The global recession is still having a major impact on the construction industry, as contractors look to diversify into emerging markets to win work.
At the Arabian World Construction Summit (AWCS) in Abu Dhabi on 25 May, senior representatives from some of the region’s biggest construction firms said that diversification is a key goal of their strategy for the coming years.
“During the last three years we have been conservative with our projects in terms of geography, with most of our projects having been located in the UAE and some in Qatar,” said Fatima Obaid Al-Jaber, chief operating officer, Al-Jaber Group.
“However, in the future, diversity is going to be key, geographically and by sectors,” she added.
Diversification into new markets is seen as particularly important for contractors based in the UAE, one of the countries in the region that has been hit hardest by the economic downturn. According to data from Gulf projects tracker MEED projects there are $425bn worth of projects in the UAE that are currently on hold or have been cancelled.
Saudi Arabia and Libya are two markets that UAE contractors are keen to break into. Despite a collapse of the UAE projects market during the downturn, the value of construction projects in Saudi Arabia doubled to more than $2bn last year, according to MEED projects.
UAE-based Arabtec Construction is one firm that has already expanded operations and begun work in Saudi Arabia’s construction sector.
“We moved very quickly when the crisis hit the UAE, moving to Saudi Arabia was our only salvation,” said Riad Kamal, chairman, Arabtec.
Arabtec currently have 6,000 employees in Saudi Arabia and this number is expected to increase to 10,000 by the end of the year, he added.
In addition to the need for diversification, contractors point to the need for increased regulation of the region’s construction sector in the coming years. Contractors speaking at AWCS said that a more closely regulated financial system was necessary to protect the industry from the problems that were encountered in 2009.
“In the next 10 years we are going to need to have a much more regulated financial system to support projects,” said Johan Beerlandt, chief executive, Besix Group.
Al-Jaber agreed with this assessment. “We need to look at regulations… we can do better to ensure synergy in regulations for construction projects in the region,” she said.
Another pressing issue for the region’s contractors in the future is growing competition in the market from Asian contractors. South Korean firms won $71bn of contracts in the Middle East and North Africa in 2009, a quarter of the $285bn total worth of contracts awarded.
“We have to find ways to deal with Asian firms, either by competing with them, or by forming partnerships and joint ventures with them,” said Samer Khoury, vice president operations, Consolidated Contractors Company (CCC).