Overall sentiment in the GCC’s construction sector has improved over the last two years by approximately 7% (from 32% to 39%), according to recent findings from Pinsent Masons’ GCC Construction Survey.
The findings show that the UAE remains the number one market expected to deliver growth in 2018, with 38% of respondents expecting the country to provide the most opportunity over the next 12 months, compared to 35% in 2016.
Presented to industry professionals at Pinsent Masons' Annual Construction and Engineering Law Conference, the report provides a snapshot of opinion from the GCC construction sector where the majority of the companies are involved in projects with a value of over AED 500mn ($136.14mn).
Ongoing concerns, however, relating to delayed payment, the rising cost of capital and increased number of disputes, continue to linger on.
Sachin Kerur, Head of Middle East Region at Pinsent Masons, said: “Optimism towards the GCC’s construction sector saw an increase from our 2016 survey, despite ongoing challenges with lower oil pricing and headwinds facing the private non-oil sector.”
“The UAE is set to see an increase in the number of projects during 2018 and we expect the country to remain in top position, particularly in the lead-up to Expo 2020.”
While the survey indicates a slight rise in overall sentiment, the findings revealed that 20% of those surveyed across the GCC expect their order books to decline by more than 10% in the coming months, compared to 16% two years earlier.
Asked about contract conditions, 86% of businesses said they had become less favourable during 2017, representing a similar sentiment in 2016 which stood at 92%.
In addition, a significant number of companies (86%) said payment periods were longer in 2017 compared to the same time last year.
Finally, 67% of respondents stated they were involved in more disputes during 2017 than had been expected before the year started, as opposed to 59% in 2015.
Additionally, a sharp rise in positive sentiment towards Saudi Arabia was noted, with 29% of respondents expecting the Kingdom to provide the most opportunity over the next 12 months, compared to just 11% in 2016.
“Whilst analysts predict a slight economic revival across many GCC markets during 2018, the survey results are indicative of what has been a challenging time for the construction sector - which has grappled with the impact of lower oil prices and ongoing geopolitical tensions,” added Sachin.
In terms of sector types, close to 60% of respondents believe power (including renewables) will offer the most opportunities during 2018.
Meanwhile, sentiment towards the real estate sector improved with 32% of respondents expecting growth from this sector in 2018, compared to 25% in 2016.
With Public Private Partnerships (PPPs) increasingly being used as a means of attracting more inward investment, the survey revealed that more than one third (40%) of respondents are currently involved or expect to be involved in PPP projects during the next 12 months, up slightly from 32% for 2016.
“PPPs provide an opportunity for the private sector investors and developers to access the various sub-sectors of the region’s infrastructure market. We anticipate a rise in PPPs now that regional governments and the private sector have developed longer-term strategies designed to adapt to a new reality of lower oil prices.”
Similar to previous years, the UAE continues to top the charts when it comes to overall optimism and ease of doing business. When asked which GCC country is the easiest to do business in, the overwhelming majority (89%) of respondents stated the UAE.
Oman followed in second place at 46%. Dubai, in particular, is viewed in a positive light with 71% of respondents viewing the emirate as the most appropriate location to solve regional disputes.