Construction, transport, and power sectors drive UAE and Saudi Arabia's development
Posted on 21st September 2018
According to *Constructionweekonline news report, Saudi Arabia and the UAE remain the largest regional markets, with the construction, transport, and power sectors driving development, according to Cynthia Corby, audit and assurance partner and construction industry leader at Deloitte Middle East.
Speaking at the Construction Week: Leaders in Construction Summit UAE 2018 on 12 September, Corby revealed that the two countries would collectively award contracts worth more than $320bn in the next 12 months: “In terms of the total project pipeline, Saudi Arabia is still the strongest market with $1.2tn, followed by the UAE at $713bn,” she said, adding that the construction sector had “the largest number of projects planned and under way”.
Challenges have beset the market in recent years, with an economic slowdown and low oil prices limiting productive output and economic expansion. Corby, said there were ways for the industry to move forward, however.
“There are huge opportunities in the region and it is just a reassessment of how we plan for those [opportunities] and how we deliver them. We need to evaluate the return on investment for these assets,” she added.
The GCC’s gross domestic product is projected to grow by 1.9% this year and 2.6% in 2019, with the economy set to rebound from a -0.2% decline in 2017. “The oil price increase helps and alleviates some of the pressure,” she explained. “However, the medium-term outlook for oil, gold, and the ongoing trade war, remains uncertain. In addition, inflation is expected to increase in 2018 with the introduction of VAT in two major GCC markets. Large fiscal deficits will persist, and fiscal consolidation is under way, which we have witnessed in the region over the last 18 months.”
There has been a decline in jobs for nationals in the public and private sectors, according to Corby: “In Saudi Arabia, the unemployment rate is at 12%, while in Oman it is at 17% – these are the highest unemployment rates in the GCC.”
On a positive note, HSBC has forecast that the international capital inflows have never been stronger. The UK-headquartered bank has said that the GCC Eurobond will enter about $120bn (AED 440m) for 2018. “Coupled with this are the various public-private partnership laws that GCC countries have introduced. External funding is really what is required,” Corby added.
During the last 18 months, assets and projects have been looked at in terms of feasibility, she explained. Deloitte’s message to the market is that “if it is feasible, it should be fundable”.
During the first eight months of the year, contracts worth $67bn (AED246bn) were awarded. “We had seen $108bn-worth of contracts awarded in 2017, which was the lowest in the last three years. The highest was in 2015 with $172.9bn, before the impact of low oil prices,” she said.
However, according to Corby, the UAE is the most consistent market with $31bn-worth (AED113bn) of contracts awarded in 2018, compared to $27bn (AED99bn) last year. The UAE market is still positive largely thanks to project awards for Expo 2020 Dubai. “Most of the packages have been awarded and well under way," she added.
"There is also a focus on economic diversification and transport [expansion]. The biggest opportunity in Dubai still remains Al Maktoum International airport, which last year was split into various phases and packages.”
In addition, there are several projects coming out of the richest country in the GCC. Saudi’s Public Investment Fund is the largest project developer, with a portfolio worth more than $533bn (AED1.9tn). “Project Neom is a huge opportunity, worth $500bn, followed by the [King Abdullah City for Atomic and Renewable Energys] nuclear power reactor, worth $60bn.”
Over the next 12 months, about $219bn-worth (SAR821.3bn) of projects are expected to be awarded in Saudi Arabia, and $102bn (AED374bn) in the UAE.
“We emphasise at all times that a successful project is not only [due to]construction, but [also to] planning and execution. If the return on investment of the whole life cycle cost is focused, the market – and the opportunities for getting certain projects funded – will be effective.”
*News source: http://www.constructionweekonl...
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