THIS QUARTERLY report on Middle East construction highlights the growing impact of private investors and the build-own-transfer (BOT) model on regional building activity. The private sector is taking the lead in several huge construction projects, particularly in markets that are trying to make themselves more attractive to investors.

In Egypt for example, local businessmen and Saudi Arabian investors are pouring money into hotels and property development (see page 19). Saudi Arabia's Prince Alwaleed is even trying to put together a $300 million company to develop a vast tract of Egypt's deep south.

On the fringes of the region, Pakistan's new government is giving a fresh push to BOT plans for building roads, ports and airports. Having slashed the state budget for development projects, there is little alternative to BOT if the country is to raise the standards of its infrastructure. However a less auspicious sign is the retendering of Lebanon's BOT scheme for building a new motorway from Beirut to the Syrian border.

In the Gulf, more conventional projects predominate, although Oman is still determined to press ahead with private infrastructure projects. Saudi Arabia is testing the water with BOT plans for the Shuaiba power plant. Over the following pages, MEED writers summarise recent developments in some key regional markets.

BAHRAIN

HOPES that a new year would bring more work for the construction industry have turned out to be well founded for once. Work connected to the Hidd power and water station has gone out to tender and the government is planning to spend some of its increased revenues on projects such as sewerage and desalination. Nevertheless, Bahrain is by no means awash with new work and competition is fierce as all the leading firms contend for contracts.

The bulk of construction work for the Hidd power project has been awarded in a single contract to the local AA Nass Contracting. The commission covers civil works for the plant and the construction of the seawater intake system.

A number of associated projects are expected to come to the market soon. The most valuable contract will be the new causeway linking Hidd, on Muharraq island, to Manama. The Works & Agriculture Ministry is understood to be in talks with Boskalis Westminster for the first contract on the project, for dredging and reclamation work. The causeway will include two sections, to the east and west, and a connecting bridge. The project is expected to cost about $80 million and is scheduled for completion by 2000-01.

Tender documents have also been issued for the construction of a 6-kilometre gas pipeline which will link the power station to the main gas network. The power infrastructure is to be developed by the Ministry of Electricity & Water and awards are expected soon for cabling and a new substation. Consultants are yet to be appointed for the work on the water network, which will include a treatment and blending plant, reservoirs, pumps and pipelines.

Away from the Hidd project the government is seeking to appoint a consultant to prepare tender documents for an $80 million revamp of the sewerage plant at Tubli. The desalination plant at Sitra is also to get a facelift and the government is in the final stages of selecting a consultant.

In the private sector things are not moving so rapidly - keenly-awaited industrial projects have yet to take shape with plans for iron and steel projects still a long way from the construction stage; work has not started on the new golf course and no contract has been awarded for the proposed new hotel at the airport.

It is hoped by public officials and private business alike that government spending on Hidd, which is expected eventually to include a port and industrial zone, and on other improvements to the country's power, water and sewerage infrastructure, will provide a much-needed boost to the economy.

IRAN

The construction sector has picked up in 1997, with considerable activity across the board and the promise of more work to come. The windfall oil export revenues that flowed from last year's high prices have helped boost confidence, though some projects may be affected by more modest revenues in 1997.

What may well be the country's biggest ever road project started at the turn of the year. The cost of the 121-kilometre motorway, which will run mostly under the Alborz mountain range, from Tehran to the Caspian Sea, is put at IR 1.4 million million ($460 million). The motorway, which will consist mostly of tunnels and bridges, has been under discussion with foreign firms since the 1970s. However a local firm now has the contract. Details are not available, but it is understood the scheme is being treated as a private enterprise, with the cost to be recouped through toll charges.

Much work is also being done on freeways in Tehran and elsewhere, as well as in other areas of transport, including a vast airport construction programme. In the east of the country, officials announced in early 1997 that construction work had started on 1,000 kilometres of railway lines.

The biggest rail scheme is the 768-kilometre line between Mashad and Bafq, cutting the link between the CIS and the Gulf by about 800 kilometres. Two other lines are being built, one of 130 kilometres from Bafq to the Chadormalou iron ore mines, and the other a 220-kilometre connection between Chadormalou and the desert town of Tabas.

In Tehran, at least one line of the underground railway is expected to open this year. However there is no word on when work will start on other lines.

