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Large scale projects driving growth in GCC sector

by James Morgan on Oct 24, 2015

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For over a year, the Gulf’s construction industry has been plagued by the spectre of low oil prices. In June 2014, the price of Brent Crude stood at more than $100 per barrel. Today, you can expect to pay around half that amount.

Nevertheless, it is encouraging to note that whilst concerns – and lacklustre prices – persist, regional construction has remained largely resilient in the face of oil-related volatility. In August of this year, the total value of 2015 construction contracts within the Gulf region was estimated at $194bn, $2bn lower than in 2014. The report, GCC Construction Industry – Trends and Challenges for 2015, pointed out that lower oil prices are likely to result in reduced costs for building materials and transportation, which will in turn affect contract values. But despite this “slight dip in the overall contract awards”, the researchers predict that the GCC construction sector’s value will increase in 2015.

Andy White, vice president of DMG Events Middle East, commented: “A lot has been said about how oil prices might affect construction markets. But each of the GCC nations has continued to invest heavily in infrastructure, housing, and healthcare.”

Such investments, especially within the field of infrastructure, appear to be driving growth within the GCC’s formwork sector. Paul Williams, divisional operations director – Middle East at RMD Kwikform, says that regional long-termism is serving to maintain market stability.

“Despite weakened oil prices, political tensions, and military interventions in neighbouring and regional territories, construction markets across the GCC have – to date – remained generally buoyant,” he tells Construction Week.

This is particularly the case in Qatar, the UAE, Saudi Arabia, and Kuwait. Here, we can see that government commitments to longer-term infrastructure plans [in Saudi Arabia and Kuwait] and major events [in Qatar and the UAE] remain intact.

“Whilst we have experienced a recent easing in market activity levels in Bahrain and Oman, RMD Kwikform has generally witnessed strong performances across its GCC businesses this year. The team is forecasting an equally strong end to 2015.”

Jörg Hegestweiler, market unit director at Peri, is in agreement with Williams on this matter. Commenting on his company’s current levels of business in the GCC, he says: “Qatar and the UAE are showing very impressive figures, and all other markets show a solid performance as well. [This is] despite the economic and political difficulties in some parts of the region.

“All sectors are contributing well as Peri aims for a diversified contribution of all market segments. But [if I were] to highlight one [sector] in particular, it would be infrastructure, which sees massive upgrade programmes throughout the GCC – especially in Qatar,” he notes.