Gulf contractors raise their game

30 January 2012

Local firms emerged as the dominant force in the GCC projects market in 2011, reflecting the shift away from ambitious real estate schemes towards state-backed housing and infrastructure

In numbers

53 per cent: Work won by local firms across all sectors in the GCC in 2011

$112.3bn: Total value of contracts awarded in the region in 2011

Source: MEED Projects

As the Arab uprisings dominated the region’s political headlines in 2011, local firms ruled the GCC projects market, picking up 53 per cent of the $112.3bn-worth of contracts awarded across all sectors, according to regional projects tracker MEED Projects.

Bahrain’s top 10 contractors, 2011
CompanyAwards ($m)Origin
Mechanical Contracting & Services1,030Local
Chase Manara500Local/Malaysia
Abdullah H Aldarazi & Sons Company 400Local
Veolia Water200France
Samsung Engineering200South Korea
Six Construct150Belgium
Nass contracting129Local
Kingdom Projects100Local
Afcons Infrastructure66India
Arabtec60UAE
Source: MEED Projects 

Qatar and Oman were the only two states to award more contracts to international firms than local companies.

Local contractors performed best in Bahrain and Kuwait, achieving market shares of 77 per cent and 63 per cent respectively. In Saudi Arabia, the GCC’s largest projects market with 54 per cent of total contract awards, local firms won 54 per cent of the $60.7bn-worth of projects awarded. In the UAE, the GCC’s second largest market, local firms enjoyed similar dominance, winning 53 per cent of $18.9bn-worth of contracts awarded.

Gulf dominance in construction market

Saudi Arabia’s projects market continues to be dominated by local construction firms, Saudi Binladin and Saudi Oger, which combined won 17 per cent of contracts awarded in 2011.

Kuwait’s top 10 contractors, 2011
CompanyAwards ($m)Origin
Alghanim International General Trading & Contracting1,300Local
Combined Group Contracting1,000Local
GS Engineering & Construction 1,000South Korea
Mohammed Abdulmohsin al-Kharafi & Sons625Local
Schlumberger430US
Alstom400France
Khalid Ali al-Kharafi & Brothers334Local
Metallurgical Construction334China
Mushrif Trading & Contracting323Local
Ahmadiah Contracting & Trading320Local
Source: MEED Projects

Saudi Oger won $6.8bn-worth of deals, 11 per cent of the contract awards made in the kingdom. Its successful bid for the estimated $5.3bn second phase of the Interior Ministry’s security compounds network accounted for the bulk of its orderbook in 2011.

Saudi Binladin won $3.5bn of construction deals, including the $1.2bn contract to build the planned 1 kilometre-high Kingdom Tower in Jeddah, which will be the world’s tallest building once completed. Binladin is the most active firm in the Saudi projects market, currently contracted for $26.8bn of work. This amounts to a quarter of the $106.4bn of construction and infrastructure projects currently under execution, and 12.8 per cent of the projects under way across all sectors.

Oman’s top 10 contractors, 2011
CompanyAwards ($m)Origin
Hyundai Engineering480South Korea
Galfar Engineering & Contracting466Local
Bahwan Engineering465Local
Danieli400Italy
Marubeni400Japan
Chubu Electric Power 400Japan
Fata 300Italy
Larsen & Toubro240India
Enerflex228Canada
Strabag210Austria
Source: MEED Projects

The emergence of local firms as the driving force in the GCC projects market last year reflects the changing dynamics of the construction sector away from ambitious real estate developments aimed at expatriates to state-backed housing and social infrastructure schemes for nationals. “Housing schemes with villas are easier to build than skyscrapers, so local firms are able to compete and win work,” says one contractor in Kuwait.

The improved capability of local firms is also thought to have helped their performance.

“It is a different picture to a few years ago. Local contractors have raised their game to international standards, in terms of quality, speed and delivery,” says a local contractor in the UAE. “They have proved themselves now, can attract the best talent and aren’t afraid to take on big projects.”

This dominance may be short-lived, however, as orderbooks are quickly filling up. In Saudi Arabia, Saudi Oger and Binladin have long dominated the kingdom’s relatively closed projects market. But last year, there was evidence that international firms were successfully penetrating the kingdom’s construction market and winning major projects.

Qatar’s top 10 contractors, 2011
CompanyAwards ($m)Origin
JGC Corporation1,700Japan
Saudi Binladin1,150Saudi Arabia
Consolidated Contractors Company (CCC)965Athens-based
Hyundai Heavy Industries 889South Korea
China Harbour Engineering880China
QDVC (Qatari Diar/Vinci Construction)535Local/France
Qcon510Local 
Hyundai Engineering & Construction434South Korea
Qatar Building Company419Local
Al-Bader Construction & Steel Works400Local
Source: MEED Projects

Turkey’s Baytur Construction & Contracting won a $800m deal on the King Khalid University project and the UAE’s Drake & Scull International was awarded a $500m deal to build the commercial buildings for the King Abdullah Petroleum Studies Research Centre in Riyadh.

With the Saudi government undertaking a construction programme of unprecedented size, international firms are poised to win more work in the next few years. “Binladin and Oger have dominated the market for a long time, but they are fast reaching full capacity. With so much work coming up, there will be chances for international contractors,” says a Riyadh-based consultant.

Saudi Arabia’s top 10 contractors, 2011
Saudi ArabiaAwards ($m)Origin
Saudi Oger6,800Local
Daelim Industrial Company Limited4,000South Korea
Samsung Engineering4,000South Korea
SK Engineering4,000South Korea
Saudi Binladin3,500Local
Samsung C&T2,900South Korea
Saipem1,800Italy
Mohammad Al-Mojil Group1,800Local
Five Solis 1,800France
Arabian Bemco Contracting Company Limited1,400Local
Source: MEED Projects

There were also plenty of opportunities for international companies in Saudi Arabia’s oil and gas sector. South Korean contractors dominated the kingdom’s projects market in 2011, winning 25 per cent of the contracts awarded. South Korean firms were particularly successful at the high end of the market, winning four of the six largest contracts awarded.

South Korea on top

South Koreans were not only successful in Saudi Arabia, they also won more work than any other international contractors in the GCC, signing deals for 17.5 per cent of contracts awarded in 2011.

In the UAE, South Korea was joined by India as the second-largest international player, claiming 7 per cent of the work tendered.

The UAE’s top 10 contractors, 2011
CompanyAwards ($m)Origin
Al-Habtoor Leighton Group1,200Local/Australian
Larsen & Toubro798India
CCC664Greece
Samsung C&T600South Korea
Six Construct600Belgium
Al-Rajhi Construction569Saudi Arabia
China State Construction Engineering Corporation480China
Ghantoot Transport & General Contracting Establishment480Local
Al-Hamad Contracting Company477Local
Arabtec463Local
Source: MEED Projects

Indian firms also performed well in the smaller Omani projects sector, picking up 6 per cent of the $6bn-worth of work awarded. Italian contractors dominated the sultanate’s projects market, with an 18 per cent market share.

In Kuwait, China’s construction majors, Metallurgical Construction Company and Sinohydro Corporation, were able to form joint ventures with local firms to win $1.2bn of work on the project to expand Kuwait University.

Qatar emerged as the GCC’s third largest projects market in 2011, awarding $13.7bn of contracts. With a vast construction programme in the run-up to the 2022 Fifa World Cup, it is a market that international contractors will be closely watching in 2012.

The GCC projects market was characterised by the dominance of local firms in 2011. But the South Koreans have shown that international firms can enjoy success in the GCC and with construction schemes of unprecedented size planned in Saudi Arabia and Qatar, there will be room for others to join them.

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