Qatar needs to manage costs to avoid bubble
Wave of proposed projects could add billions to infrastructure bill
The plethora of new construction projects planned for Qatar could lead to the cost of building rising by 18% a year unless efforts are made to keep them in check, according to a new report.
EC Harris’s Avoiding the Inflationary Bubble report argues that unless action is taken, construction inflation in Qatar could effectively add billions of dollars to the cost of building Qatar’s future.
The firm's analysis of major projects either already announced or underway, which draws on the firm's experience both in the UAE and Singapore, highlights a number of measures which it says the emirate needs to take to mitigate inflation.
Currently, the Emirate is planning a spend of $160bn on capital projects and infrastructure, which will lead to its construction sector growing by an average of 12% a year.
"While this is a remarkable opportunity to propel Qatar forward...the ability of the supply chain to absorb fluctuations in workload is limited in Qatar. The potential consequence of this is that the risk of price fluctuations in response to workload increases – and with this comes a heightened threat of inflation."
The firm says that both the capacity and capability of Qatar's supply chain needs to be improved by encouraging local companies to partner with international contractors.
There should also be minimal restrictions on importing labour and materials to prevent price hikes, and a Qatar-wide plan for accommodation workers in decent, accessible locations should be implemented.
EC Harris also argues that the procurement process should be revamped so that it employs best value principles and an open, transparent approach to any appointments made.
Terry Tommason, EC Harris’s Middle East head of property and social infrastructure, said: “Qatar has seen a remarkable transformation in less than a generation, and the exciting thing is we’re only part-way on the journey.
"These are unique times for Qatar as the country witnesses an explosion of construction activity which will continue over the next decade.
"Growth in output on this scale is unprecedented, with GDP more than tripling over the last ten years.
“However, this unprecedented growth brings challenge as well as opportunity.
"By taking action now, there is every reason to believe that construction inflation can be avoided. In so doing, Qatar would cement its position on the world stage – the World Cup host country with a world-class approach to delivering infrastructure investment on a truly mass scale.”