Political uncertainty slows Oman's construction sector in 2011

13 December 2011

Despite instability, demand for infrastructure programme should provide opportunities in 2012

The $2.3bn-worth of construction and infrastructure contracts awarded in Oman in 2011, up until 13 December, is less than half of the $4.7bn construction deals awarded in 2010.

The contract awards total in 2010 was inflated by the $1.8bn contract to build passenger terminals at Muscat International and Salalah airports. The airport contract made up about 40 per cent of the total contracts awarded in the Sultanate in 2010, and if subtracted from the total means that $2.9bn contracts were awarded, only 20 per cent more than the total awards in 2011.

However, the value of contracts awarded in 2011 is also significantly lower than the $3.2bn-worth of construction and infrastructure work awarded in 2009, which depicts a noticeable slowdown in the sultanate’s construction sector over the past three years.

A lack of activity in Oman’s construction in the early part of the 2011 can be attributed to the political unrest that swept through the region, as the pro-democracy protests reached the sultanate and several protesters were killed in February. The unrest expectedly had a negative impact on Oman’s projects market.

For the first two quarters of 2011, $482m-worth of construction deals were awarded, 64 per cent less than the $1.2bn awarded for the same period in 2009. However, as the unrest subsided Oman’s construction sector started to pick up, with $1.2bn worth of construction and infrastructure deals awarded in the third quarter and contracts worth a total of $644m awarded in the fourth quarter.

The roads sector continues to dominate Oman’s construction market, with $1.1bn-worth of contracts, almost half of the total contracts awarded in 2011, awarded for road projects. The two biggest road deals to be awarded were the packages 1A and 1B, $325m and $305m respectively, for the bid to Sur dual highway project, which will connect capital city Muscat to the Sharqiyah region in the north-eastern part of Oman.

The roads sector is expected to continue to play an important part in the sultanate’s construction sector in 2012, with contractors submitting bids from more than $600m-worth of road projects in the fourth quarter. One of the biggest planned projects is the 265-kilometre-long Batinah expressway project, which will extend from the current Muscat Expressway to Khatmat Malaha. The expressway project has been allocated about $649m in the sultanate’s eighth Five-Year Plan (2011-15), which was announced by the government earlier in 2011.

In the coming years, Oman is set to divert increased funds into its construction sector to improve its social infrastructure and prevent further protests. Oman will receive $10bn in aid from the other GCC states over the next 10 years to assist in developing its healthcare and education infrastructure.

One of the largest hospital projects in the pipeline is the 700-bed Sultan Qaboos hospital planned for Salalah. The hospital will cover a total area of 200,000 sq m, and the Health Ministry is expected to invite contractors to submit bids in the second quarter of 2012.

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