There aren't too many reasons to fret about the state of the UAE’s contracting market
There is a phrase used in English which purports to be an old Chinese curse, “May you live in interesting times”.
The fact that there is no such Chinese saying spoils this somewhat, but I think concern about what is to come portrayed the mood at the most recent UAE Infrastructure Summit, where many of those taking part seemed a little less sure of the industry’s prospects than they had at previous Construction Week events.
At our most recent Leaders in Construction conference in September, for instance, there was plenty of talk about the abundance of new work coming through, and the need for all of this to be delivered within tight timeframes for 2020.
Since then, the oil price crash has caused some concern. As mentioned elsewhere in this issue, oil and gas still represents around 51% of Abu Dhabi’s GDP, and although the emirate has plenty of reserves to allow it to carry on developing marquis projects there are fears that, as with Saudi Arabia and Qatar, there could be an impact on future pipelines as priorities are reassessed. The fear is that, particularly with infrastructure, big-ticket items that were due to be brought to tender could be pushed back or just cancelled.
Both the Federal UAE and the Dubai government set expansionary budgets at a time of rapidly-falling oil prices late last year, although in Dubai’s case the actual amount allocated to infrastructure spending dropped by around 5%.
Given that the momentum which was propelling Dubai’s property market 12 months ago now seems to have halted, and that hotel occupancy rates have recently fallen back – at a time when investors are being asked to create up to 35,000 new hotel rooms by 2020, which would increase the city’s total stock by over 50% – you can see why some participants were voicing concern.
For instance, Al Shafar General Contracting’s CEO, Bishoy Azmy, went from a position 12 months where he was expecting a hotel building bonanza (at the time, 30% of buildings it was tendering for were new hotels) to one where he would be happy to settle for a “mediocre” year with no disasters.
Yet there are still plenty of others, like Bechtel’s EMEA president David Welch, who are willing to argue that growth prospects within the GCC remain healthy – especially when viewed against other parts of the world.
Overall, the Middle East is predicted to grow at 3.5% – higher than the 1.4% forecast for Western Europe and even the 3.2% figure predicted for a resurgent North American market.
And when you look at forecasts for states within the GCC, only heavy-spending Qatar with its looming World Cup deadline is set to grow more quickly than the UAE, for which Capital Economics predicts a growth rate of 4.5% for 2015.
Although Dubai, in particular, is unlikely to throw around anything like the sums of cash that Qatar is, there are certain things that will need to be delivered in time for Expo 2020, which will continue to facilitate spending over the next few years. So there’s no need to be too gloomy just yet.