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UAE to award $25 billion projects in second half

The value of project contract in Kuwait will be $16 billion, a fourfold increase on the first half of the year, the Meed research report said.In the first sixth months of the year the GCC projects market fell in value by 19 per cent compared with the same period in 2009. “Just over $49 billion worth of contracts were awarded in the first six months compared with the $60 billion worth of deals signed in the equivalent period last year,” the report said. The drop in project awards was despite an additional $35 billion in GCC capital spending allocated in government 2010/11 budgets, and a general improvement in the region’s economies.

“It is somewhat surprising to see project awards falling compared with last year. The first six months in 2009 were at the height of the global recession, and we would have expected project spending to have been lower then than now, especially as there has been an improvement in the macroeconomic environment,” said Edward James, Head of Meed Insight, the research and analysis arm of the Meed business.

The report predicts that the total GCC project spend in 2010 will be $150 billion, down when compared to 2009 but in line with the five-year regional average.

The research report, the GCC Projects Forecast & Review 2010 offers a detailed picture of the existing GCC projects market - providing the latest data on competitor and client activity by sector within the key markets. Analysis of the data highlights a sharp drop of more than 60 per cent in the value of Saudi Arabian contract awards between the two periods from $29 billion to just $11 billion. The decline was partly as a result of delays on the $11 billion Yanbu refinery project. Delays in awarding several other high-value deals were another factor.

“The downward correction in contract awards in Saudi Arabia is a concern because many in the market had been looking to the kingdom to make up the loss of project activity caused by the Dubai real estate crash,” says James. “However, we are hopeful that much of the shortfall will be made up in the second half of the year.”

A feature of the first half of 2010 was the growing competition for new work in the GCC. In key markets, such as the Abu Dhabi building sector, contractor margins were estimated to have halved since their mid-2008 peak. Intense competition was also apparent in the oil and gas sector with bids on a host of projects coming in at 20-30 per cent below budget.

“The project market in Kuwait has not lived up to its potential over the last 10 years,” said James. “However, the signs are now that it is finally pushing ahead with its long-delayed project plans such as the Subiya causeway, the Al Zour North power and desalination projects, and the Failaka island development. We expect the state to comprise a large proportion of project activity over the next five years.”

In May, Meed Projects reported that the GCC has over $1.3 trillion worth of announced and un-awarded projects and a further $1.4 trillion worth of schemes in the wider Middle East.

The report forecast an uncertain outlook for the UAE construction sector with more than $425 billion worth of construction and infrastructure projects put on hold or cancelled since the start of the market downturn in the fourth quarter of 2008.

Of these, just under $300 billion are located in Dubai, compared to Abu Dhabi that has seen close to $49 billion worth of projects postponed or cancelled, said the report citing latest data from Meed’s online project tracking database.

However, Dubai still has over $216 billion worth of infrastructure projects under construction and nearly $270 billion worth of projects in the pipeline or under bid. However, in its forecasts for the future, the report paints a bright picture for the region as a whole.


issacjohn@khaleejtimes.com