Construction firms have been very active in the oil and gas sector too, including laying pipelines. The much-delayed Bandar Abbas oil refinery was rushed through for an opening ceremony this year, and work has started on a big gas treatment plant on the Gulf coast to handle output from the yet-to-be-completed offshore South Pars gas field. Local firms are also helping the French oil company Total at the offshore Sirri oil fields, which are due to start production in 1998. Bids were invited in early 1997 for construction of a 70,000 barrels-a-day condensates refinery at Bandar Abbas.

Without much fanfare, local firms are also completing several important gas pipelines in the northeast and in the west. A $190 million pipeline to bring in Turkmen gas is due for completion in late 1997. Another pipeline is being built between Tabriz and the Turkish border to export Iranian gas, starting in 1998.

Near Tehran, work started in early 1997 on two underground gas storage facilities, together costing $700 million. Capacity at each facility will be 1 million cubic metres.

In the south, the $600 million Bandar Abbas dockyard opened recently. Construction has started nearby on two drydocks to be used for ships of up to 300,000 dwt.

There has been an acceleration since 1996 in plans for more power plants over the coming years. One of the biggest construction schemes, the second phase of the Masjid-e Soleiman dam, in the south, is expected to be tendered this autumn - following evaluation of prequalification bids submitted in May.

JORDAN

CONSTRUCTION activity is far from frenetic, but the government is making renewed efforts to attract the foreign finance needed to quicken the pace. Confidence is also growing in the private sector, where a number of companies are striking out for the first time to raise capital from the international markets.

Mineral production remains the mainstay of Jordan's industry, and it is here that some of the most ambitious projects are moving ahead. The Jordan Phosphate Mines Company will issue a $100 million Eurobond by the end of July to help finance the ongoing $250 million expansion at its Shidiyeh mine.

Tender documents will be released later in the year for the construction of a plant for the local Jordan Magnesium Oxide Company, part-owned by the local Arab Potash Company. Austria's Refractory Consultant Engineers is completing the basic engineering designs. Jacobs Engineering of Ireland is carrying out detailed designs and will supervise construction, due to start in mid-1998.

Jordan is currently turning attention to improving its water facilities. The most ambitious scheme is the planned $750 million water conveyor from the Disi aquifer in southern Jordan to Amman. An international group of consultants led by Harza Engineering Company of the US is drawing up new tender documents to allow the contract to proceed on a build-operate-transfer (BOT) basis. The client, the Water Authority of Jordan, is expected to invite contractors to prequalify for the work towards the end of the year.

New tourism and commercial projects continue to take shape. The Luxembourg- registered General Mediterranean Holdings (GMH) is pursuing plans for a $60 million conference centre and leisure complex on the second circle in Amman. GMH says it intends to tender the excavation work in late August, and the construction contract in mid-September. Construction is scheduled to begin in mid-November. The 28-storey complex will include a 215-room hotel, an underground car park, a shopping mall, conference rooms, three cinemas, a health club and water sports facilities.

The government's investment arm, the Jordan Investment Corporation, has invited consultants to bid to carry out studies for a similar complex on the outskirts of Amman. The $100 million BOT scheme is progressing more slowly than GMH's project, which is being financed from within the group.

The local Mediterranean Tourism & Investment Company has awarded Canada's Page & Steele a contract to carry out conceptual designs for its 200-room Four Seasons hotel in Amman. The local Arabtech Jardaneh Consulting Engineers & Architects will complete detailed design by early 1998. The construction work will cost up to JD 26 million ($37 million).

The International Finance Corporation earlier this year took a $3 million stake in the local Zara Investment Company and agreed to lend it $15 million to help finance hotel projects in Amman and the Dead Sea area. A number of local contractors have been awarded packages on the Dead Sea village complex, which will be managed by Switzerland's Moevenpick. Moevenpick will also manage Zara's 300-room, five star Aqaba Bridge hotel, for which construction tender documents are due to be released in August.

The government's approval of plans to turn the Aqaba area into a free trade zone may open up new construction opportunities in the longer term. In the more immediate future, bids will be invited later in the year for the construction of a new 400-metre industrial wharf at Aqaba port. The UK's Rendel Palmer & Tritton and the local Consolidated Consultants are due to complete designs and tender documents for the work in August.

KUWAIT

The oil sector continues to offer the most lucrative construction contracts in Kuwait. In late June, two key enhanced oil recovery contracts at the Rawdatain field were awarded. Korea's Daelim Industrial Company, a recent arrival in Kuwait, won a $128 million contract to build gathering centre (GC) 25 while Italy's Snamprogetti won a $96 million contract to install water injection facilities with a capacity of 100,000 barrels a day (b/d). The new GC will boost production by 250,000 b/d.

