The capital projects and infrastructure sector in the Middle East is compelled to address long-standing issues.
Low oil prices, Covid ‘hit Mideast capital projects’
01 September 2020
A Sharp fall in oil prices and the impact of Covid-19 has resulted in the capital projects and infrastructure industry in the Middle East navigating a perilous market landscape, forcing many projects to either be cancelled or temporarily placed on hold, according to top advisory and tax services consultant PwC.
In its latest “Middle East Capital Projects and Infrastructure Survey”, PwC found that majority of the companies (52 per cent) identified risk and change management as among their five most pressing internal challenges, whereas, financial performance (40 per cent) was ranked third. Some 37 per cent of respondents said both funding and financing remained an issue.
The survey conducted between February and April 2020, captured the evolving sentiment of industry leaders as the pandemic progressively influenced their strategic thinking.
The data was gathered during a “pre-Covid-19” period before March 3, the time frame relevant to the Middle East, and a subsequent “pandemic” period after that.
It outlined how the economic shock due to Covid-19 and the lower oil prices has compelled the industry to address long-standing issues such as lax project management and inadequate technology.
Externally, 57 per cent of respondents identified delayed payments from clients which did not vary much between the pre- and post-March 3 results, underscoring the degree to which delayed payments are an enduring issue for the industry due to the length of supply chains.
On the other hand, there was a significant difference between the pre- and post-March 3 results regarding market volatility, ranked second (50 per cent) in the overall survey as a major external challenge.
The survey also found that the pandemic pushed organisations to digitalise functions and operations. A total of 67 per cent of those surveyed believe digital innovation will either transform (29 per cent) or effect significant change (38 per cent) to the infrastructure market over the next two years.
According to PwC, Covid-19 has also sharpened the perceptions about the top five technologies to disrupt the industry in the next two years with two thirds (66 per cent) of the post-March 3 sample identifying artificial intelligence (AI) and machine learning in their top five, compared with just 50 per cent in the pre-Covid sample.
“The overall message from the survey is clear: technology will be the major enabler for organisations as they optimise costs and improve productivity in order to maximise value from capital portfolios and address the daunting challenges that lie ahead,” remarked Andrew Stead, PwC Middle East Capital Projects Services Partner.
Around 83 per cent of the survey respondents agree on the importance of private sector funding, in line with the 2018 survey (80 per cent).
Survey respondents are acutely conscious that successful projects will depend more than ever on deeper private sector involvement and greater public investment efficiency, given the impact of the oil price and the virus on state budgets.
- Mid-2021 launch date for Oman’s mega solar plant
- Fluor JV completes Kuwait clean fuels project
- Low oil prices, Covid ‘hit Mideast capital projects’
- Bahrain Water Garden Phase Two work on track
- Madayn to establish Oman Nano City
- Sector sees recovery; $11.6bn new projects
