* Infrastructure contracts awarded after years of inaction
* Causeway to be built by Hyundai for $2.6 billion
* Aims to boost trade, revive north of the country
* First big public-private partnership signed
* Political, administrative hurdles haven't disappeared
By Sylvia Westall and Ahmed Hagagy
KUWAIT, Feb 13 Freight trucks trundle down the
dusty, potholed roads of Kuwait's busiest port, running into
traffic jams as they emerge into the surrounding streets. But
after years of inaction, the government is finally moving to
ease the congestion.
It is pushing ahead with a $2.6 billion plan to build a 36
km (22 mile) causeway, one of the longest in the world,
connecting Shuwaikh port and densely populated southern Kuwait
with the north of the country, near the Iraqi border.
Such big projects were stalled for years by political
wrangling and bureaucratic inertia, leaving Kuwait with
underdeveloped infrastructure and low levels of foreign
investment in relation to its huge oil wealth.
In the last few months, however, authorities have begun
issuing contracts for some of the projects, raising hopes that
one of the region's most under-performing economies may finally
live up to its potential.
The government signed a contract with South Korea's Hyundai
Engineering and Construction Co in November to
design and build the causeway over the next five years.
Construction is due to start later this year.
"It is a very strategic project - we have been talking about
this since the 1970s," Abdulaziz Alkulaib, undersecretary at the
Ministry of Public Works, told Reuters.
Last month, Kuwait signed a deal with a consortium led by
France's GDF-Suez, and including Sumitomo Corp
of Japan, to build the Az Zour gas-fired power and seawater
treatment plant in Kuwait.
This was seen as a breakthrough because it is the first of
Kuwait's major public-private partnerships, in which private
firms will help to operate infrastructure. Once running in 2015,
the plant is to account for some 12 percent of Kuwait's power
generation capacity and a quarter of desalination capacity.
"It has taken a long time for these projects to begin, but
this is an encouraging step," said Daniel Kaye, senior manager
for economic research at National Bank of Kuwait (NBK).
"It sends a positive signal to businesses and investors that
projects are at last moving."
The causeway and Az Zour projects are part of a 30 billion
dinar ($107 billion) development plan that aims to diversify the
economy and was approved by the ruling emir, Sheikh Sabah
al-Ahmad al-Sabah, in 2010. The plan also includes a new airport
terminal, an oil refinery, a metro system and hospitals.
In the fiscal year 2010/11, the first year of the plan, the
government spent only 62 percent of its target on the projects,
and it has continued to undershoot targets since then.
One reason is the technical and administrative difficulties
of carrying out complex projects through a government which
lacks experience, expertise and a reputation for efficiency.
Politics have been an even bigger obstacle. Continual
feuding between an elected legislature and the cabinet, chosen
by a prime minister who is appointed by Sheikh Sabah, blocked
parliamentary approval of development funds and led to a series
of cabinet reshuffles which distracted from policymaking.
Last year the country was rocked by large youth- and
opposition-led demonstrations demanding political reforms. The
protests did not constitute an Arab Spring-style campaign for
regime change, but they also distracted the government.
In the past few months, however, the environment for
economic policy-making has improved. After parliament was
dissolved ahead of snap elections on Dec. 1, the government was
able to use executive powers to push through a raft of
legislative measures and approvals.
Opposition MPs, some of whom had blocked state spending in
the past, boycotted the elections. The result was a new 50-seat
parliament with a larger number of pro-government legislators
and political newcomers, who may be more willing to comply with
the cabinet's plans.
Government officials are certainly adopting a considerably
more decisive tone.
"This is in the master plan and it is set out by emiri
decree. Whatever is in that master plan has to be implemented,"
Alkulaib said of the causeway project.
Such statements are cheering the stock market, where the
main index sank to an eight-year low last November but
has since climbed about 12 percent.
The new mood of optimism does not necessarily mean the
government will get an easy ride for its projects. Political
tensions have not disappeared and street protests have continued
since the December elections, presenting the risk that political
turmoil could eventually worsen again.
A majority of lawmakers in the new parliament voted last
week to form a special committee to probe the process under
which the contacts for the causeway and Az Zour were awarded;
the committee is expected to reach a conclusion in three months.
NBK's Kaye said it was important not to get carried away
about prospects for investment in Kuwait because there were
still political, technical and administrative hurdles.
"But we do now detect a greater determination on the part of
the authorities to push ahead with key development projects."
Kuwaiti economists say the causeway, which will cut the road
distance between the north and south of Kuwait by two-thirds,
will help to develop the neglected north of the country, where
an urban area called Silk City is planned.
"Urbanisation in Kuwait is located in the southern coastal
area but there is planned urbanisation in the northern region as
part of the plan," said Abbas al-Muqrin, professor of economics
at the University of Kuwait.
"The shortcut to gain access to this area will revive the
Silk City's name recalls the Silk Road, the web of trade
routes which linked Europe and Asia centuries ago, and the
project is designed to form part of a trade hub near a planned
new port, Mubarak al-Kabeer. Some economists think the port
could eventually become a rival to Iraq's Umm Qasr.
Kuwaiti authorities hope Silk City will become home to
around 530,000 people, or about 14 percent of the country's
"The causeway will create new chances for people to work
there and live there," senior project engineer Mai Ebrahim
al-Mesad said. "It will be a signature for Kuwait."