Kuwait National Petroleum Company (KNPC) is working on a number of projects to upgrade the export facilities at its refineries. The UK's Mouchel & Partners is front runner to pick up the front end engineering and design (FEED) contract for a new pier at Mina al-Ahmadi refinery. The company submitted a low bid for the project in early June. KNPC is currently evaluating prequalification applications from international contractors interested in bidding for the construction package.

The new pier will replace the south pier at Mina al-Ahmadi and will be about two kilometres long with four-six berths. The new pier is not expected to be completed for at least four years, so KNPC is renovating the existing south pier to ensure it will last until the new pier is in place. It is also making long-term repairs to the north pier to keep it operational for another 15 years. The Netherlands' Frederic R Harris is completing detailed designs for the renovation of both piers.

One key non-oil project to move ahead has been the Kuwait waterfront development. In late June the Kuwait City Municipal Council technical committee awarded the development of phase five to a consortium led by the local United Real Estate Company (UREC), some 12 months after bids were received for the build-operate-transfer scheme.

UREC is committed to investing about KD 50 million ($165 million) in the scheme over 24 years, including a four-year construction period. The project involves the construction of 40,000 square metres of commercial space, a government office, a mosque complex and parking and recreational facilities. The municipality now has to select a developer for phase four from those that submitted bids last September.

The municipality has pressed ahead with phases four and five on a BOT basis after the success of phase three which is due to be completed next February. Under an agreement signed in 1994, the local National Real Estate Company agreed to invest KD 35 million ($117 million) in phase three over 25 years. The company is building shops, a marina, cinemas, a theatre and recreational facilities on the site.

Plans to build a new headquarters for Kuwait Petroleum Corporation (KPC) are still moving slowly. KPC is understood to be looking at fresh designs options for its new head office in an effort to reduce the cost of the project. Designs for the complex were completed last year, but they were costed at KD 36 million ($120 million), well above the KD 25 million ($84 million) budget.

Already more than a year behind schedule, bids for the construction packages cannot be invited until the design is finalised. The architects are the local Salem al-Marzouk & Sabah Abi-Hanna and the US' Arthur Erickson Architects. The project managers are the UK's Bovis International and the Kuwait-based Project Analysis & Control Systems (Projacs).

LEBANON

The heady days of the post-civil war construction boom are over. The government's fiscal belt-tightening means that contractors can no longer count on the stream of public infrastructure works seen in recent years. In the private sector, a glut on the housing market coupled with prohibitive mortgage interest rates has also led to a slowdown in construction activity.

However, the Beirut Central District (BCD) remains something of an exception. The redevelopment of the area is being supervised by property company Solidere, whose healthy land sales last year are a sure sign that new contracts will continue to emerge.

The BCD is helping to give Lebanon's once-famous tourism sector a new lease of life, as a number of hotel projects take shape. A group of Malaysian investors in June bought a site for a $75 million touristic/residential development, including a five-star hotel, due for completion by 2000.

Prince Alwaleed Bin Talal Bin Abdulaziz of Saudi Arabia is in negotiations with Solidere for the construction of a Four Seasons hotel in the BCD. In June, he unveiled plans to build a Planet Hollywood restaurant in Beirut in partnership with a local businessman, Khaled Ali Hammoud. Prince Alwaleed's cousin, Prince Husam Bin Saud Bin Abdulaziz, is part-financing the construction of the $33 million Beirut Forum hotel, which will be managed by the US' Intercontinental Hotels.

The $70 million contract for the refurbishment of the Phoenicia hotel has still not been awarded, but is expected to go to the Saudi Binladin Group before the end of the year. Binladin, with the local Almabani General Contractors, will also take the estimated $65 million contract to complete the landmark Beirut Trade Centre once Solidere has pre-let 70 per cent of the building.

Bids will also be invited later this year for a medical consulting clinic in the BCD, expected to cost $20 million. Equity is currently being raised for another clinic, the International Medical Centre in the Museum area of Beirut, led by US and French investors. The work is expected to cost at least $100 million. Bids for the construction work are due to be invited towards the end of the year.

Tender documents are expected to be released in September for the construction of a $30 million water sports complex in Dbaye for the Arab/European General Mediterranean Holdings. The work will include building a 120-room hotel and up to 150 chalets.

In the public sector, a contract estimated to be worth $40 million-50 million will be awarded soon for the construction of a stretch of road between Saufar and Mdeirej, part of the Arab Highway linking Beirut to the Syrian border. The contract for the entire road was originally awarded to Bouygues and Dumez, both of France, but the deal was cancelled by the government in May. It is now to be retendered in smaller packages, each to be carried out on a build-operate-transfer (BOT) basis.

