Political instability in Bahrain has caused much uncertainty in the kingdom’s construction market. Several projects have been delayed or cancelled.

According to data from regional projects tracker MEED Projects, the total value of projects planned or under way in the kingdom has fallen from $80.6bn at the beginning of March to $66.7bn by 26 April.

Most projects put on hold have been in the private sector, as investors do not want to put their money into an uncertain market.

Large-scale real-estate projects on hold or cancelled since the beginning of the protests include the estimated $800m Nomas Towers development and the estimated $200m Difaaf Residential Development.

“The uncertainty in the market has meant that private developers and investors are unwilling to push ahead with planned projects as they do not know what’s going to happen,” says a consultant based in Bahrain. “It’s difficult to make decisions, so projects are being put on hold. What is the point in tendering projects and beginning work when nobody knows what will happen tomorrow?”

Uncertain investment

Since the violent government response to protests began, many foreign businesses have withdrawn staff from the country. Those that remain have been unable to make decisions as a result of uncertainty in the market.

“There has certainly been a slowdown in new starts and a lot of people are holding back at the moment to see what happens over the next few months,” adds the consultant.

But while the private-sector projects market has come to a standstill, there is still activity in the public works sector.

“The projects have not stopped, apart from a few days in February and March. Things have been progressing quite normally,” says

a contractor working on a state-backed project in Bahrain.

The government’s recent pledges to step up its housing programme and push ahead with infrastructure projects has meant Bahrain still promises to offer some interesting opportunities for contractors.

“Many Bahrainis are living in substandard housing … [Manama is] making plans to solve the problem”

Bahrain-based consultant

In response to the protests, Manama has announced several reforms in an effort to stimulate the economy and curb its people’s growing discontent with the ruling regime. As well as payouts to each family and the creation of extra jobs, the state has pledged to invest BD2.5bn ($6.6bn) to build new homes for its people.

Bahrain is facing a looming housing crisis. Much of the housing developments built in recent years have been luxury developments targeting expatriates. The government has said it will build 50,000 social housing units over the next five years to meet expected demand.

Improving the housing of local people is a central element of the government’s attempts to appease protesters and quell the potential of any further unrest. According to Bahrain’s Housing Ministry, in 2010 there were 47,000 local citizens on the waiting list for a house to be allocated to them by the government.

“Many Bahrainis are living in substandard housing and conditions need to be improved. The government has realised this and is making plans to solve the problem,” says a consultant based in the kingdom.

Private progress

As part of its effort to meet the increasing demand for low-cost housing, Manama is pushing ahead with plans for the first public-private partnership (PPP) housing scheme in the region. Under the pioneering project, the contract for 5,000 housing units has been tendered. If successful, the scheme will be extended to cover the construction of 20,000 low-cost properties.

But progress on the PPP scheme has been delayed by the anti-government protests and reshuffles at the Housing Ministry. Bassim bin Yaqoub al-Hammar was appointed as Housing Minister in late March, despite his predecessor only having been in the position for a month.

The Housing Ministry remains committed to implementing the scheme and has appointed the local Naseej Properties as the preferred bidder for the initial 5,000-house programme.

“We are the preferred bidder and we are holding a series of negotiations with the government. We are confident they will make a decision soon,” says Christopher Sims, chief executive officer at Naseej. “Naseej is a cash-rich organisation. It is backed by key banks in Bahrain and is ready to start developing.”

Bahrain will have the economic means to carry out its ambitious development plans. The GCC has pledged to send $10bn in aid to Bahrain over the next 10 years to stave off discontent and encourage stability. Most of the economic stimulus package will be funded by Saudi Arabia, which will be keen to prevent any upheaval or sectarian problems in Bahrain that could inspire protests within its own borders.

Social infrastructure

A key part of the stimulus plan is expected to be capital expenditure on new projects and to ensure that previously planned projects receive the required backing to go ahead.

The government is also pushing ahead with projects to expand the country’s social infrastructure. Singapore’s Meinhardt Consultants was recently awarded a BD1.3m contract to design and supervise the construction of the faculty of engineering for Bahrain University.

Work is still ongoing with several school projects planned or under way, including the BD2.1 million project to build a new primary school in Al-Eker. The Bahrain Minister of Works recently paid a visit to the construction site to show that the government was pushing ahead with important development projects.

There are also large-scale schemes planned to improve the kingdom’s transport links and infrastructure. Expanding the international airport is one key project.

Manama is planning to expand the existing passenger terminal at its international airport, boosting the capacity from the current 4 million passengers a year to 12 million when completed. State-backed Bahrain Airport Company (Bac) is looking to start the prequalification process for the main construction package to upgrade the existing terminal in July.

Despite the government’s bullish attitude towards its construction programme, state-backed projects have not been immune to the effects of the political unrest.

Although Bac is pressing ahead with the planned expansion of the existing terminal, schemes to build two new terminals have been put on hold indefinitely.

Manama’s ambitions to build a $7.9bn rail network have also been blighted by the current political turmoil. Bahrain’s Works Ministry prequalified 10 groups in April 2010 for the contract to carry out feasibility studies for the first phase of the planned rapid transport network.

However, the project has been delayed as the ministry is to redo the prequalification process. The first phase of the proposed rail plans will involve the construction of an 11-kilometre light rail transit line that will run from the airport to the capital Manama, then on to Isa Town Gate interchange to end at the Qatar-Bahrain causeway, which has also been delayed.

The $4bn Qatar-Bahrain causeway is scheduled to connect Ras Ashairij on the west coast of Qatar to Askar on the east coast of Bahrain.

Construction work on the project was scheduled to begin in the first quarter of 2010, but later that year in June, the consortium appointed to build the structure demobilised site staff. The suspension of work was due to a combination of financing and political issues. The 40km bridge is a key component of Qatar’s Fifa World Cup Plans for 2022. The first part of the causeway was scheduled for completion in 2013. The future of the project is now uncertain.

Backlash backfires

The government backlash against the pro-democracy protests has had a crippling effect on the Bahraini projects market, which was just starting to pick up after the global recession.

Large real-estate schemes and multibillion-dollar transport projects had previously promised to offer many opportunities for the region’s construction sector. The private sector will now need to see stability return before it starts to invest in the kingdom’s projects market.

Despite the government expressing a commitment to push ahead with an ambitious housing and infrastructure programme, until a political compromise can be reached, the future of these projects cannot be guaranteed.