Middle East governments and industries continue to face challenges and pressure to perform and deliver 'more for less' on social and economic infrastructure projects, despite an increase in oil prices compared to 2016, said a report by leading advisory firm PwC Middle East.

The squeeze on funding for capital projects from the top down has rippled through the construction supply chain: by far the biggest external challenge facing contractors this period appeared to be payment delays by clients and availability of funding, stated the company in its fourth Capital Projects and Infrastructure survey published today.

It outlines the current challenges facing the industry and highlights the importance that alternative financing will have on future investment projects in the region.

The study reports a more positive outlook and increased capital expenditure, with almost half (49 per cent) of respondents spending more. One in six of those respondents expect 25 per cent capital expenditure increase (compared to 21 per cent in 2016) and only 19 per cent of 2018 respondents saw a marginal decrease in their capital expenditure compared to 63 per cent in 2016, it stated.

Project performance is improving, with only 34 per cent of respondents indicating delay of 6 months or more, compared to 47 per cent in 2016, it added.

The PwC Middle East survey pointed out that there are a variety of reasons relating to project delays and overruns such as changes or poorly defined scope of existing projects (from 60 per cent in 2016 to 46 per cent 2018).

The survey also highlights a stronger focus on building in-house project management capabilities and strengthening project governance and controls.

Other reasons include increased cost of materials, labour and equipment, along with challenges relating to working capital, said a report.

And finally, the need for private sector financing appears to be growing, with the general consensus. This was evidenced by the 80 per cent of respondents who believe that over the longer term, private sector funding will continue to increase to help support major infrastructure projects across the region, it added.

Maarten Wolfs, PwC Middle East Deals (Infrastructure and Government Leader) said: "Governments across the region continue to face challenges and pressure to perform and extract the highest value from projects as possible. What this tells us is that the industry needs to evolve."

"This may be done through the entry of new competitors, new technologies or changes to regulation to facilitate the delivery of capex programmes," noted Wolfs.

"It is important that the lessons learnt about project management and governance is not forgotten about in the wake of increased spending, in doing to the industry may miss opportunities to improve long term performance," he added.-TradeArabia News Service