Despite a projected slowdown in the GCC’s construction market, investments in key areas must press ahead to alleviate the fall in oil prices, said an expert at a major leadership summit in Dubai, UAE.

"Even if oil prices remain low, there are certain areas that should not see a compromise in spending and investment," stated Mohammed Al Rais, the president (Middle East) at the Hill International, a US-based leading construction consulting firm.

He was speaking at the Meed’s Construction Leadership Summit, a premier conference and awards programme in the GCC, connecting the region’s construction leaders and recognising the best projects.

It is a high-end meeting place for the Gulf’s leaders in engineering and construction and provides a much needed platform to promote open dialogue between the leading contractors, consultants and clients.

Addressing the gathering, Al Rais said: "Social projects for the people, which in certain areas fall behind, must continue irrespective of the situation. The issue is prioritisation by the authorities."

Samer Khoury, the president of engineering and construction at Consolidated Contractors International Company (CCC), a major contractor based in Athens, Greece, said petrochemicals will slowdown but upstream will improve.

"Aramco will expand outside of the core business, but other countries will only focus on oil and gas upstream," he noted.

The summit also heard that major National Oil Companies (NOCs) will continue to press ahead with investment to maintain production in order to maintain government revenues.

Low oil prices have forced governments to concentrate only on essential schemes. The first four months of the year saw the second-lowest level of contract awards in the Middle East’s construction sector since 2008, as the impact of low oil prices is felt in the industry, said the experts.

While work that was under way has largely continued unaffected this year, the region is experiencing a fall in new contract awards, they added.

This is very much reflected in the signing of new contracts this year in the GCC which has only hit $61 billion up till May 20, down nearly 28 per cent over a total of $85 billion during the same period in 2014.

Industry experts fear that with less new work being secured, diminishing backlogs may create a more significant slowdown in construction activity on site in 2016, while at the same time offering some respite to a market that in 2014 was starting to look overheated.

The impact is expected to continue throughout the year, they added.

According to them, the contract awards for work either directly or indirectly associated with the Expo 2020 in Dubai or the 2022 FIFA World Cup in Qatar are expected to still happen. But awards for projects that are not considered strategically important could slow down or stop.

Saudi Arabia, said the experts, has propped up the construction market so far this year and has several schemes in the pipeline. However, with the sweeping governmental changes made by King Salman bin Abdulaziz Al Saud, and his edict that projects costing more than SR300 million ($80 million) go through a committee review, upcoming awards could be in danger of being stopped or scaled back, they added.

It is the same story in the UAE, where the 12-month growth rate has dropped from 13.5 per cent to 11.3 per cent. It will not significantly affect projects in 2015, but does mean a slowdown in the projects pipeline.

Given the outlook for oil prices, it is a trend that will continue as it is difficult to see where new projects will come from.

However, there is one city in the region that is bucking the projects slowdown trend - Dubai, which is mainly driven by tourism, said the experts.

The emirate is tendering a raft of major new hotels, attractions and infrastructure to cater for the 20 million visitors it hopes to welcome in 2020, when it hosts the Expo, they stated.

Of particular interest is the development of Route 2020, the metro extension to the Expo site. Questions about Dubai’s liquidity, however, continue to cause concern, they added.-TradeArabia News Service