DUBAI: Kuwait is expected to sign within two weeks a $1 billion contract with Italy's Salini Impregilo and Turkey's Limak Construction for its planned South Mutlaa City project, an official said yesterday. It is the first phase of the planned 100,000 sq km urban development, which is situated in central Kuwait and is expected to house around 400,000 residents when completed.

The project is part of a larger effort by the government to implement billions in megaprojects under its five-year development plan, despite a projected state budget deficit of around KD 22 billion for the next three years as a result of lower oil prices. The government has called for 'cost-cutting' programs including unsuccessfully reducing salaries and benefits of the country's oil sector workers.

Kuwait suffers a significant shortage of government-funded housing which particularly impacts young people, who often wait for years for a family home. The South Mutlaa City contract will cover construction of a road and other infrastructure and be funded by the Kuwaiti government from its own reserves, Naser Khraibut, director of planning at the country's Public Authority for Housing Welfare, told reporters on the sidelines of a conference in Dubai.

Costs for building infrastructure and public buildings in the city have been estimated at around $20 billion. "Other packages we're now in the process of prequalification for contractors to tender," said Khraibut. The state will also sign a contract this month worth between $80 million and $90 million with Hill International to manage the building of the entire city, Khraibut said. Meanwhile, Kuwait is also designing and completing an economic study for the planned South Saad Abdullah City, which will cover 60 sq km. The $10 billion to $15 billion cost of the project will be financed through a special purpose vehicle jointly established by the Kuwaiti and South Korean governments, Khraibut said. - Agencies