Iraqi border. The project has faced multiple delays, with initial proposals dating back to 2004.

There has recently been positive news that the project may now move forward. In early July a $1.2bn deal to build the first phase of a container port on Boubyan (with a 42-month target date) was signed between the Ministry of Public Works (MoPW) and a consortium involving Kuwait’s Kharafi Group and South Korea’s Hyundai Engineering and Construction.

According to Marzouk Nasser Al Kharafi, the group vice-president for the Kharafi Group, “It is a huge concern that projects have been continually delayed. Parliament acting as a hurdle rather than supporter of state projects remains a major obstacle. However, we are starting to see the government get serous about pushing things through parliament. The timing is right and all circumstances point toward a pressing need for projects to go ahead. The government has surplus funds and there is a surplus of local and foreign contractors hungry for work.”

In addition to a planned 60 berths and capacity to handle 2.5m TEUs, according to the MoPW, the overall development will also involve the establishment of free trade zones and light industrial areas. The project calls for the construction of a rail link which, as part of a wider GCC rail network, will connect directly to Iraq’s only deep-water port of Umm al Qasr, the eventual destination, it is hoped, for much of Boubyan’s arriving cargo.

With the Iraqi government currently undergoing negotiations with potential bidders for the construction of a new port, time is of the essence, especially since Kuwait is far from the only player looking to capture its share of shipments bound for the Iraqi market.

In 2009 Bahrain opened the 1m-TEU Khalifa bin Salman Port, which was constructed with the intention of serving commercial traffic throughout the northern Gulf. Meanwhile Turkey, Jordan and Syria are each positioning their main ports as trans-shipment points for goods destined to northern and central Iraq.

Mohammad Al Muali, the vice-chairman and CEO of Kuwait’s Mubarrad Transport, told OBG, “Boubyan Port will undoubtedly provide a boost to the country’s logistics sector. We have a strategic location and a business understanding of Iraq that simply cannot be replicated by any of our neighbours.”

While Kuwait has undeniable competitive advantages when it comes to serving the Iraqi market, it will need to move quickly to put the infrastructure in place to make the most of them.

Global Arab Network

This article is published in partnership with Oxford Business Group

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