GCC offers construction projects worth $500bn
Beirut, May 23, 2012
Massive construction projects in the GCC, particularly around social and transport infrastructure, will offer tremendous opportunities valued at up to $500 billion for contractors, said a report.
Of the biggest investments currently underway is Qatar’s plan to spend $100 billion in preparation for hosting the 2022 World Cup and achieving its 2030 vision, and Saudi Arabia’s capital spend programme approaching $400 billion over the next 10 years alone, added the newly released Deloitte Middle East’s annual report on the sector: ‘GCC Powers of Construction: Five Lessons to Learn From’.
Key findings in the Deloitte report indicate that despite grappling with challenges and delivery issues related to current projects, major opportunities in the construction sector remain prevalent in Saudi Arabia, Qatar, Abu Dhabi and Iraq in 2012.
Opportunities will include continuing upstream and downstream oil and gas related developments in the coming years, the report said.
Although there are massive opportunities associated with huge construction spend, many project sponsors still have to deal with illiquid projects and debt, according to the report.
“What primarily differentiates participants in the GCC’s construction industry from their Western counterparts is that grand opportunities continue to be capitalized upon across the region, despite being forced to deal with continuing negative financial circumstances – simultaneously - in specific locales,” said Rizwan Shah, managing director, Corporate Finance, and leader of Deloitte’s Capital Projects Advisory services practice for the Middle East.
“This report demonstrates Deloitte’s unique perspective on the construction industry and its commitment to addressing what is ‘next’ for the benefit of our clients and wider GCC industry participants, by leveraging a multitude of lessons learned in the context of projected growth for the GCC construction industry in the future.”
“Collectively, the report is designed to share what is typically privileged client intelligence in a neutral medium, to help stakeholders involved in the construction industry improve their business performance and to benefit and advance the GCC construction industry as a whole,” Shah added.
The Deloitte report is produced based on data gathered from surveys and internal data, supported by interviews with some of the most prominent industry leaders from the region, to understand and leverage how they have progressed their businesses through these difficult times and how they have managed to create a stable foundation to move forward.
“The region certainly is expected to continue to offer a lot of opportunity for contractors,” said Cynthia Corby, audit partner Deloitte Middle East and leader of the Construction industry for the UAE.
“Construction contracts alone, worth US$ 40 billion were awarded to contractors in the first quarter of 2011, 47 percent of which were in the energy sector. It is interesting to note that despite such grand investments, governments are still trying to recuperate from the impact of the financial crisis,” she added.
The Deloitte construction industry report indicates that there are vast opportunities across the Middle East, with longer term infrastructure investment plans for the region estimated to be in excess of $1 trillion.
This figure, as research shows, may continue to rise as governments assess the impact of the Arab Spring on priority investments.
In addition, the uprisings have been credited with positively influencing infrastructure investment, forcing governments to accelerate spending programs in order to meet citizens’ higher expectations.
In terms of projects in the pipeline across the Middle East, the majority are social (36 per cent); 29 per cent power-related; 13 per cent in transport and 13 per cent in oil and gas.
The Deloitte report shows that there is imminent growth in the Saudi Arabian construction industry, being the biggest market in the GCC in terms of population and GDP. Budget value of contacts to be awarded in Saudi Arabia in 2011 onwards is set to increase to $35 billion, as compared to $25 billion in 2006.
The government is undertaking grand investments, with plans nearing US$400 billion in five years, demonstrating an increasing trend of projects that will need to be awarded in the coming years ahead.
These will include building schools, hospitals, universities, houses, airport expansions, and new railway infrastructure and road improvements. This construction market is therefore expected to be one of the most buoyant in the world.
The Deloitte report classified Qatar as the fastest growing economy in the GCC region and holding an 8 per cent share of the total value of the regional projects. In terms of its construction industry, its value was forecasted at approximately $ 8 billion in FY11.
Projects planned to be underway in Qatar in the future are valued at approximately US$ 230 billion; with the hosting of the 2022 FIFA World Cup positioned to be a truly major enabling event for the future development of the country and achieving its vision for 2030.
The UAE is ranked as the second largest market with investments worth $ 9 billion allocated to buildings, infrastructure and energy sectors in the first quarter of 2011 as the Deloitte report indicated.
Despite the regional unrest and the public slowdown of projects in Abu Dhabi in 2011, the UAE has overall demonstrated some key elements of stability.
Abu Dhabi, in particular accounted for 70 percent of the total US$ 20 billion of contracts awarded between Q1 and Q3 of 2011. Driving this growth, with over USD$ 12 billion in awarded contracts, the Emirate is placing particular attention on transport, utilities and social infrastructure. – TradeArabia News Service
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