The Kingdom of Bahrain is pushing forward with its plan to invest $4.4bn in housing, utilities and education projects over the next three years. The first wave of infrastructure development, announced in January, is gaining momentum, and new construction tenders are starting to be awarded.
In the first quarter of this year, the Ministry of Works awarded tenders for three public school construction projects worth a total of around $30m. In March, Crown Prince Salman bin Hamad Al Khalifa hinted that officials were ready to announce the winners of a $651m round of infrastructure contracts, composed mainly of new housing developments in Northern City and East Hidd. As of mid-May, however, contract awardees had yet to be officially announced.
This new round of projects represents the first wave of development spurred by the GCC Development Programme, a $10bn aid package from GCC constituents approved in 2011 and to be disbursed over 10 years. Funded by Kuwait, Saudi Arabia, Qatar and the UAE, the programme is intended to help stimulate the Bahraini economy and strengthen social programmes. In January, Deputy Prime Minister Sheikh Khaled bin Abdullah Al Khalifa announced plans to launch $4.43bn worth of projects tied to the GCC aid package.
Nearly half of the project’s total value, or $2.18bn, will go to housing developments over the next three years. As the deputy prime minister told the press in January, the Kingdom plans to build 2500 houses next year, 1400 in 2016 and push for another 5000 units in 2017. These particular projects will be financed by development funds from Kuwait, Saudi Arabia and the UAE.
King Hamad has made adequate housing supply a priority issue and earlier this year renewed his call to meet a goal of 40,000 new units.
Decades of intense local and regional development have strained Bahrain’s supply of housing. Even as the country’s population growth has slowed – dropping from 6.5% in 2009 to 1.9% in 2012, according to the World Bank – a huge backlog of demand has remained. As of early 2014, the waiting list for government housing topped 50,000, local media reported. According to a 2011 Gallup poll, 41% of Bahrainis surveyed said they had trouble finding affordable housing.
One perennial issue holding up new construction is the lack of available land. An island of only about 760 sq km, the Kingdom is small and, at 1631 people per sq km, the seventh-most densely populated country in the world. Compounding the challenge, certain areas regulated as “greenbelt” zones are off limits for new development. City councillors in the capital of Manama have advocated government purchase of available private lots within development zones for use in housing or other social infrastructure.
Tight project financing has constrained private sector development in the residential market – an issue Bahrain shares with other GCC countries. A February survey by an international law firm found that 96% of those polled in the construction industry said the cost of capital was as expensive or more so than in 2013.
Power shortage looms
Electricity production has been another investment target since the GCC package was assembled in 2011. Of the first round of aid, about $2.2bn will be devoted to water and power projects, including two, 400-KW electric transmission stations, expected to be put to tender soon. According to the Electricity and Water Authority, peak demand for power nearly doubled between 2003 and 2012, from 1540 MW to 2967 MW, straining the country’s supply of natural gas, which fuels its power plants.
Current capacity stands at about 4000 MW – enough to meet demand until 2016, according to government estimates.
To help meet future demand, the Kingdom is also pushing forward with developing renewable energy. In 2012, it launched its first solar power project, a 5-MW solar power and smart grid installation in Awali. An additional 5 MW of combined solar and wind capacity was to begin operations late last year.
Oxford Business Group