GCC projects market 'to be flat this year'
Dubai, November 20, 2012
The GCC projects market is experiencing a tough period now with this year predicted to be a flat one for the sector, according to a new report.
This follows a poor 2011 when a total of $130 billion worth of contract were awarded in the region, the lowest total for the GCC since 2005, said the Meed Insight report 'Mena Projects Forecast and Review 2012'.
However, there may be some increase in activity in 2013, said the report.
It said last year was a challenging year for the industry in the region. Although Saudi Arabia did well and $76 billion worth of contracts were awarded by the kingdom, there was a slump in activity in Abu Dhabi resulting in a sharp fall in contracts awarded in the UAE that was the main cause for the low overall regional figure, the Meed Insight report's executive summary said.
While the UAE and Qatar will see rises in activity during 2012, this will be offset by a fall in Saudi Arabia, the report said.
The main drivers for project development continue to be a combination of high oil prices, demographic and economic growth, and a political commitment to invest in domestic infrastructure, it said.
"Far from having a negative impact on projects development, the ongoing political unrest is acting as a stimulant for the increased and more rapid project delivery, as governments move to head off discontent by enhancing social infrastructure investment," the report said.
The $100 billion plan to build 500,000 houses for local nationals, announced by Saudi Arabia's King Abdullah in March 2011, is a good example of this, it said.
This year, the value of contract awards in Saudi Arabia is expected to drop to $68 billion, the report said. This is mainly due to bureaucratic issues and challenges in project delivery. Consequently, it seems that the kingdom’s four-year growth in activity is coming to an end.
The Qatari market is expected to grow to $18 billion on the back of the start of the investment drive in the required World Cup infrastructure. However, this acceleration has not been as quick or rapid as expected and the real impact will only be felt from 2013 onwards.
The Kuwaiti market remains in the doldrums beset by political squabbling between government and parliament. It remains the market with the most potential, but there appears to be little prospect of it achieving this potential any time soon.
The UAE market will likely see some marginal increase on 2011 due to a return to some activity in Abu Dhabi and confidence slowly returning to Dubai. Nonetheless, the dizzy heights experienced in the 2006-08 period are unlikely to be repeated, the report said.
The Omani and Bahraini markets remain small in comparison with their neighbours. The latter has been impacted heavily by the political situation while Oman remains a stable, but limited market, albeit one with good potential, it said.
The Middle East and North Africa (Mena) region, excluding the GCC states, remains a market with a high potential for growth, but its volatility ensures wide swings in project activity from year to year, the Meed Insight report said.
In 2011, total contract awards hit a record $85 billion on the back of substantial growth in Iraq, particularly in the oil, gas and housing markets. However, this year we forecast that the region will record $65 billion worth of contracts due to falls in activity in Iraq, Iran and Algeria, as well as a collapse in the Libyan and Syrian markets, it said.
Iraq will reinforce its position as the largest market in Mena excluding GCC and the second largest market after Saudi Arabia in the Middle East as a whole. The hydrocarbons sector will continue to drive this growth as the international oil companies (IOCs) ramp up their investments in the country, it predicted. - TradeArabia News Service