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Home > Business/Finance > Diversified Services > Shipping & Logistics
Kuwait Freight Transportation Report Q2 2008
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Jazeera Airways shares more than quadrupled on the day of their debut on the Kuwaiti stock exchange on January 14, with news agencies reporting a surge from 100 fils (KWD0.1 or US$0.37) to 460 fils(KWD0.46 or US$1.69). Investor enthusiasm for the low cost carrier, founded in 2004, was based ongrowth prospects. Chief executive Marwan Boodai said it hoped to be flying 82 routes within the Middle East within five years, and had a total of 40 aircraft on order, including 30 Airbus A320s. The companywas on course to achieve a KWD4mn (US$14.66mn) profit in 2008. Further airline IPOs were expectedin the region. In Kuwait itself a week earlier Parliament approved a long-delayed government plan to sell40% of state-owned loss-making Kuwait Airways Corp to the public and 35% to a long-term investorwithin two years. KAC management had been keen to privatise the firm to make it more competitive butmany deputies had previously resisted the move, fearing it would put the jobs of Kuwaiti employees atrisk. As capacity grows, so will Kuwait’s contribution to regional airfreight traffic. In our latest Kuwait Freight Transport Report, BMI concludes that airfreight traffic is likely to grow at an annual average rateof 6.3% in the 2008-2012 forecast period.
Various factors support this prediction. Although the recent global economy will cool and oil price boomwill ease over the next couple of years, we still see Kuwaiti GDP rising by an annual average of 4.9%over the next five years. Growing capacity, and growing trade in high-value/low-bulk goods will allcontribute to airfreight growth. Kuwait is a relatively small country and its trading sector - and thereforetransport network - has a vibrant re-export component. Kuwait has evolved as a trade hub for its largerneighbours, particularly Iran and Iraq, which have had limitations on their direct links with theinternational community.
BMI also forecasts 2.8% average annual growth for road haulage and 5.9% for maritime cargo in the fiveyears to 2012. We estimate annual average pipeline throughput growth of 6.8%. We expect that the bulkof transport will continue to be waterborne and consist largely of oil and related goods. Transit trade, particularly that involving Iraq, will comprise raw materials involved in that country’s eventual rebuilding(aggregates, basic metals and the like) and machinery related to building and construction work.At 64.0 on a scale of zero to 100, Kuwait’s overall freight rating is now above the average for the Middle East and Africa (MEA) region. It scores well in terms of its economic risk and its record of investment ininfrastructure. However, it is below the average for freight growth, the regulatory environment and for thetransport intensity index (a measure of the dynamism of foreign trade).
For the 2008-2012 forecast period, we expect the transport and communications sector to continueoutpacing the economy as a whole. It will achieve average annual growth of 5.8%, versus 4.9% foroverall GDP. The total value of transport and communications GDP will rise to US$6.7bn in nominalterms by 2012, representing 5.2% of Kuwait’s GDP.
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