More attractive opportunities for contractors lie ahead in a number of water and wastewater schemes in the coastal cities. Finance has already been secured in the form of loans from the EU and Japan. The largest of the projects is the estimated $120 million Kesrouan water network upgrade and expansion, for which contractors are expected to be invited to prequalify later in the summer. The client, the Council for Development & Reconstruction, expects to invite a shortlist of prequalified bidders to submit offers in December.

OMAN

SALALAH port and the liquefied natural gas (LNG) project have been keeping contractors in Oman on their toes this year. Prospects are also looking good as a second private power project nears the bidding stage. Even the Oman-India fertiliser project seems to be taking shape. More distant prospects include an industrial port at Sohar, a petrochemicals complex and an aluminium smelter.

The main construction contracts for the Oman LNG project have now been awarded. The local Bahwan Engineering Company has already started work on the construction of non-industrial buildings, laboratories, warehouses and workshops. The company has also been awarded the civil works contract for utilities, including power generation, desalination and sewerage facilities.

The engineering, procurement and construction (EPC) contractor, the Japanese/UK/local Chiyoda Foster Wheeler & Company, has awarded the contract for concrete works and structural steel for the main plant area to the local/UK Wimpey Alawi. Wimpey Alawi is also getting a slice of the action on the Salalah port project, having won a contract worth $93 million for the construction of a 1,200-kilometre quay wall, paving and other associated works.

With most work on these major projects now awarded, other contractors are looking ahead to projects coming up in the power sector. Local contractors are already providing international developers with quotes for construction work for the Salalah power scheme. Bids for the 30-year concession are due to be submitted in August. Subcontracts for construction work are unlikely to be awarded until next year. In addition to construction of a 200-MW power plant, contractors will be required for a new diesel storage facility at Raysut and a pipeline connecting the facility to the power station at Salalah.

Petroleum Development Oman is also planning a new power facility, which will provide a potential source of work for contractors. Switzerland's Electrowatt Engineering Services is currently working on tender documents, which will be issued to international developers interested in taking on the project on a build-own-operate, or similar, basis.

Of Oman's planned large-scale industrial projects, the Oman-India fertiliser plant is the most advanced. The EPC contractor - a consortium comprising Italy's Snamprogetti, France's Technip and the Athens-based Consolidated Contractors International Company - was finally selected in February. The project now depends on the completion of a finance package, after which it is expected that the EPC contract will be signed and subcontracts will start to be let.

There is a wide variety of work going on around the country. Qurum Contractors is to carry out $74 million worth of work on the Rusail-Nizwa road, and Haifa Construction company is carrying out work on a new hospital in Muscat. Other prospects include a hydrochloric acid plant, a sugar refinery and a port and industrial zone at Sohar.

PAKISTAN

A DRAMATIC drop in development spending is one result of Prime Minister Nawaz Sharif's tough economic policies in the 1997/98 budget. This means there will be fewer government projects in the year ahead, but there should be a commensurate push in build-operate-transfer (BOT) projects.

There is scope for plenty of construction work on the road and communications infrastructure. However, contractors will either have to be willing to invest in the projects themselves, or to submit keenly-priced bids to private sector developers.

The recent award of a $500 million contract to Turkey's Bayinder for the construction of a six-lane motorway from Islamabad to Peshawar is likely to be the last major non-BOT contract awarded by the National Highway Authority (NHA) for the forseeable future. However, the NHA is not short of plans for major road projects. Details of eight roads and a railway bridge were to be issued to about 30 prequalified companies after 15 July. Bids to build the roads on a BOT basis are expected to be submitted by 15 September.

However, the scale of the required investment - about $4,000 million - makes it unlikely that all the projects will be implemented and it may take a long time to thrash out the details. In the longer term the NHA has also invited developers to identify further road projects for BOT construction.

The NHA is not the only state organisation to be exploring the potential of BOT. The Civil Aviation Authority has plans for three development projects which it hopes will be taken up by the private sector. New airports at Sialcot in Punjab and in Islamabad are planned, as well as a new passenger terminal complex at Lahore. The plans for Islamabad and Lahore are the most advanced with tender documents already issued to prequalified companies.

