The 2022 FIFA World Cup is expected to be a key driver for the construction industry with a number of infrastructure projects and initiatives to be undertaken by the government.
Qatar, the fastest growing construction and infrastructure market in the GCC region, is likely to record an annual average real growth rate of 10.2 per cent with the growth elevating to 11.4 per cent between 2015 and 2022, according to a BMI report. ´Large investments in construction have led to an industry growth of 18 per cent recently, which is equal to 2.2 per cent of the total 6.6 per cent growth in the local economy,´ reveals Ali Al Khalifa, CEO, ASTAD Project Management. This growth is mainly driven by the National Vision 2030 and the hosting of the 2022 FIFA World Cup, through which the industry expects significant growth, propelled largely by an increase in construction activity in terms of infrastructure and real estate. Both public and private funds will be required to maintain and develop this infrastructure. Robust private consumption, on the back of a fast-growing population, large government spending commitments, and continued progress on infrastructure projects will lead the residential and non-residential sector, in particular, to outperform over the long term.
A contractor´s haven
Preparations for the World Cup have entered a new phase with contracts being awarded for planned facilities such as the Al-Bayt stadium in Al Khor and the upgradation of the Khalifa Stadium to increase its seating capacity to 60,000. Lusail Stadium, the largest of the stadiums to be built, is also in its early stages. ´We have around a dozen ongoing projects including Phase 12 Kahramaa Substations, New Underground Carpark and Cinema at Souq Waqif, 42 Storey Abraj Quartier Tower-1 at Pearl Qatar and Al Meera Cooperative Stores at several locations,´ reveals M Vasanth Kumar, CEO, Arabian MEP Contracting.´
This apart, a huge project that will be tendered soon is the regional rail network linking Doha and other centres in Qatar to the GCC rail network at the Saudi Arabia border.
Qatar has allocated specific investments in all the major sectors including a $20 billion in roads; $40 billion in railways; $4 billion in stadiums; $8 billion on a deep-water seaport. ´Qatar´s intelligent multimodal transport system integrates Hamad international airport, sea port, roads, rail and metro. Indeed, it serves to knit together with the dramatic transformation of the Doha skyline and delivery of many iconic developments associated with the FIFA World Cup 2022,´ states Andrew Thorp, Executive Director, EY.
Additionally, thousands of hotel rooms are being built along with a whole new city. The energy and utilities sector has also been a major target for investment by the Qatari government, with plans to invest $22 billion in its power and water infrastructure up to 2020. The government also plans to build 140 electricity substations and add over 2,000 MW of electricity generation capacity.
Qatar is engaging in new ways to attract investment, especially leveraging the private sector in the use of public-private partnerships (PPP). ´In addition to re-sequencing and prioritising Qatar´s portfolio of investments, it is starting to embrace CORE - Cost Optimisation and Revenue Enhancement. A two-pronged approach to removing unnecessary cost leakage, by considering changes in traditional governance structures, delivery models, contract types, supply chain arrangements, performance and incentivisation schemes, business process and system transformation; and improving revenue enhancement by using digital and data analytics to design engineer how to sweat assets more effectively and efficiently,´ notes Jamie Andrews, Senior Manager-Infrastructure Advisory, EY.
The country plans to invest over QAR 130 billion (US$ 35.7 billion) in 2011-2016 through its state-linked companies, including about QAR 100 billion by Barwa Real Estate Company (BRES.QA) and Qatar Diar for residential and business construction projects. Qatar Petroleum and its subsidiaries are expected to spend a further QAR 88 billion. State infrastructure spending is likely to exceed US$ 67 billion, including roads, port, power and water.
