43% of projects in GCC on hold

Sunday, Sep 09, 2012

Dubai: The total value of construction projects in the Gulf region has reached $1.68 (Dh6.17) trillion as of the end of August 2012, despite the challenging economic environment, according to a report by BNC Network, an online project tracker.

This is slightly lower than the $1.8 trillion (Dh6.6 trillion) reported earlier by the Middle East Economic Digest (MEED) Projects.

Of this, $489.39 (Dh1797.58) billion worth of projects are under construction, $81.45 (Dh299.1) billion worth of projects are in the tendering phase, $125.12 (Dh459.58) billion worth of projects are in design phase while $265.25 (Dh974.29) billion worth of projects are in the initial planning and concept phase. However, nearly 43 per cent, or $723.61 billion (Dh2.65 trillion), worth of projects the largest category of projects are still on hold, the report shows.

The UAE is still the largest construction project market - with the value of projects totalling $690.2 billion, which includes $429.23 billion worth of projects on hold. Saudi Arabia is the second largest construction market where the total value of projects have exceeded $451.09 billion, including $100.96 billion worth of projects that are on hold.

This is followed by Kuwait, where the total value of projects reached $195.99 billion including $61.47 billion worth of projects that are currently on hold or cancelled. Qatar, which has won the bids to host World Cup Football 2022, ranks fourth among the six countries with total value of projects exceeding $171 billion of which $69.14 billion worth of projects are on hold.

Among some of the large projects, the Dh40 billion UAE National Railway, a Dh35 billion Jeddah Metro project will dominate the infrastructure sector while massive investment in power and desalination projects are also going to play a key role in the regions overall development. Contractors are awaiting decision for the $4.8 billion Building & Infrastructure - Package 2 - Barwa Al Khor Development in Doha, Qatar.

More than $80 billion worth of contracts will be awarded in Saudi Arabia in 2013, a 36 per cent increase from the total value of projects awarded in 2011.

Despite the economic slowdown caused by the global financial crisis in 2008-09, the Gulf region still remains one of the largest construction market in the world after China where several large-scale projects are still on track, said Ben DSouza, Chief Operating Officer of BNC Network, said.

This reflects the governments determination to continue to invest in expanding their infrastructure that will help spur economic growth at a time when Europe and the US economies are struggling amid crisis after crisis.

Airport development projects to the tune of Dh100 billion are at various stages of development in the GCC, including the Dh28 billion Concourse 4 project and expansion of Terminal 2 in Dubai are crucial for Dubais growth while Abu Dhabi Airports Company has recently awarded a Dh10.8 billion tender to a Turkish-UAE joint venture, Arabtec-TAV to build the Midfield Terminal Complex - part of the Dh25 billion Abu Dhabi International Airport redevelopment plan.

The prospects for new construction awards in the GCC are positive. Growth rates in the GCC region remain high for the medium-term, both in terms of GDP and construction sector growth. With over $2.9 trillion of planned infrastructure projects announced by the GCC regions governments in the second quarter of 2011, many contractors are well positioned to benefit from the regions robust bidding pipeline, Fawad Tariq-Khan, Corporate Finance Advisory at Deloitte, says.

Qatar is planning to open the first phase of its Dh18.3 billion New Doha International Airport terminal later this year, while works are progressing well to build a new airport terminal in Jeddah.

BNC Network is the regions largest online project intelligence provider tracking about 55,786 projects worth $2.65 trillion. It updates information on over 150 projects every day and has added 191 new projects in the Middle East over the last seven days. Over 60,000 construction industry professionals including property developers, architects, consultants, contractors, sub-contractors and suppliers receive regular project intelligence bulletins. The company has 98,072 construction related companies on its database and over 21,501 unique construction products listed.

The Gulf countries are investing the oil windfall in expanding their infrastructure wisely that will help them meet the future growth requirements for a long period, DSouza says.

With continued investment in infrastructure, that has helped the construction sector busy, the governments here are creating the right environment for further foreign direct investment and growth.

Construction sector contributed 5.4% of the overall GDP of the GCC region.

Whilst confidence in the industry has improved year on year, business leaders remain cautious about the prospects given the delays in project awards. We know the investments will be made, the only question is over what time frame, says Cynthia Corby Deloittes Audit Partner and Head of Construction for the UAE.

Data/Table

UAE Construction market at a glance

Stage Project Value

Concept $559.644 billion

Design $25.655 billion

Tender $14.583 billion

Under Construction $190.596 billion

On Hold $331.415 billion

Data as of Aug 28, 2012 01:50 PM

Market Project Value

Oil & Gas $74.817 billion

Industrial $30.305 billion

Infrastructure $223.517 billion