Friday, 25 May 2012
DOHA: Despite its major investment opportunities, the GCC's constructions sector is being grappled with unique challenges. Delays in awarding projects, increasing competition, slow payments and poor contract documentation are some of key challenges the region is facing, according to the newly released Deloitte Middle East's annual report on the sector.
The report "GCC Powers of Construction: Five Lessons to Learn From", states the challenges will remain for the foreseeable future. However, the report notes, the opportunities still exist-particularly in Qatar, Saudi Arabia and Iraq- and for those who are able to demonstrate that they can deliver to an international standard, the region can still be an area of growth.
Key findings in the Deloitte report indicate that large infrastructure projects, particularly around social and transport infrastructure, will offer tremendous opportunities for contractors, as will continuing upstream and downstream oil and gas related developments in the coming years. Cemented as a trusted advisor to a large number of clients throughout the Middle East construction industry and supply chain entities, Deloitte is uniquely positioned in this report to analyze the impact of the global financial crisis on the GCC construction sector, particularly regarding current projects.
Of the biggest investments currently underway is Qatar's plan to spend $ 100bn in preparation for hosting the 2022 World Cup and achieving its 2030 vision, and Saudi Arabia's capital spend program approaching $400bn over the next 10 years alone. The Deloitte report indicates that although there are massive opportunities associated with huge construction spend, many project sponsors still have to deal with illiquid projects and debt.
"The region certainly is expected to continue to offer a lot of opportunity for contractors," says Cynthia Corby, audit partner Deloitte Middle East and leader of the Construction industry for the UAE. "Construction contracts alone, worth $ 40bn were awarded to contractors in the first quarter of 2011, 47 percent of which were in the energy sector. It is interesting to note that despite such grand investments, governments are still trying to recuperate from the impact of the financial crisis," she added.
The report indicates that there are vast opportunities across the Middle East, with longer term infrastructure investment plans for the region estimated to be in excess of $1 trillion. This figure, as research shows, may continue to rise as governments assess the impact of the Arab Spring on priority investments. In addition, the uprisings have been credited with positively influencing infrastructure investment, forcing governments to accelerate spending programs in order to meet citizens' higher expectations. In terms of projects in the pipeline across the Middle East, the majority are social (36 percent); 29 percent power-related; 13 percent in transport and 13 percent in oil and gas.
"What primarily differentiates participants in the GCC's construction industry from their Western counterparts is that grand opportunities continue to be capitalized upon across the region, despite being forced to deal with continuing negative financial circumstances - simultaneously - in specific locales," states Rizwan Shah, Managing Director, Corporate Finance, and Leader of Deloitte's Capital Projects Advisory services practice for the Middle East.
The 'GCC Powers of Construction' series is an annual report issued by Deloitte Middle East. The 2012 edition provides a collection of unique perspectives on the underlying issues that have challenged the GCC's multi-trillion dollar construction industry, and how these challenges have been overcome by some of the largest and most sophisticated businesses in the region.
© The Peninsula 2012
