Value of UAE projects rises to $930 billion

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The UAE is carrying out projects in construction and other sectors with a total value of nearly $930 billion (Dh3.4 trillion) - some 45 per cent of all projects planned in the Gulf, a Kuwaiti bank said yesterday.

The combined value of projects planned or being carried out in the GCC totalled around $2.1trn (Dh7.7trn) at the end of the second quarter of 2009, more than four times the estimated value of projects in June 2005, an annual growth of nearly 50 per cent, Kuwait National Bank (KNB) said in a study.

Quoting the Meed project database, the bank said the construction sector accounts for the bulk of those projects in the absence of major investment opportunities in industry and other sectors. "This is an immense figure, worth two to three times the size of the region's expected GDP this year, and some $55,000 for each inhabitant of the Gulf.

"Although time series data is not easily available, what there is supports the claim that there has been explosive growth in planned spending," the study said.

It said the figures include projects at all stages of completion - from the early stages of planning (the 'planned', 'feasibility study' and 'outline design' stages), to advanced stages of planning (at the 'invitation to bid' stage) and to those projects actually underway (where the main contract has already been awarded).

It noted that the figures exclude projects that are currently on hold, adding that some 29 per cent of the total projects or around $610bn are already underway, with the remainder still at the planning stage.

"The UAE accounts for by far the biggest share of project activity, totaling around $929bn and affirming its position as the leading GCC country in attracting capital investment. Some 81 per cent of the UAE projects are in the construction sector," KNB said in a 10-page report.

"Indeed, the construction sector dominates in every GCC country, though to a lesser degree... while the total value of projects in the UAE is far higher than anywhere else, Saudi Arabia has a much larger base of non-construction related projects - some $224bn, which is 28 per cent larger than in the UAE. This probably reflects the larger size of the Saudi economy in absolute terms, necessitating a greater degree of industrial diversification."

According to the study, the higher value of non-construction-related projects in Saudi Arabia stems largely from the petrochemical, power and utilities sectors. At a combined $127bn, the value of the kingdom's projects in those sectors is about 35 per cent larger than in the UAE.

"The overwhelming balance of non-construction-related projects in other GCC countries comes in the oil and gas, power and utilities sectors, with the latter reflecting the region's growing domestic power needs," it said.

"Overall, these data show that a huge pipeline of potential projects in the GCC remains, though largely in the construction sector and weighted towards the UAE. If executed as planned, the schemes would provide a major stimulus to the regional economy and help it pull through the current economic downturn."

But KNB added that because of a weakening growth outlook and credit constraints, a number of current investment proposals are being rethought. "2009 is due to be a peak year for GCC project starts. But a combination of demand weakness and credit constraints now cloud the outlook," it said.

© Emirates Business 24/7 2009