The Deloitte report indicates that there is at least an estimated $500 billion investment opportunity regionally, in energy, transportation, education, healthcare and other critical sectors of economic development.
Key findings in the Deloitte report indicate that large infrastructure projects, particularly around social and transport infrastructure, will offer tremendous opportunities for contractors, as will continuing upstream and downstream oil and gas related developments in the coming years. Cemented as a trusted advisor to a large number of clients throughout the Middle East construction industry and supply chain entities, Deloitte is uniquely positioned in this report to analyze the impact of the global financial crisis on the GCC construction sector, particularly regarding current projects.
Of the biggest investments currently underway is Qatar’s plan to spend $100 billion in preparation for hosting the 2022 World Cup and achieving its 2030 vision and Saudi Arabia’s capital spend program approaching $400 billion over the next 10 years alone. The Deloitte report indicates that although there are massive opportunities associated with huge construction spend, many project sponsors still have to deal with illiquid projects and debt.
“What primarily differentiates participants in the GCC’s construction industry from their Western counterparts is that grand opportunities continue to be capitalized upon across the region, despite being forced to deal with continuing negative financial circumstances – simultaneously – in specific locales,” Rizwan Shah, Managing Director, Corporate Finance, and Leader of Deloitte’s Capital Projects Advisory services practice for the Middle East, said.
The ‘GCC Powers of Construction’ series is an annual report issued by Deloitte Middle East. The 2012 edition provides a collection of unique perspectives on the underlying issues that have challenged the GCC’s multi-trillion dollar construction industry, and how these challenges have been overcome by some of the largest and most sophisticated businesses in the region.
“This report demonstrates Deloitte’s unique perspective on the construction industry and its commitment to addressing what is ‘next’ for the benefit of our clients and wider GCC industry participants, by leveraging a multitude of lessons learned in the context of projected growth for the GCC construction industry in the future,” adds Shah. “Collectively, the report is designed to share what is typically privileged client intelligence in a neutral medium, to help stakeholders involved in the construction industry improve their business performance and to benefit and advance the GCC construction industry as a whole,” he added.
The Deloitte report is produced based on data gathered from surveys and internal data, supported by interviews with some of the most prominent industry leaders from the region, to understand and leverage how they have progressed their businesses through these difficult times and how they have managed to create a stable foundation to move forward.
Backed by vast oil-based reserves and government stimulus packages, the economic prospects of the GCC region have remained positive despite ongoing political unrest in the wider Middle East region. As such, efforts to maintain a balanced and diversified economic base have remained the primary focus of the regional governments as evidenced by a steady stream of investments into construction and infrastructure developments.
The oil and gas exporting countries, such as Saudi Arabia, Qatar and Abu Dhabi, have an additional objective which is the need to diversify their economies away from the traditional petrochemical and hydrocarbon industries. This is also driving infrastructure spending in these countries. These countries are now looking at how to take advantage of existing strengths to develop upstream industries – and the focus has shifted to construction, according to the Deloitte report
“The region certainly is expected to continue to offer a lot of opportunity for contractors,” Cynthia Corby, audit partner Deloitte Middle East and leader of the Construction industry for the UAE, said.
“Construction contracts alone, worth $40 billion were awarded to contractors in the first quarter of 2011, 47 percent of which were in the energy sector. It is interesting to note that despite such grand investments, governments are still trying to recuperate from the impact of the financial crisis,” she added.
The Deloitte construction industry report indicates that there are vast opportunities across the Middle East, with longer term infrastructure investment plans for the region estimated to be in excess of $1 trillion. This figure, as research shows, may continue to rise as governments assess the impact of the Arab Spring on priority investments. In addition, the uprisings have been credited with positively influencing infrastructure investment, forcing governments to accelerate spending programs in order to meet citizens’ higher expectations. In terms of projects in the pipeline across the Middle East, the majority are social (36%); 29% power-related; 13% in transport and 13% in oil and gas.