2013: The year to exploit opportunities in the GCC construction sector

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2013: the year to exploit opportunities in the construction sector
With 2013 forecast to be a year of optimism and opportunity for construction in the Middle East, all eyes are back on governments in the region and how they propose to manage their spending, according to Deloitte. Photo-Michele Solmi

According to the recently released Deloitte GCC Powers of Construction Report, 2013 is a year of optimism and opportunity in the GCC construction sector.

The report titled ‘GCC Powers of Construction: Meeting the challenges of delivering mega projects’, proposes that the opportunities presented within the Middle Eastern construction sector this year can be efficiently exploited by effective governmental spending.

In a region where there is an acute deficit in terms of infrastructure, the ingredients for capital projects could not be better.” — Deloitte report

However, the GCC economies seem to have more pressing matters at hand. The regional economies are seeking either political stability or economic sustainability, while there is a simultaneous focus to reduce costs and increase revenue. The treasury functions are also pushing an infrastructure agenda that doesn’t necessarily ‘pay back’. With everyone focused on spending, it is now more relevant than ever before to balance the focus on costs — per the Deloitte Report.

“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 realize the benefits each can bring to the process.” — Cynthia Corby, audit partner and leader of the Construction industry for the Middle East

“Clients’ increasing need for transparency, predictability and sustainability of what they spend, provides contractors with an opportunity to reflect on how they can meet this by better operational performance, improved procurement, schedule management and cost reporting.” — Deloitte report

“By leveraging best-in-class internal controls, contractors too can deliver ‘more for less’ whilst still retaining existing or improved profitability.

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.” — Andrew Jeffrey, director, Corporate Finance, Deloitte Middle East

The report includes a section where it has carried out comparative analysis of the GCC countries.

Commenting upon the construction sector within the UAE, the report says that in terms of contract awards, the UAE replaced KSA as the GCC‘s largest construction market in 2012 with $USD 16.2 billion, 4 percent more than the USD 15.6 billion worth of contracts awarded in Saudi Arabia. This is the first time since 2008 that KSA has not recorded the largest value of construction awards in the region.

Providing details about infrastructure projects in Saudi Arabia, the report revealed that the largest construction deal awarded in Saudi Arabia in 2012 was the deal awarded to expand the Masjid al-Haram in Medina. This will increase the capacity of the mosque from 600,000 to 1 million worshippers at an estimated cost of USD 1.5 billion.

Qatar was the third most active GCC construction market in 2012, with USD 10.4 billion worth of contracts awarded. Transport infrastructure dominated Qatar’s construction sector, with four of the five biggest contracts awarded for major transport projects. 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 USD 150 billion.

Kuwait was the fourth most-active construction market in 2012, with USD 8 billion worth of deals awarded. The largest of these was the long-awaited USD 2.6 billion deal to build the Subiya Causeway, which had been in the pipeline for almost a decade. Transport construction accounts for 76 percent of the total construction spend in the country.

The Deloitte report is the fourth publication in the series and the only one of its kind among the Financial Services industry in the Middle East.

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