Doha's development ambitions

04 September 2009

Qatar is finalising a 25-year masterplan for economic development in the middle of a global downturn.

Trying to devise realistic economic plans is fraught with difficulties at the best of times, let alone in the middle of a global economic downturn. But that is the task facing officials at Qatar’s Urban Planning & Development Authority and Japan’s Oriental Consultants, which are due to finish work on the Qatar National Masterplan by the end of this year.

The document, which will be published in January, will set out a guide for the development of Qatar over the next 25 years and could be one of the most important documents in the country’s history.

Such masterplans are nothing new in the Gulf. Abu Dhabi and Bahrain both have plans covering the next 21 years, and governments across the region have been keen to put in place long-term targets to guide their economic development. But the reality does not always match the ambition - Dubai is reviewing its Strategic Plan 2015 in light of the global economic downturn.

Construction concerns

As much of the work on Qatar’s masterplan has been carried out during the current downturn, Doha should at least be realistic about the country’s economic prospects and the need for continued large-scale government investment.

On the face of it, Qatar’s economy appears to be the strongest in the GCC, with the International Monetary Fund predicting growth of 18 per cent this year and 16.4 per cent next year, in part due to the healthy revenues from the sale of liquefied natural gas. But there are worrying signs of a potential slowdown in private sector activity.

In early August, a report by the US’ Bank of America Securities-Merrill Lynch warned that Qatar could face a significant oversupply of homes by 2012 as the workforce that has been building the country’s infrastructure in recent years begins to leave.

Firms across the construction industry say that activity levels are down this year. Suppliers of ready-mix cement in Doha, for example, say that sales are down about 20 per cent compared with last year.

“We are definitely down this year,” says one. “There are two issues: there are not as many projects, and getting paid as clients run out of funds [is becoming a problem].”

“The ‘build and they will come’ era is behind us,” says Blair Hagkull, managing director for the Middle East and North Africa at US real estate services company Jones Lang LaSalle. “Doha is evolving into a much more mature market that is more focused on the traditional real estate fundamentals, rather than how quickly something can be built.”

With private sector development slowing, the government is likely to play an even more crucial role in the country’s economy. Already, the majority of upcoming projects in Qatar are government-backed, and construction industry sources in Doha say they expect a large number of major contract awards in the coming months.

”We are tendering about QR20bn [$5.5bn] worth of work between October and January,” says one local contractor. “The market is very busy. I am optimistic about the opportunities.”

In particular, several multi-billion-dollar infrastructure projects are expected to move ahead in the coming year, which is helping to buoy optimism. “There are three big infra-structure jobs, so we are quite positive about the future,” says the concrete supplier.

The most advanced scheme is the $11bn New Doha International airport, which is being built on a site close to the existing airport on the outskirts of Doha.

The Sky Oryx consortium, which includes Japan’s Taisei Corporation and Turkey’s TAV, is working on the airport’s main passenger terminal, while a team of other contractors are working on a range of other, smaller packages. The first phase of the project is now due to be completed by 2011, but new work is also being tendered - four groups are preparing to bid in October for a contract to build an extension to the passenger terminal, known as the north node.

On the other side of the peninsula, site preparation work will start at the end of the year on the estimated $2bn causeway linking Qatar to Bahrain. The Friendship Causeway will provide road and rail links between Ras Ashiraj on the west coast of Qatar to the village of Askar on the east coast of Bahrain, and should bolster trade between the two countries. Dredging and reclamation work is due to follow next year.

The third major infrastructure project is New Doha Port at Mesaieed. This is being built  to replace the existing port in the city centre, which is operating at full capacity and unable to expand. The first main construction package is being tendered and involves the excavation of 58 million cubic metres of earth and the construction of 8 kilometres of quay wall.

In terms of social infrastructure, work is ongoing on the QR8.6bn Sidra Hospital, which was awarded to a joint venture of Spain’s OHL and US-based Contrack International in late 2007, and an estimated QR4bn tender for a contract to fit out Hamad Medical City has been issued to contractors.

