GCC construction outlook to improve with oil prices recovery and implementation of reforms

The Kuwait airport expansion recorded an all-time high of $12.2 billion of project contract awards in 2016.

Significant opportunities. Al Baleed Resort Salalah by Anantara in Oman. (MEED)


2017/06/25 Issue: 112 Page: 18


The Arab Weekly
N.P. Krishna Kumar



Dubai - Despite spending cuts and a 33% decline in project contract awards in 2016, the construction mar­ket in Gulf Cooperation Council (GCC) countries is expect­ed to improve in 2017, Middle East business intelligence service MEED stated.

A MEED report, “Outlook for GCC Construction 2017,” noted that the region offers significant opportu­nities for construction companies despite the slowdown in project spending. The recovery in oil prices and the implementation of reforms indicate that things will improve this year.

The report warned, however, that fewer opportunities, less cer­tainty about project timelines and increased competition could cause the construction market to harden.

It said the region’s strongest mar­kets over the past 12 months were Dubai, Kuwait and Bahrain. The latter saw its second-best year for awards since 2007, thanks to the financial support of its GCC part­ners through the Gulf Development Fund.

The approval of a major con­tract award to expand Kuwait’s airport took the country’s market to an all-time high in 2016, when it registered $12.2 billion in project contract awards. The United Arab Emirates registered an increase in awards in 2016, thanks to work leading up to Expo 2020 in Dubai.

Projects in Dubai accounted for 72% of all construction and trans­port deals in the country. Project spending fell sharply in Abu Dhabi.

Elsewhere in the region, the fall in oil prices since mid-2014 has had a profoundly negative effect on markets. With government rev­enues halved, ministries and other client bodies imposed strict limita­tions on capital spending. The most affected countries as seen from contract awards were Saudi Arabia, Qatar and Oman.

Richard Thompson, editorial director of MEED, said the partial recovery of oil prices eased some financial pressure on governments but was not expected to trigger a significant pick-up in construction activity in 2017.

“I expect to see a strong pick-up in GCC construction activity in 2018 as governments increase spend­ing to stimulate growth and as we begin to see some of the privatisa­tion and public private partner­ship (PPP) initiatives taking hold,” Thompson said.

He said that all Gulf countries are considering PPP to finance major projects and government services but each was at a different stage of readiness to implement the model.

“I am looking at Saudi Arabia for the biggest rise in PPP opportuni­ties. It is by far the biggest market with the biggest needs but, through its Vision 2030 programme, Riyadh has made a huge public commit­ment to delivering privatisation and PPP in the kingdom. It has been very aggressive in setting up new structures to deliver these re­forms,” Thompson said.

“As ever, Dubai will be very bold in using new financing mechanisms and I think Bahrain and Kuwait will also see progress in housing and utilities through PPP projects.”

Thompson contended that Ri­yadh wants to manage spending carefully to ensure that it is getting value for money from its invest­ments. “By establishing a National Programme Management Office (NPMO) it set up the frameworks and systems across the entire Saudi government to plan, manage and deliver major projects. It is a mam­moth task to roll out such wide-ranging civil service reform that could take three years to set up,” he said.

“Riyadh has a tricky juggling act to perform to allow some projects to proceed in advance of the re­forms being completed and holding back projects to wait for the new systems to be in place.”

The construction market in 2016- 17 was not as satisfactory as the in­dustry players had expected it to be. Several construction companies, including big ones, experienced a tough time due to increased com­petition.

However, the China State Con­struction Engineering Corporation (CSCEC), LLC Middle East, a mul­tinational active in the region, was among those not badly affected, having been awarded five building projects and one infrastructure pro­ject totalling $1.2 billion in value.

CSCEC President Yu Tao said that, while tight budgets and depressed market conditions due to low oil prices were among challenges fac­ing the sector, prospects were good.

“We believe that the coming Expo 2020 and expanding tourism can bring more opportunities to construction, including residential, hospitality, retail, health care, of­fices, infrastructure facilities, etc,” he said.

CSCEC Middle East has complet­ed several projects for clients on schedule this year, including Vice­roy Palm Jumeirah Dubai, Al Amal Psychiatric Hospital, Dubai Water Canal and Dubai Park Flyover, Tao said.


N.P. Krishna Kumar is an Arab Weekly correspondent in Dubai.


As Printed
MENA Now
Editors' Picks

The Arab Weekly Newspaper reaches Western & Arabic audience that are influential as well as being affluent.

From Europe to the Middle East,and North America, The Arab Weekly talks to opinion formers and influential figures, providing insight and comment on national, international and regional news through the focus of Arabic countries and community.

Published by Al Arab Publishing House

Publisher and Group Executive Editor: Haitham El-Zobaidi, PhD

Editor-in-Chief: Oussama Romdhani

Managing Editor: Iman Zayat

Deputy Managing Editor and Online Editor: Mamoon Alabbasi

Senior Editor: John Hendel

Chief Copy Editor: Richard Pretorius

Copy Editor: Stephen Quillen

Analysis Section Editor: Ed Blanche

East/West Section Editor: Mark Habeeb

Gulf Section Editor: Mohammed Alkhereiji

Society and Travel Sections Editor: Samar Kadi

Syria and Lebanon Sections Editor: Simon Speakman Cordall

Contributing Editor: Rashmee Roshan Lall

Senior Correspondents: Mahmud el-Shafey (London) & Lamine Ghanmi (Tunis)

Regular Columnists

Claude Salhani

Yavuz Baydar

Correspondents

Saad Guerraoui (Casablanca)

Dunia El-Zobaidi (London)

Roua Khlifi (Tunis)

Thomas Seibert (Washington)

Chief Designer: Marwen Hmedi

Designers

Ibrahim Ben Bechir

Hanen Jebali

Published by Al Arab Publishing House

Contact editor at:editor@thearabweekly.com

Subscription & Advertising: Ads@alarab.co.uk

Tel 020 3667 7249

Mohamed Al Mufti

Marketing & Advertising Manager

Tel (Main) +44 20 6702 3999

Direct: +44 20 8742 9262

www.alarab.co.uk

Al Arab Publishing House

Kensington Centre

177-179 Hammersmith Road

London W6 8BS , UK

Tel: (+44) 20 7602 3999

Fax: (+44) 20 7602 8778

Follow Us
© The Arab Weekly, All rights reserved