GCC construction sector to award $150b contracts by ’13

The GCC construction industry will witness a pick-up in project activity toward the second half of the year until 2013 with contract awards to reach a high of $150 billion, experts said at the recently concluded Arabian World Construction Summit 2012.

Attended by construction and projects industry stakeholders from across the Arab world, summit speakers presented a comprehensive overview of projects across key sectors and markets in the region.

Among the key milestones predicted in the next 12 months, based on the research presented by Ed James, Head of MEED Insights, include an acceleration of project spending in the Saudi market. Last year, the Saudi government awarded close to $70 billion in signed contracts, more than all the other GCC states combined, and is expected to increase expenditure as part of its ninth development plan. "Additional spending announcements following the region’s unrest, the kingdom’s projects market can only grow in the short to medium term," James added.

Qatar should start to see an upsurge in spending as World Cup gains momentum. And it could be a pivotal year for Kuwait with many of PTB’s projects due to be awarded as well as the $30 billion downstream refining program. The UAE cannot decrease much further and should start to rise again. "In 2010, 229 projects due to be awarded were cancelled; this number fell to 137 in 2011. It is down to 109 this year and is set to drop to about 30 in 2013 as developers commit to more commercially viable schemes," continued James.

An expected surge in project activity is also expected in Iraq, as the IOC field concessions result in upstream spending and the political and security situation improves to allow for greater infrastructure investment. Mohammed Al Derajy, Iraq’s Construction & Housing Minister, told the Arabian World Construction Summit that Iraq plans to build a total of 2.5 million homes by 2016.

A return to normalcy in Egypt could result in greater government spending, while high oil prices should result in stable spending levels in Iran. Libya has a huge potential that could possibly now be tapped with a new government in place. "We should also see an increase in project activity in Algeria as government pushes ahead with capital investment program. As such, we believe total MENA contract awards will climb to about $70-85 billon in 2012," James said.

Experts gathered at the Arabian World Construction Summit see the near and long-term trend for the Middle East projects market being largely positive. "Oil prices will remain high, while other project market drivers such as rising population and economic growth will remain. The Arab Spring unrest could even be an impetus for capital investment, although larger political, security and bureaucratic issues need to be addressed," said Edmund O’Sullivan, Chairman, MEED Events, organizers of the annual Arabian World Construction Summit.

Local contractors should face stiffer competition from Asian contractors now aggressively pursuing and winning projects. Overall, over next five years, GCC projects market is expected to stabilize around the $140 billion – 150 billion range while the greater Middle East market, boosted by Iraq, could hit as much as $100 billion.