There is imminent growth in the Saudi Arabian construction industry, being the biggest market in the GCC in terms of population and GDP. Budget value of contacts to be awarded in Saudi Arabia in 2011 onwards is set to increase to $35 billion, as compared to $25 billion in 2006, according to Deloitte.
In its latest report titled ‘Deloitte Middle East’s annual report on the sector: ‘GCC Powers of Construction: Five Lessons to Learn From’ Deloitte said that Saudi Government was undertaking grand investments, with plans nearing $400 billion in five years, demonstrating an increasing trend of projects that will need to be awarded in the coming years ahead.
“These will include building schools, hospitals, universities, houses, airport expansions, and new railway infrastructure and road improvements. This construction market is therefore expected to be one of the most buoyant in the world.”
The immediate challenge that the Kingdom faces is how to implement the various capital investment programmes and to ensure efficient delivery whilst containing inflationary pressures that are challenging the region as a whole. However, the lower global demand in some locales for construction products together with foreign companies shifting focus to countries such as KSA should provide some buffer against inflationary pressures, as per Deloitte’s report on the GCC construction industry.
The Deloitte report classified Qatar as the fastest growing economy in the GCC region and holding an 8 percent share of the total value of the regional projects. In terms of its construction industry, its value was forecasted at approximately $8 billion in FY11.
Projects planned to be underway in Qatar in the future are valued at approximately $230 billion; with the hosting of the 2022 FIFA World Cup positioned to be a truly major enabling event for the future development of the country and achieving its vision for 2030. Therefore sport will be a key element of the construction industry boom, in the non-oil and gas sector, with investments allocated to hotel, leisure, tourism, sports, recreational and infrastructure projects estimated at $60-$70 billion.
The UAE is ranked as the second largest market with investments worth $9 billion allocated to buildings, infrastructure and energy sectors in the first quarter of 2011 as the Deloitte report indicated. Despite the regional unrest and the public slowdown of projects in Abu Dhabi in 2011, the UAE has overall demonstrated some key elements of stability. Abu Dhabi, in particular accounted for 70 percent of the total $20 billion of contracts awarded between Q1 and Q3 of 2011. Driving this growth, with over $12 billion in awarded contracts, the Emirate is placing particular attention on transport, utilities and social infrastructure.
In addition, according to the Deloitte report, the Abu Dhabi government has a long term investment program to upgrade its airports, seaports and public transport system to cater to the growing population. In addition, approximately US$ 2 billion has been allocated towards an integrated housing project on the outskirts of the capital to improve the imbalances within the residential market.