For the first time since the financial crisis of 2008, the UAE last year overtook Saudi Arabia as the Gulf region’s largest construction market.
Contract awards in the Emirates hit $16.2bn in 2012, a small but significant lead of 4% over the $15.6bn signed in Saudi Arabia, according to a new report by Deloitte.
The UAE’s strengths include a clear regulatory environment that encourages private investment, plus ongoing government-sponsored infrastructure spending, notes Deloitte.
"With significant investment in major infrastructure programmes increasing, contractors, consultants and clients alike need to rethink the way they engage each other."
Cynthia Corby, Deloitte
Such advantages appear to be giving it an edge over what Deloitte identifies as Saudi Arabia’s weaknesses: no vibrant private sector, the preponderance of the government as a client – and its record for not paying – plus a looming electricity shortage.
The largest contract awarded in the UAE last year was the $2.8bn contract to build the Midfield Terminal building at Abu Dhabi International airport, awarded to a joint venture led by Turkey’s TAV. In Saudi Arabia, the largest construction deal awarded in 2012 was the expansion of the Grand Mosque (Masjid al-Haram) in Mecca to increase its capacity from 600,000 worshippers to 1 million at an estimated cost of $1.5bn.
Qatar
Qatar was the third most active construction market in the Gulf Cooperation Council (GCC) grouping last year, with $10.4bn worth of contracts awarded, according to the report, GCC Powers of Construction: Meeting the challenges of delivering mega projects.
Transport infrastructure dominated Qatar’s construction sector, with four of the five biggest contracts awarded for major transport projects. Ahead of the 2022 FIFA World Cup, and in line with the country’s 2030 Vision, Qatar’s infrastructure spend is expected to reach $150bn, Deloitte said.
Kuwait
Oil-rich Kuwait managed to stay ahead of Bahrain and Oman to be the fourth most active construction market in 2012, with $8bn worth of deals awarded, but Deloitte said continued political instability, corruption, and a business-unfriendly environment continue to hamper its development plans. The largest of these was the long-awaited $2.6bn deal to build the Subiya Causeway, which had been in the pipeline for almost a decade, Deloitte said.
At the beginning of 2013 Kuwaiti MPs voted by a narrow majority to probe the award of this contract to South Korea’s Hyundai Engineering and Construction over alleged irregularities.
Overall, Deloitte notes that GCC countries are under extra pressure now to save costs and increase revenue, while at the same time pushing an infrastructure agenda that doesn’t necessarily “pay back”.
Dubai’s business-friendly environment seems to be giving it an edge. (Credit: EVO from UAE/Wikimedia Commons)
Cost conscious
Deloitte said the construction supply chain active in the GCC region should be correspondingly extra mindful of costs.
“With significant investment in major infrastructure programmes 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 realize the benefits each can bring to the process,” said Cynthia Corby, audit partner and leader of the construction industry for the Middle East.
“By leveraging best in class internal controls, contractors too can deliver ‘more for less’ whilst still retaining existing or improved profitability,” said Andrew Jeffrey, director, corporate finance, Deloitte Middle East.
“Additionally by engaging more intelligently with clients, contractors should look at more innovative ways of sharing savings, risks and opportunities to the benefit of all,” he added.
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