In the Middle East, there are traditional two quiet periods of the year: summer and Ramadan. This year, like last year, the two coincided, causing a lull in awards, tenders and general business activity.
Although this was to be expected, the slowdown this year means that clients now have just four months to make up for what has so far been a lethargic 2012 when it comes to contract awards.
This year, there has been $121bn of contract awards across the region – less than half of the $257bn that was signed off in 2011. This may not be cause for panic as with $148bn of contracts currently being tendered, there could be a glut of contract awards by the end of this year.
But most contractors feel this is unlikely. Firms have been busy bidding for work this year and many of those tenders are frustratingly still sitting with clients waiting for a decision.
The big disappointment this year has been the construction sector. Last year, it was the region’s most active sector with $102bn of awards, or 40 per cent of the regional total. So far this year, the sector has produced $39bn of awards, which is $63bn short of the 2011 total.
This is a surprise given the massive spending commitments that were made by the oil-rich Gulf governments in the wake of the Arab Uprisings last year. Since then, the promises have been bogged down in bureaucracy as government clients stall on awarding contracts.
There are many theories as to why this is so, but there is an underlying cause. Most governments in the region are highly centralised with decisions, ranging from foreign policy and security to construction contracts, being made by a select group of individuals.
With political turmoil still engulfing the region, decision-makers are more preoccupied with Syria and Iran. As tension in the region shows no sign of abating, this is a trend that could continue for some time.