Dubai and Saudi Arabia remain the largest regional markets, with construction, transport and power as the main drivers, says Cynthia Corby, Audit Partner & Middle East Construction Industry Leader, Deloitte Middle East.
Corby was speaking at the Construction Week: Leaders in Construction UAE Summit held on 12 September 2018 in Dubai.
She said: “In terms of the total project pipeline, Saudi is still coming out as the strongest market with $1.2tr, followed by the UAE at $713bn.” She added that the construction sector has “the largest number of projects planned and underway”.
Corby admittedly said that the last couple of years were challenging, as a result of slow down and low oil prices. However, she believed that there were opportunities. “There are huge opportunities in the region and I think it’s just a reassessment of how we plan for those [opportunities] and how we deliver them. We need to evaluate the ROI for these assets,” she said.
In an economic context, GCC’s GDP growth is projected at 1.9% for 2018 and 2.6% in 2019, which means that the economy is recovering from a decline of -0.2% that was seen in 2017. She added: “The oil price increase helps and alleviates some of the pressure. However, the medium term outlook for oil, gold and the ongoing trade war remains uncertain.
“In addition, inflation is expected to increase in 2018 with the introduction of VAT in two major GCC markets. Large fiscal deficits will persist and fiscal consolidation is underway, which we have witnessed in the region over the last 18 months, but still far from complete at the consolidation of various ministries that has undertaken in Saudi.”
In terms of employment outlook, Corby said that there has been a decline in jobs for nationals in the public and private sector. “In Saudi the unemployment rates is at 12%, while in Oman it’s at 17% which are the highest unemployment rate in the GCC.”
However, on a positive note, HSBC forecasted that the international capital inflows have never been stronger. “HSBC’s forecast, she said, “for 2018 is that the GCC Eurobond will enter about $120bn.
“Coupled with that is the various PPP laws that various GCC countries have introduced. External funding is really what is required.”
She said that over the last 18 months, assets and projects have been looked at in terms of feasibility. Deloitte’s theme of publication last year was “if it's feasible, it should be fundable”.
Giving a year-on-year comparison of the contract value awarded in the GCC, Corby said that in 2018 until August there is $67bn worth of contracts awarded. “We had seen $108bn contracts awarded in 2017, which was the lowest in the last three years. The highest was in 2015 with $172.9bn, before the impact of low oil prices,” she said.
However, according to Corby, the UAE is the most consistent market with $31bn of contracts awarded in 2018, compared to $27bn in 2017.
The UAE market is still positive as a result of the EXPO deliveries. “Most of the packages have been awarded and well underway. There is focus on economic diversification and transport network. The biggest opportunity in Dubai still remains the Al Maktoum International Airport, which last year was split into various phases and packages.”
In addition, there are several projects coming out of Saudi. Saudi’s Public Investment Fund (PIF) is the largest project developer with projects worth more than $533bn. Corby said: “Project NEOM is a huge opportunity worth $500bn, followed by KA-CARE Nuclear Power Rector, worth $60bn.”
Over the next 12 months, around $219bn projects are expected to be awarded in Saudi, followed by $102bn in the UAE.
Corby concluded: “We emphasize at all times that a successful project isn’t only because of construction, but planning and execution. If the ROI of the whole life cycle cost is focused on, I really believe that the market and opportunities for getting certain projects funded will be effective.”