The value of contract awards for projects planned and under way in the GCC in 2015 is expected to reach $172 billion, the highest on record to date as the region continues to invest in infrastructure and capital projects, a report said.

Key drivers for diversification include job creation given that 50 per cent of the GCC population is under the age of 25 added the report entitled “GCC Powers of Construction 2015: Construction – the economic barometer for the region” by Deloitte, a leading provider of audit, tax, consulting, and financial advisory services.

In Saudi Arabia alone, four million jobs will be needed in the next five years, the report said.

GCC population growth is forecast to grow from 35 million to 60.2 million by 2050, all driving the GCC countries’ strategies to provide education, healthcare, infrastructure and support to communities. This growth will require energy and water: a 34 per cent increase in electricity generation capacity and a further 2.2-billion litre desalination capacity are required by 2020.

“The forecast of $172 billion worth of projects are against a backdrop of lower oil prices, continuing political unrest and reduced International Monetary Fund (IMF) growth forecasts across the GCC,” said Cynthia Corby, audit partner and leader of the Construction industry for the Middle East.

“However the GCC countries have the benefit of reserves, which they have built up as a buffer and which they can continue to use to achieve their outlined strategies. Therefore, they are expected to continue to spend on infrastructure and capital projects in order to achieve their strategies for diversification of their economies.” she added.

Highlights of the report include:

UAE

The dwarfing infrastructure project of the region is of course DWC: Al Maktoum International Airport expansion, currently budgeted at $32 billion and anticipated to be the biggest airport in the world.  This is followed by a massive industrial project in Abu Dhabi for Tacaamol - Al-Gharbia Chemicals Industrial City, planned at $20 billion.

There are other sectors with several billions being planned on capital projects, with the top sector for 2015 being mixed-use and residential projects amounting to $24 billion.

Saudi Arabia

The largest project in pre-execution phase in Saudi Arabia is Al Mozaini - Riyadh East Sub Centre, for $15 billion. The second largest project in pre-execution phase is Khozam Development in Jeddah for $13.3 billion.

This mixed-use development located in the south east of Jeddah is expected to develop the area economically, culturally and socially. There are a number of other sectors with several billions being planned on capital projects, with the top sectors for 2015 represented by healthcare projects amounting to $19 billion, infrastructure projects (roads and bridges) at $35 billion, and power plants at $13 billion. This is all muchneeded capital spend in Saudi Arabia, the report noted.

Qatar

In Qatar, the two largest projects in pre-execution phase and expected to be awarded in 2015 are from QRail, namely the “QIRP: Passenger & Freight Rail”, budgeted at $15 billion, and from QIRP, whose “Passenger & Freight Rail: Phase 2” is budgeted at $3 billion.

This is followed by two projects, one for the new Qatar Economic Zone budgeted at $3 billion, which is one of the three new planned economic zones mainly focusing on logistics and air freight companies (expected to be the biggest of the three), and Occidental Petroleum Corporation (Oxy) - Idd e Shargi North Dome Expansion Phase Five, again budgeted for $3 billion.

Rest of the GCC

Out of the total $2.8 trillion projects which are in execution and pre-execution phases, 40 per cent of this value relates to residential, leisure and hospitality buildings and mixed-use developments, totalling an anticipated budget value of $1.1 trillion.

These projects are the most sensitive in terms of balancing supply and demand in each of the GCC countries, with the timing of delivery balanced alongside a sensible return on investment likely impacting the awards of these projects specifically. The GCC countries are hence expected to manage their economic growth and planned capital projects to create diversified economies with effective debt and capital funding in the coming years.

“What seems clear is that the necessity to move away from oil-based economies has never been greater and that in the race to diversify, there will be winners and runners-up,” said Andrew Jeffery, managing director, Capital Projects Advisory, Deloitte Middle East.

“Quite how this will play out is too early to say, but the gap is likely to grow, providing a regional hotspot of investment and development,” he concluded. – TradeArabia News Service