The construction market in the GCC is expected to see a manifold increase in contracts awarded in 2013-14.
In the world of construction that is witness to a growing number of power shifts, this one is the latest. The United Arab Emirates has overtaken the Kingdom of Saudi Arabia as the GCC region's largest construction market for the first time since 2008, as per a report by Deloitte.
The Deloitte report focuses on the construction markets of Saudi Arabia, UAE, Qatar, Kuwait, Oman and Bahrain. The shift found reflection in terms of the size of contracts awarded where the UAE replaced Saudi Arabia with a market of $16.2 billion, which is four percent higher than the former.
Qatar was the third most active GCC construction market last year, with $10.4 billion worth of contracts largely dominated by transport infrastructure-as many as four of the five biggest contracts were associated with transport. Hosting the FIFA 2022 World Cup should yield considerable contracts across the construction and infrastructure sectors. Ahead of the 2022 FIFA World Cup, and in line with the country's 2030 Vision, Qatar's infrastructure spend is expected to reach $150 billion. Meanwhile Kuwait has emerged as the fourth most active construction market in 2012, with $8 billion worth of deals awarded.
According to the Deloitte report, 2013 is expected to be a year of optimism and opportunity for construction in the Middle East. The projects industry in the GCC is expected to see contracts collectively valued at $1.35 trillion awarded by the end of 2013, which is a big leap from the $730 billion awarded in total last year. The focus now will be on how governments in the region with acute infrastructure deficit will manage their spending. "The infrastructure and capital projects market is growing rapidly with governments announcing projects across the Middle East region, utilising trillions of petro-dollars over the coming years," the report says.
Cynthia Corby, audit partner and leader of the construction industry for the Middle East, is led to say, "With significant investment in major infrastructure programs increasing over the coming years across the GCC, contractors, consultants and clients alike need to rethink the way they engage each other if they are to truly realise the benefits each can bring to the process."
According to data from MEED Saudi Arabia led the region with close to $600 billion projects to be awarded, followed by the UAE with slightly more than $350 billion contracts and Kuwait with a little over $150bn. Between Qatar, Oman, and Bahrain, more than $250 billion are expected to be awarded this year. According to the report a majority of construction companies based in the Gulf have performed better as compared with the previous quarter. UAE contractors led by Arabtec Holding, Drake & Scull International and Depa Limited, the report said, continue to lead in terms of order backlog.
Overview of construction sector in the GCC
According to the Middle East Economic Digest (MEED), the value of construction and infrastructure contract awards in the GCC fell by almost 18 per cent in 2012, with $51.9 billion of contracts awarded during the calendar year compared with $63.4 billion in 2011.
$549 billion: The total value of projects planned or underway in the UAE (MEED).
Main Focus Areas
Transport: Amounts to 13 per cent of the total UAE construction spend. Road and bridge projects currently underway or in the planning phase amount to $58 billion. Phase-II of the $100 billion Etihad Railway Network, which is a part of the wider GCC Railway will provide a significant boost to the local construction industry. Abu Dhabi International Airport is increasing capacity from 11 million passengers to 30 million passengers annually. The cost of the mega project to be completed in 2017 is expected to touch $6.8 billion.
Projects: Etihad Rail, Dubai International Airport Concourse 4 and Terminal 4 expansion, Dubai Metro, Abu Dhabi International Airport expansion, Al Maktoum International Airport, Abu Dhabi Metro, Mafraq-Ghweifat highway PPP.
Housing: The UAE is set to start a massive housing project replacing 12,500 houses built before 1990, at a cost of $2.7billion.
Projects: Dubailand, Al Ain Aviation City
Energy and resources: Accounts for 19 per cent of the total construction spend. The nuclear power project in Abu Dhabi has been plagued by project delays and cost inflation. Dubai has an ambitious plan to build a $3 billion, 1,000 MW combined solar park which is being touted to become the largest in the world.
Projects: Abu Dhabi Nuclear Power Plant, IGCC plant, Dubai, Gas processing facilities, Abu Dhabi, Shuweihat 2 IWPP, Oil storage terminal in Fujairah.
$732 billion: The total value of projects planned or underway in Kingdom of Saudi Arabia (KSA).
Social and economic Infrastructure: Under the Ninth Development Plan, the KSA government aims to invest $385 billion in between 2010 and 2014.
Projects: Grand Mosque expansion, Mecca, Jubail refinery scheme, University building projects, Jubail refinery scheme.
Housing: The government has pledged $66 billion, with 500,000 new units in the pipeline. Total hotel capacity to be increased to 53,000 rooms.
Transportation: Makes up 20 per cent of total construction spend within KSA. A $16.5 billion revamp of the transport system is being planned in the holy city of Mecca. Further, a $72 billion expansion is being planned for King Abdulaziz International Airport in Jeddah. KSA is also looking to improve its rail network by adding 3,900 km of track. A $9.4 billion high-speed rail-line between Mecca and Medina is also on the anvil.
Projects: Jazan, Abha, Al Qasim Airports, King Abdulaziz International airport, Saudi Landbridge Railway, Jeddah Monorail, Phase one of Mecca Mass Rail Transit project (MMRT).
Energy and resources: This sector accounts for 47 per cent of the total construction spend. KSA through solar energy will generate about 10 per cent of its electricity needs by 2020. Over $800 million has been invested in solar energy plants in Yanbu Port in the Madina region and Jubail in the Eastern Province.
