ANALYSIS: GCC project pipeline worth $2 trillion

April 01, 2018

The GCC has over $2 trillion worth of projects currently in the planning stages with construction accounting for more than half the value of the pipeline, according to the 2017 edition of Deloitte’s GCC Powers of Construction report.

undefinedTransport makes up close to a quarter of the total with $447bn worth of projects planned, while the value of power projects totals $224bn, the report said citing MEED Projects.

undefined“Whilst business conditions are tougher today and project activity has been slowing down since 2015, the construction industry in the Middle East region will sustain its workflow going forward,” the report says.

“This will be driven by economic and demographic needs, initiatives associated with the Saudi Vision 2030, Abu Dhabi Economic Vision 2030, Dubai Plan 2021, and Qatar National Vision 2030, as well as tourism related projects, and the commitment from governments towards infrastructure investment.”

Project activity declined in 2015 and further decreased in 2016 to $117bn
of project awards. In 2017, the value of contracts awarded dipped again to $108bn, led by the UAE with $43.5bn and Saudi Arabia with $24bn.

“The projects market has underperformed across different sectors and geographies except for Dubai, and in particular on the real estate side, where developers have the financial capability to fund projects and are less reliant
on government spending on infrastructure,” the report says.

The Bright Spot

Dubai remains the bright spot compared to the rest of the GCC, where there are significantly fewer construction opportunities. The emirate’s performance is underpinned by the growth of its tourism sector and the delivery of projects related to Expo 2020. The announced 2018 budget is the largest ever, with 21% allocated to infrastructure investments as Dubai gears up for the six-month-long mega-event.

Major transport projects in the planning stage include the expansion of Al Maktoum International Airport, as well as extensions to the Dubai Metro and Dubai Tram. Dubai Harbour, Dubai Creek Harbour and Dubai Holding’s Marsa Al Arab near the Burj Al Arab hotel are significant ongoing and planned mixed-use construction projects that will comprise residential and tourism components.

Saudi Arabia has undergone significant reforms during the past two years in a bid to wean the country off its dependence on oil prices. There are plans to privatise a number of public entities in the healthcare, services and energy sectors, as well as privatising projects and having them delivered on a PPP basis.

“There is a lot of large-scale opportunities for the Kingdom to be delivered in the foreseeable future, once the government will have completed a review and reprioritisation of key projects,” the report says.

Various GCC governments intend to have the private sector supporting the provision of costly traditional government projects through the use of public-private partnership (PPP), build-operate-transfer (BOT) or other financing models. PPPs, however, still seem to generate a certain level of skepticism within the market, outside the power
and utility sectors which have a more established model, the report says.

“Supporting regulations and project bankability, and hence feasibility, should aim at further strengthening the legal framework and build up confidence for PPPs to gain some traction,” it says. “The region needs to adjust to, and understand the need to, assess the whole life cost of assets for PPP to be a viable partnership and result in more pragmatic assessments of return on investment on all infrastructure and capital project investments.”


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