Attracting private investment into developing Pakistan's ports is proving more difficult than at first anticipated. Port Qasim Authority (PQA) failed to secure any offers to develop a liquid cargo terminal on a BOT basis, despite two extensions to the deadline. PQA did manage to elicit offers from four groups for a liquefied petroleum gas terminal but differences in the structure of the bids prompted the authority to scrap the tender. Bids are to be reinvited and all four original bidders will be eligible to participate.

In nearby Karachi, work has begun on a new container terminal being developed by a joint venture of American President Line and International Container Terminals of the Philippines. The Athens-based Joannou and Paraskeviades has been awarded the civil works package on the $65 million project. Other plans for the development of Karachi port include a second BOT container terminal and refurbishment of the oil pier.

QATAR

The construction sector is moving from strength to strength this summer. With a healthy backlog of project work in the oil, gas and housing sectors, contractors are now looking forward to a wide range of new construction opportunities. Both the government and private investors are trying to make the most of buoyant economic conditions brought about by a surge in oil revenues and the departure of the first gas shipments to Asia.

The 24 February inauguration of the Ras Laffan port and the Qatar Liquefied Gas Company (Qatargas) project has provided a dynamic boost to the economy and underlined Qatar's ability to undertake multi-million dollar developments in gas and infrastructure. The technical and financing experience gleaned from both schemes is proving invaluable as the government seeks to push ahead with the next generation of industrial projects. These are based on North field gas and funded through non-recourse financing structures.

The highlights of the year so far derive from the Ras Laffan LNG Company (Rasgas) and Qatar Fuel Additives Company (Qafac). Korea Gas Corporation's decision to double gas purchases to 4.8 million tonnes a year (t/y) has allowed Rasgas to proceed with the construction of a second train at its grassroots gas complex. The work is being carried out by the Japanese/US joint venture of JGC Corporation and The MW Kellogg Company, under an option contained in its original engineering, procurement and construction (EPC) contract with Rasgas. At Qafac, the May signing of a $350 million financing package has paved the way for Japan's Chiyoda Corporation to begin work on its EPC contract to build the methanol and methyl tertiary butyl ether (MTBE) plant at Umm Said.

Industrial projects will continue to dominate the construction scene for the foreseeable future. The recently-formed Qatar Hot Briquetted Iron Company (Qabico) is due to receive bids from two contracting groups in late July for the construction of its $400 million plant. Meanwhile another new venture, Qatar Vinyl Company, is planning to tender in September the EPC contract for the estimated $500 million ethylene dichloride (EDC) complex at Umm Said. The summer should also see National Oil Development Company release tender documents for the $600 million expansion of its Umm Said refinery.

Several other industrial projects are at a less advanced stage of planning. The US' Phillips Petroleum company, in a joint venture with Qatar General Petroleum Corporation (QGPC), is aiming to have a new petrochemical plant in operation by 2001. South Africa's Sasol and the US' Exxon Corporation are both considering gas-to-liquids plants at Ras Laffan, while the shareholders in Rasgas and Qatargas are proposing a 100,000 barrel-a-day (b/d) condensate refinery.

To meet the gas feedstock demands of the new petrochemical capacity, QGPC is pressing ahead with the construction of the NGL-4 plant at Umm Said and has recently invited bids for the front end engineering and designs (FEED). A fifth natural gas liquids (NGL) unit is under study by the client at Ras Laffan. At the same time, tendering is proceeding on the $200 million Dukhan consolidated facilities upgrade facilities.

Outside the oil and gas sector, the planned expansion of power and desalination capacity at Ras Abu Fontas is the main attraction. Tender documents are expected to be released in the summer for the work, which entails the installation of 700-MW of generating capacity and 27 million gallons a day of desalination. International contractors have also started prequalifying for the construction of the main terminal building on the new Doha International Airport project and are keeping tracks on another Ministry of Municipal Affairs & Agriculture project involving the upgrade of 280 kilometres of the state's primary road network. The client is expected to invite bids, with financing offers, in 1998.

The upsurge in major project work has fuelled a boom in the residential and office markets. Also, at least three new hotel developments are under consideration, although their future can only be assured if investors can secure the necessary financing.

SAUDI ARABIA

The upturn in the construction sector that began in the second half of last year has gathered pace in 1997. The pick-up in activity is particularly apparent in Riyadh where several major developments are moving ahead which will dominate the skyline for years to come. Higher government revenue last year has also led to an increase in public sector activity.

Many of the beneficiaries have been local civil contractors who are competing effectively with their international counterparts and are increasingly able to take on sophisticated projects. The market is so buoyant that contractors in the capital say labour is in short supply.