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2018 Preview: What lies ahead for the Gulf’s construction sector?

While the Gulf’s economies are still striving to adapt to the post-oil era, regional construction developers, contractors, consultants, and suppliers tell Construction Week that they are optimistic about their growth prospects in 2018

ANALYSIS, SPECIAL REPORTS, Business, Sectors, 2018, Alba, Gcc construction market, Middle East’s construction companies, Saudi Arabia, Uae, VAT

Welcome to Construction Week’s 2018 Preview, a summary of the trends, challenges, and opportunities that the Middle East’s developers, contractors, consultants, and suppliers can look forward to in the new year.

Because 2016 tested the resilience of the Middle East’s construction companies in the face of lowered oil prices, it was only fair that industry leaders were concerned about how their projects and products would perform in 2017. However, many would agree that the regional construction sector – particularly that of the Gulf countries – exeeded most expectations last year.


Take the example of Dubai’s real estate sector, which recorded 69,000 transactions, worth more than $77.6bn (AED285bn), in 2017. Dubai Land Department (DLD) said in a statement that 2017 transactions recorded a 6% increase in value compared to 2016’s $73.2bn (AED268.7bn), and a 4% rise compared to 2015’s $75.1bn (AED275.8bn). While $77.6bn is a respectable total in itself, the value of these real estate transactions is even more impressive once the challenges of the current economic climate are factored in.

Alternatively, turn to Aluminium Bahrain (Alba) for inspiration. The aluminium smelting giant announced that its production volume for 2017 was the highest annual production recorded in the company’s history. In a statement, Alba revealed that its 2017 production volume hit 981,016 metric tonnes per annum (mtpa), 1% higher than 2016. As chief executive officer, Tim Murray, pointed out, these figures – combined with Alba’s Line 6 Expansion programme in 2018 – prove that the Bahraini mammoth is on track for continued growth.

Even Saudi Arabia, which until two years ago showed signs of a slowdown, is cruising at a steady pace in the pursuit of its long-term national goals. Saudi’s construction outlook  for 2018 appears to be positive, backed in part by the programmes planned by the Public Investment Fund – led by Crown Prince Mohammed bin Salman – as well as the introduction of value-added tax (VAT).

VAT is expected to generate revenues worth $9.3bn (SAR35bn) in the first year of its implementation in the kingdom. These earnings will be used by the Saudi government for its infrastructure and developmental works, Hamoud Al-Harbi, project manager of VAT at General Authority of Zakat and Tax, said earlier this month.

Clearly, the Gulf’s largest construction economies are determined to grow, and seem ready to contend with any challenges that may lie ahead. For many construction leaders and investors in the region, this is likely to be just the good news they need to start the new year on the right foot.

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Construction Week - Issue 730
Feb 21, 2019