Alongside these infrastructure projects, the government is backing a series of major building schemes. The most high profile is the 510-metre-tall headquarters building for Qatar National Bank, which is 50 per cent owned by the government. The building will be the tallest in the country and one of the largest skyscrapers in the world. Contractors are currently preparing bids for the scheme and work is expected to start on site by mid 2010.

State-run oil company Qatar Petroleum is also planning a headquarters complex at Lusail, to the north of Doha. It has already approached contractors to build an office complex that will house all of its current Doha-based functions, and construction work is expected to start early next year.

Rail projects

Further infrastructure schemes are expected to be launched in the coming years, based on targets in the masterplan. They are likely to include a series of rail lines to be developed over the next 10 years. The government has said it plans to build a rail link following the east coast between Ras Laffan and Mesaieed, a high-speed line across the causeway to Bahrain, a freight line connecting to the planned GCC rail network, a metro network in Doha, and a light rail network serving residential developments around the capital.

The billions of dollars worth of work that such schemes represent should ensure that Qatar remains an attractive market for inter-national companies. But the recent downturn has also exposed some problems for companies working in Qatar. Malaysia’s UEM claims it has not been paid in full by the Public Works Authority (Ashghal) after completing the 81-kilometre-long Salwa Road project last year, and other contractors working on road projects complain of difficulties and delays in being paid.

“It is a difficult place to work,” says one international contractor working in Doha. “The supply chain is limited and you have to use a lot of local suppliers so there are a lot of hidden problems that you do not plan for at the tender stage.”

Perhaps the biggest problem the masterplan will need to address is ensuring that international companies and their staff want to come to the country in the future. A large number of real estate developments have been launched in recent years, including Lusail and The Pearl Qatar, and the market is already showing signs that supply and demand are approaching equilibrium. “After many years of chronic shortages, supply is catching up with demand,” says Hagkull.

Much of that demand comes from expatriates who are working on developing the country’s infrastructure. Unless Qatar creates new jobs for these people, many could leave, creating a problem of oversupply, as the Bank of America Securities-Merrill Lynch report warns.

That in turn would have a knock-on effect on other areas of the economy, with consumer demand falling for other goods and services, and could bring to an end the recent period of rapid economic growth Qatar has enjoyed.

Construction on the port and the railways will still be going on in 2012, which will help to mitigate the problem, but the government’s masterplan will also need to lay out other strategies to spur the private sector into action.

Major Project bidders

New Doha International Airport north node

  • China State Construction Engineering Corporation
  • Hyundai Engineering & Construction Company (South Korea)
  • Midmac Contracting Company (local)/Six Construct (Belgium)
  • Qatari Diar Investment Company/Vinci Construction Grand Projets (France)

New Doha Port 

  • Al-Habtoor Leighton Group (UAE/Australia)
  • Al-Jaber Group (UAE) / Daewoo Engineering & Contracting (South Korea)
  • China Harbour Engineering Company
  • Dutco Balfour Beatty (UAE)/HBK Contracting (local)
  • Jan de Nul (Belgium)
  • Middle East Dredging Company (local)
  • Dredging International (Belgium)
  • Qatari Diar/Vinci
  • Van Oord/Bam International (Netherlands)
  • Six Construction
  • Hyundai Engineering & Construction/Boskalis (Netherlands)

Hamad Medical City

  • Daewoo Engineering & Construction
  • GS Engineering (South Korea)
  • Hyundai Engineering & Construction
  • Contrack (US)
  • Rizzani de Eccher (Italy)
  • Pizzarotti (Italy)
  • Midmac/Six Construction
  • Qatar Arabian Construction Company (Lebanon)
  • Qatari Diar/Vinci
  • Tadmur Contracting & Trading
  • Establishment (local)/Ellison Don (Canada)

QNB headquarters

  • Qatar Arabian Construction Company
  • Al-Habtoor Leighton Group
  • Midmac/Six Construction
  • Multiplex (Australia)
  • Samsung Corporation (South Korea)

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