Posted on February 15, 2014

The construction sector has extreme importance in the Middle East — in the private and public spheres  — as it is the locomotive of development for other sectors of the economy, including the communications, services, infrastructure and utilities sectors. 

The construction sector has come to the forefront of economic activities in the GCC states over the past 10 years, thanks to fast development — upgrading infrastructure, building roads and bridges, ushering in train, and underground transit networks and establishing industrial, commercial and health cities.

A recent Kuwaiti report says infrastructure projects have been the backbone of the global economy — in Europe, Asia, or America — thanks to the fact that development and progress hinge on them.  The report also says these projects offer necessary push for other work, pointing out that infrastructure contracts in 2013 were estimated at $71bn. 

Current projects in the Middle East are estimated at $1.3trn, including those under progress at $935bn  and those worth $83bn awaiting the tendering process. Projects at planning and design stages are estimated at $162bn, and those under study at $110bn. Countries like Qatar, Saudi Arabia and the UAE have allocated billions of dollars to implement underground projects. 

Saudi Arabia has signed contracts worth $14.3bn, the UAE worth $8.7bn while Qatar has inked contracts worth $12.2bn to implement its underground projects. Saudi Arabia topped the GCC states in terms of infrastructure projects and basic services such as schools, hospitals and residential buildings. 

A report says Qatar’s economy is expected to reach $213bn by 2016, thanks to the fast growing real estate sector, implementation of more construction projects, particularly infrastructure, and the growing number of contracting work during the past year. The value of all these projects is estimated at QR23.3bn. 

The construction sector in the Middle East and North Africa is promising too, thanks to the government’s role in modernising development plans — contracts under implementation are valued at $75bn, and health sector projects at $800m. 

United Arab Emirates 300x250

Many factors are pushing the growth of the construction and real estate sectors. They include the rise in oil prices in the international markets, population growth, and an international desire to boost investments in the Middle East by establishing new partnerships to compensate for the losses sustained in the aftermath of the global downturn in Europe and the US in 2008. These partnerships aim at higher rates of profit. 

Revenues from oil exports and annual budget surpluses are considered strategic fuels for development plans which in turn have a major influence on the economies of the region and investments allocated for the energy sector. Data shows that the construction sector has witnessed continuous growth because of the growing demand, particularly for health, educational, commercial and infrastructure facilities. 

I have referred to a report in a previous article that the GDP of the Gulf countries is expected to witness noticeable growth over the next four years. This will give Gulf companies a chance to hammer out good construction and urbanisation partnerships. 

The report also says construction projects in the Gulf grew by 19 per cent, while construction projects worth $7.68bn were implemented in the GCC during the past year. The Kuwaiti report says the construction sector will continue to be an important investment magnet, as the global economy is facing increasing risks and the exchange rates of currencies keep fluctuating. Construction projects in the government sector constitute half of all such projects in the region. 

I have also written that projects worth $5.64bn will be assigned to contractors in the near future — a one-third growth compared with 2012 when projects worth $4.48bn were assigned. The education and health sectors had the lion’s share.

Also, the housing sector will continue to be the main driver for the growth of the real estate sector with a share of 38 percent, followed by commercial projects with a share of 17 percent. Strategies and plans of the Gulf countries for the next 10 years have contributed to drawing up an ambitious vision for over-all development, including the economic, tourism and services sectors.

by Ali Bahzad