Progress slow on Gulf state construction projects

18 January 2011

Despite the desire to spend and the backing of cash-rich governments, progress is sluggish on big schemes 

Large scale real-estate projects may have stalled across the region, but there are still good opportunities for construction firms.

Regional governments are continuing to invest heavily on upgrading infrastructure and in 2010 that meant billions of dollars of contract awards on power stations, sewage treatment plants, roads, airports and ports. It also included social infrastructure such as hospitals, schools and universities.

Budgets for 2011 indicate that state spending on infrastructure will increase and with oil prices currently sitting close to $100 a barrel, the future looks promising.

The problem is that although the funds and the intent to spend are there, awarding contracts and making progress on projects is often a different proposition.

In the UAE, Union Railway’s decision to cancel consultancy contracts on its $11bn railway shows that even if there is a cash-rich government and the will to build, schemes can still encounter problems.

Union Railway is not the only project to have been delayed in Abu Dhabi. An award on the Mafraq-Ghweifat road scheme has not been made a year after bids were submitted. Contractors competing for work on the deep gravity sewers for the Strategic Tunnel Enhancement Programme (Step) had to wait for more than a year for an award.

Decision-making outside Abu Dhabi and the UAE is also slow with protracted tenders in other markets, such as Saudi Arabia, Qatar and Kuwait, where there are financially strong governments with a stated desire to spend.

If governments do not become more efficient in driving projects forward, then the region runs the risk of failing to live up to the promise that construction firms hope it will deliver.

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