The challenges zone
So, where does the challenge lie? ´We have experienced and recognised firsthand, some of the repetitive challenges faced by the region, which have often escalated to disputes between employers, contractors and consultants. Some of the most common challenges include frequent claims, awarding the lowest bidders, and misunderstood risk appropriation, which are all issues that are not addressed properly on a contractual level and are often due to unclear contracts, creating a lack of understanding and inefficient contract administration. This often delays projects, increases costs, and in some cases, leads to incomplete projects,´ reveals Al Khalifa. ´The reduction in the price of hydrocarbons is driving liquidity constraints. The tendency is for many employers to ´shelve´ projects or delay their start. Often these decisions are taken subjectively and on the basis of cost alone. The impact of this is a market that experiences cost escalation and time overruns in a claims oriented environment,´ adds Andrews.
Several measures have been adopted to counter these challenges, and as Al Khalifa reveals, ´We have developed our own Inclusive Suite of Construction Contracts, which has been created as a result of the distinctive contractual challenges faced within the construction industry in the Gulf to aid, support and streamline contractual procedures. Amid going international, we have developed these contracts with the added value of customisability, as well as designing them to suit the needs of not only Qatar, but the entire Gulf region, further supporting our goal to share knowledge of this industry and our strategic aim to ease contractual procedures across the region.´
Read on to know more about the ongoing projects and recent developments in the region...
Major Growth Drivers Diversification at full stream
The government has launched the National Development Strategy (NDS) to achieve the targets of Vision 2030. The strategy is to leverage the hydrocarbon sector revenues to build the non-hydrocarbon sector and a more sustainable economic base.
FIFA World Cup 2022: The Game Changer
The successful bid to host the FIFA World Cup 2022 has been a big achievement for Qatar. The construction sector has since witnessed a spate of new project announcements. The government has also allocated US$ 20 billion towards the development of the tourism sector.
Well regulated and capitalised banking sector
Recently, the government completed the two-year capitalisation programme. In August 2011, the central bank lowered its interest rates to initiate lending to the private sector that has optimum capital ratios to extend lending to the construction and private sector.
Arabian MEP Contracting
The company currently has around a dozen ongoing projects including Phase-12 Kahramaa Substations, New Underground Carpark and Cinema at Souq Waqif, 42-Storey Abraj Quartier Tower-1 at Pearl Qatar and Al Meera Cooperative Stores at several locations.
Astad Project Management
The company is currently managing the delivery of Qatar Foundation Stadium, one of the proposed stadiums for the 2022 FIFA World Cup and the Khalifa International Tennis & Squash Complex, both of which will continue to embrace the nation´s commitment to sports. Its other projects nearing completion include the Sidra Medical Research Centre and the National Museum of Qatar.
EY shares a list of some key upcoming projects in the region
Energy: The construction of Umm al Houl Power and Desalination Plant is currently progressing and estimated at circa $3 billion. It will meet the country increasing water and power consumption needs.
Infrastructure: The construction of the FIFA World Cup in 2022 continues to be a core driver for a substantial amount of infrastructure investment in the country. The construction of the stadiums led by SCDL and supported by transportation infrastructure delivered by organisations such as Qatar Rail, HIA and Ashghal continue to be major construction investments across Doha and wider afield, which will transform the way the country´s residents travel, and go about their business, positively impacting the economy and attracting further investment.
Healthcare: The construction of new healthcare services continues to increase in line with the population and support transforming the experience of those who require healthcare provision. Qatar aims to double its health facilities by 2022 and planned projects include the completion of SIDRA´s Medical and Research Centre and expand Hamad´s medical facilities such as the General Hospital.
Others: Other major developments also include the industrial zone and real estate continues to see substantial investment to support the growing commercial, residential and tourism requirements of the state.
"Large investments in construction have led to an industry growth of 18 per cent recently." - Ali Al Khalifa, CEO, ASTAD Project Management
"We have around a dozen ongoing projects." - M Vasanth Kumar, CEO, Arabian MEP Contracting
"Qatar´s intelligent multimodal transport system knits together delivery of many iconic developments." - Andrew Thorp, Executive Director, EY
"Qatar is starting to embrace Cost Optimisation and Revenue Enhancement." - Jamie Andrews, Senior Manager-Infrastructure Advisory, EY