Kuwait Freight Transport Report Q2 2009

In January, Global Private Equity acquired a 60% controlling stake in Jassim Transport and Stevedoring Co (JTC) in what was described as the largest private equity transaction in Kuwait's history.

Set up in 1979, JTC is one of the country's largest logistics operators. It has the biggest share of the commercial stevedoring business in Shuwaikh Port, runs a fuel distribution network for Kuwait National Petroleum Co. (KNPC), and also runs an equipment rental business for cranes, forklifts, compressors and generators. JTC's 2008 revenues were estimated at US$120mn. Shailesh Dash, senior vice-president at Global, said 'we continue to believe the logistics sector in the region is set to witness growth as well as higher margins, particularly as weak players gradually exit the market or integrate into larger and stronger companies'.

In our latest Kuwait Freight Transport Report, BMI concludes that freight traffic across all transport modes, measured in million tonne-kms (mntkms) is likely to grow at an annual average rate of 2.2% in the 2009-2013 forecast period. Various factors support this prediction. Despite its accumulated oil wealth, Kuwait is being affected quite seriously by the current global downturn and we expect average annual GDP growth to fall to 1.8% over the next five years (down from 7.6% in the previous five years). This will bring down freight volumes, although on the plus side Kuwait is a relatively small country and its trading sector - and therefore transport network - has a vibrant re-export component. Kuwait has evolved as a trade hub for its larger neighbours, particularly Iran and Iraq, which have had limitations on their direct links with the international community.

Like all Gulf Cooperation Council (GCC) states, Kuwait does not disclose statistics, other than some basic banking releases. Accordingly, it is difficult for BMI to establish solid facts relating to the transport sector. Nevertheless, BMI forecasts 1.1% average annual growth for road haulage, 2.2% for maritime cargo and 2.4% for airfreight, in the five years to 2013. We estimate annual average pipeline throughput growth of 2.5%. We expect that the bulk of 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 Iraq's re-building (aggregates, basic metals and the like) and machinery related to building and construction work. At 53.2 on a scale of zero to 100, Kuwait's overall freight rating scores well in terms of its economic risk and its record of investment in infrastructure. However, it is below the average for freight growth, the regulatory environment and for the transport intensity index (a measure of the dynamism of foreign trade).

For the 2009-2013 forecast period, we expect the transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 2.2%, versus 1.8% for overall GDP. The total value of transport and communications GDP will rise to US$8.71bn in nominal terms by 2013, representing 5.2% of Kuwait's GDP.