Projects: 16 nuclear reactors, Ras Al Zour combined desalination and power plant, Multi-effect desalination plant, Yanbu
$188 billion: Total value of projects (planned or underway ).
Construction and social infrastructure: Accounts for 4 per cent of total construction spend. Kuwait has at least $5 billion of university building projects either in the planning stage or under construction. The largest is the $3 billion Sabah al-Salem New University at Shadadiyah, Sabah al-Salem University.
Energy and resource: Accounts for 20 per cent of total construction spend. Kuwait National Petroleum Company is set to construct the largest oil refinery in Middle East. The $14.5 billion facility will have a daily processing capacity of 615,000 barrels from 2018. $1.8 billion water and power project is being developed at Al-Zour North.It will have an overall capacity of 1,500 MW and be capable of producing up to 107 gallons of potable water daily.
Projects: Upgrades and expansions for Mina Abdulla and Ahmadi refineries, Al-Zour IWPP, Power plant, Subiya, Thermal power plant and desalination plant-Shuaiba North.
Transport: Accounts for 76 per cent of total construction spend. $7 billion metro project is expected to be completed by 2020. Further, the $3.3 billion Kuwait International Airport (KIA) terminal will open in September 2016. An approximate $6.2 billion will be invested in a 550 km motorway construction project. The $2.6 billion 37.5 km Subiya causeway will cross Kuwait Bay, linking Kuwait City, the Subiya peninsula and Boubyan Island.
Projects: Boubyan port construction, Mass Rapid Transit (MRT), East-West Railway network, motorway construction packages, expansion of Kuwait airport, railway network from Kuwait to Oman.
$222 billion: The total value of projects (planned or underway).
Ahead of the 2022 FIFA World Cup, and in keeping with country's 2030 Vision, Qatar's infrastructure spend is expected to reach $150 billion. A series of construction projects are in the pipeline including a $4 billion spending on stadiums, in Doha. Work has begun on the $1.37 billion Doha Festival City project. Lusail City when completed will cover an area of 35 square kilometers and will house 200,000 residents, 80,000 visitors and 170,000 workers. The Hamad Medical City, currently under construction, with a 2018 completion date, is set to become the largest hospital complex in the world.
Main Focus Areas
Housing: Lusail City, Musheireb development, Golf City Project (Lusail City), Doha Festival City project.
Energy and utility: Ras Girtas C (formally Ras Laffan C) IWPP
Transport: Accounts for 58 per cent of total construction spend. A $20bn investment is expected in roads, $25bn in railways, $15.5bn on the new international airport, $8bn for a deepwater seaport, and $1bn for a transport corridor project Doha Metro attracted more than 60 bids from international consortia competing for the $7 billion first phase of the contract. Projects:Developments in Doha Metro, New Doha International Airport, Abu Dhabi-Qatar Causeway, New Doha Port Project, New Doha Port, Qatar-Bahrain Causeway
$116 billion: Total value of projects (planned or underway).
Construction and social infrastructure: The Omani government is spending up to $78 billion on infrastructure as part of its plans for 2011-2015.
Projects: Steel plant, Oman Conference and Exhibition Centre, Muscat
Transport: Transport occupies about 66 per cent of the total construction spend. The country has allocated about $4.4 billion for road projects.One of the biggest road projects is the second phase construction of the 240 km Al-Batinah coastal road. The construction of six new airports and the expansion of existing airports at Muscat and Salalah at a cost of $1.8 billion and $765 million is also under process. A new international airport at Duqm is due to be operational next year. An investment of $12 billion will make Sohar one of the largest port development projects in the world.
Projects: Construction of the GCC railway, Oman National Railway Project, National rail network, Duqm Port, Muscat International Airport's new terminal.
Energy and utility: 25 per cent of Oman's total spend in the construction sector is devoted to energy and resources. Currently, about $2 billion worth of renewable projects are planned including a solar panel production facility, a 400 MW solar power plant, a renewable energy university.
Projects: Kish gas field pipeline, Terra Nex solar PV energy development, Sur IPP, Haya Water Project.
$52 billion: Total value of projects (planned or underway).
Construction and social infrastructure: Thanks to the political uncertainty foreign investors remain wary of putting their money in construction projects thus suppressing demand. Reportedly only $295 million worth of contracts was awarded during the 2012 calendar year. Incidentally commercial and residential construction accounts for 47 per cent of total construction spend. Among the important projects taken up is the $2.5 billion waterfront and commercial development called Bahrain Bay. The Bahrain government is planning to build 30,000 new housing units over the next five years at a cost of $3.18 billion. The largest contract awarded in 2012 was $70m to Abdulaal Construction Services for phase two of the Majaal industrial development, which consists of the construction of warehouses and office space.
Projects: 30,000 new housing units, Durrat Al Bahrain, Infrastructure development at Amwaj Islands, social housing programme, Lulu Island mixed development and Hidd steel mill civil engineering works.
Transport: Occupies up to 32 per cent of the kingdom's total construction spend. $4.8 billion has been committed to the Bahrain International Airport expansion project to triple airport capacity to 27 million passengers per annum and $4.2 billion for the 40 km long Bahrain-Qatar Friendship Bridge.
Project: Expansion of Bahrain International Airport, Bahrain-Qatar Friendship Bridge.
Energy and utilities: Al Dur 1 IWPP. 3rd phase of Al Hidd Power Complex