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Social infrastructure drives market growth

01 June 2014

Government-led initiatives will continue to drive growth in the GCC construction sector this year, with social infrastructure projects remaining in focus, according to an annual report by Deloitte Middle East.

According to the newly released report on the sector – GCC Powers of Construction: Are you ready for the recovery? – the rail industry alone in the GCC could create 50,000 jobs with most nations creating or upgrading their rail networks. These consist of the multi-nation interconnected railway network along with metro and tram projects, including the Riyadh Metro in Saudi Arabia, Etihad Rail in the UAE, Qatar Rail and the upgrades to the Dubai metro.

Over the last year, the optimism within the GCC construction market has risen considerably as $70 billion worth of construction projects were completed in 2013 with this number predicted to rise. Residential developments accounted for just over 43 per cent of total completed projects, which is due to the region’s rapid population growth and thus the governments’ increased social infrastructure spends. The UAE and Saudi Arabia ranked in the top two positions for all sectors apart from education and healthcare where Qatar held the top spot in both.

The report highlights some key projects across the GCC states.

It indicates that in the UAE, $12 billion worth of previously stalled projects have now resumed construction. In the transport sector, $2.9 billion will be invested in developing a 131-km metro system in Abu Dhabi with the other big rail project being the $10.8-billion Etihad Rail which will link all the seven emirates and eventually the planned 2,177-km-long GCC railway. There will also be 246 km of new major roads, including a 62-km highway connecting Dubai and Abu Dhabi, scheduled for completion in 2017 in the UAE.

In Saudi Arabia, a large proportion of the high-value construction contracts awarded in the last three years have been in the transport sector, particularly aviation and rail. These include the King Abdulaziz International Airport in Jeddah and the Riyadh Metro project. The country is also set to award further substantial contracts in the transport sector over the next five years, with project management contracts having been tendered for both the $7-billion Saudi Landbridge rail project and the estimated $10-billion expansion of Riyadh’s King Khalid International Airport, the report indicates.

In Qatar, the government is preparing to spend in excess of $70 billion, mainly on infrastructure and transport but also on hotels and stadia, in anticipation of the 2022 Fifa World Cup and Qatar Vision 2030. The country continues to focus on improving its social infrastructure. Funds have also been set aside for completing the Hamad International Airport, the New Doha Port, the rail and metro, and the roads programme. The Qatar Rail project is expected to cost around $45 billion to build.

Across the rest of the GCC, work is picking up in Kuwait and Bahrain “but it is Oman that is the one to watch with strong spending planned for its infrastructure and tourism sectors. The country announced $15.5 billion of spending on rail at the end of 2013 as well as the construction of a new town in Duqm”, the Deloitte report states.