Contractors in Gulf market change focus

25 January 2011

The Gulf projects market has shrunk, but there is still plenty of work for firms willing to adapt to a changed marketplace

A lot can change in five years. In 2006, the Gulf was mid-way through its construction boom and the total value of projects planned or under way exceeded $1 trillion for the first time.

At the beginning of 2011, the region’s projects market dropped to its lowest value since 2008. But despite the market continuing to shrink, the Gulf still holds plenty of opportunities for contractors.

During the boom, the GCC construction market was dominated by real-estate projects in Dubai. Contractors from across the region and beyond were building artificial islands, marinas and glass towers. The recession put a halt to the flood of expatriates entering the region. Many developers went bankrupt and multibillion-dollar megaprojects were put on hold or cancelled.

Contractors are now having to turn their focus to new markets and publicly funded infrastructure schemes.

With the cash flow problems and difficulty accessing finance, governments have replaced private developers as the client for major construction projects. The number of real-estate projects has fallen, but the number of social infrastructure and transport schemes has increased. Construction companies are also having to diversify geographically to win work.

Governments have replaced private developers as the client for major construction projects

Kuwait and Saudi Arabia are both witnessing rapidly growing populations and investing a lot of money to bridge the infrastructure gap. Both countries are in desperate need of new hospitals, schools, roads and public transport facilities. Saudi Arabia is now the region’s largest projects market and the kingdom has pledged to spend $385bn over the next five years.

Similarly, Qatar’s 2022 World Cup spending programme will also create new opportunities for work hungry contractors.

With oil prices remaining high, if contractors are able to adapt and diversify, the Gulf still has plenty of work to do.

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