|31 December, 2017

Construction: Economic reforms to build confidence in a resilient industry in the Middle East

Consolidation set to continue as market adjusts to new normalities, but a marked upturn is unlikely before the end of 2018

Image used for illustrative purpose. Buildings under construction in Dubai.

Image used for illustrative purpose. Buildings under construction in Dubai.

REUTERS/Ashraf Mohammad
It’s fair to say that 2017 has seen mixed performance and sentiment across markets and sectors in the Middle East region, with terms such as optimism and concern being deployed in equal measure. But the term best used to describe the region, despite the unprecedented events of the past year, is resilience.

Major programmes have continued, new projects have been announced and there remains optimism and ambition for the region and its construction sector.

Looking forward into 2018, I believe that this will be a period of consolidation while the region gets used to the new norms politically and economically. This transition will not happen overnight and some will be quicker to respond to the changes than others. The levels of activity we have seen this year are likely to continue into much of next year, but we are unlikely to see a marked upturn until towards the end of 2018. There is still a tremendous amount of construction projects ongoing in the Middle East which still require funding. This, coupled with the regional uncertainties, means that there will be a holding pattern for much of 2018.

Talabani: Stronger oil price will aid government infrastructure spending

The green shoots of recovery we are seeing in the oil price will aid government spending on key infrastructure and economic development programmes.  However, diversifying away from oil and gas is critical to the regional economy and will be the driving force for the construction industry in the Middle East, both directly and indirectly. The largest economy in the region, Saudi Arabia, and its much-publicised, ambitious plans for growth and diversification, will be at the core of this resurgence.

While the belief is that new construction projects will be announced, investment will be focused on schemes that are viable, sustainable and achievable. This places even more importance on making schemes more cost-effective to build. The business case and design brief need to be sound, the scheme then needs to be procured in the correct and appropriate manner and the budget needs to be controlled through the construction phase, where the management of change is a major factor to the success (or otherwise) of a scheme.

Ineffective control and budget overruns will make a viable scheme economically unviable. As a result, those participating in these projects will be selected based on capability and competitiveness, which is just how it should be. Well, that is the plan at least, but with the Middle East you never know what is around the corner and an ability to respond and adapt is key to its resilience.

Alan Talabani is managing director of project management company Turner & Townsend Middle East

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