Region’s projects market booms

12 May 2013

MEED identifies industry leaders taking advantage of the growth in schemes

The story of the evolving Middle East construction industry is full of strong leaders. Visionary rulers have long understood the transformative effect of infrastructure in terms of economic stimulation. Ambitious clients have channelled investment into buildings, services and transport networks, and pioneering engineers have designed and built the roads, ports, airports and buildings that support regional development.

Transport in particular has played a crucial role in development, with roads, ports and airports creating huge opportunities for logistics and freight industries. This is set to continue into the future with investment in a regional rail network, led by Saudi Arabia, and local metro systems boosting inner city development and connectivity.

Elite group

According to data from regional projects tracker MEED Projects, there is currently $389bn in construction work for buildings and transport alone being executed in the region by about 1,000 companies. However, an elite group is leading this investment. Of the work under way, $175bn, equivalent to 45 per cent, and more than the gross national product of Kuwait, is being carried out by 50 firms. This is true for clients too, with the leading 25 owners responsible for $159bn in projects.

There is currently $389bn in construction work for buildings and transport alone being executed in the region

MEED Projects

In considering today’s leaders of the construction industry MEED identified the people driving these companies forward in the Middle East and North Africa (Mena) region. Many of these leaders are continuing a legacy that was started by their families, who have been planning, designing and building the infrastructure of the Mena region since as far back as the early 1900s.

Construction firms set up by individuals that began by excavating single-track roads and vital water supply pipelines are now fully international conglomerates, just as comfortable building the world’s tallest towers as they are selling cars, insurance and heavy equipment or investing in real estate and telecoms. Local firms such as Saudi Binladin Group, Saudi Oger, Al-Naboodah Construction Group, Arabian Construction Company, Al-Jaber Group, Consolidated Contractors Company, El-Seif Engineering Contracting and Arabtec are now multibillion-dollar giants that continue to lead the industry in their home markets and overseas.

The increasing scale and complexity of the regional construction industry has also attracted world-leading contractors to increase their regional presence. Although international firms have come and gone, some have grown from strength to strength in the region. Several international firms have formed lasting partnerships with local organisations. Al-Habtoor Leighton, Al-Futtaim Carillion and Qatari Diar Vinci Construction are bringing the best of both local and foreign expertise to their projects.

Then there are the international companies that have made the region a core part of their international portfolio. Chinese contractors have a long history in the region and have been joined by South Korean firms such as Hyundai Engineering & Construction, Turkish companies led by TAV Construction, and Belgian firms such as Besix, which operates in the region as Six Construct.

It has not been an easy journey for any of these enterprises, especially recently when the global financial crisis caused projects to flounder, finance to dry up and some clients to vanish. Payments to contractors, particularly in Dubai, stopped and the construction bubble burst, leaving the most exposed companies in dire straits.

Consistent demand

However, the region’s consistent need for basic infrastructure meant that slowly but surely the projects market ticked on, and in markets such as Saudi Arabia and Qatar, clients have taken advantage of the slump in commodities prices and pushed ahead with major investments at lower cost. The strongest contractors held firm, rode out the storm and are continuing to deliver the region’s much-needed infrastructure.

“The past three years have been challenging for HLG [Habtoor Leighton Group] as, like most contractors in this region, we’ve had to deal with the fallout from the global financial crisis,” says HLG chief executive officer (CEO) Jose Antonio Lopez-Monis. (Q&A with Jose Antonio Lopez-Monis). “We believe that most markets have now bottomed out, and we are seeing positive signs in all our key markets. In general, the market outlook is very positive.”

These views are shared by most of the leaders interviewed by MEED, who now feel growth is back. “The past three years were record years for Saudi Oger, where we delivered some of the most iconic projects in Saudi Arabia, such as King Abdullah University of Science & Technology,” says Ayman Rafic Hariri, vice-chairman and deputy CEO of Saudi Oger. (Q&A with Ayman Rafic Hariri).

Construction leaders point to industrial projects, healthcare, education, aviation and railways as key drivers for future work. Events such as football’s Fifa World Cup in Qatar in 2022 and the potential for the UAE to host the Expo 2020 (for which it is currently bidding) are also set to drive further investment in infrastructure. The construction leaders point to Saudi Arabia and Qatar as showing most promise, followed by Kuwait and the UAE.

We believe that most markets have now bottomed out, and we are seeing positive signs in all our key markets

Jose Antonio Lopez-Monis, Habtoor Leighton

Saudi Arabia in particular has huge potential for contractors as it seeks to expand its airports and build a new rail network. Of the region’s largest clients by projects under way, nine of the top 25 are in Saudi Arabia and account for 40 per cent of work being undertaken. This is followed by the UAE with 23 per cent and Qatar with 10 per cent. 

Saudi Arabia is also pioneering public-private partnerships (PPPs) in its transport infrastructure. In late 2011, a consortium led by TAV Airports Holding won the first fully fledged PPP airport development contract in the GCC, the Medina Prince Mohammad bin Abdulaziz International airport. Under this deal, the Tibah consortium, consisting of TAV, Saudi Oger and Al-Rajhi Holding, will design, finance, build and operate the Medina airport for 25 years. TAV Construction’s regional director tells MEED that works on site have already begun and operations from the new terminal building will commence in 2015.

However, despite improved market sentiment, meeting the demands of the industry will not be without its challenges. Some firms report that although payment conditions have improved since the downturn, they are still slow and unpredictable. “This is a major challenge,” says Gary Wells, CEO of the UAE’s Al-Naboodah Construction Group (Q&A with Gary Wells). “Also, we see a shift towards unfavourable contract terms and conditions weighted against contractors. This is not good for the industry at a time when all project stakeholders should be doing the reverse and getting closer in their joint delivery of bankable project development solutions.”

Increased competition

The tighter margins and unfavourable contract terms are unfortunate side-effects of the region’s competitive construction sector, which sees contractors diversifying into new markets and sectors, increasing the pressure on existing firms.

“The past few years have seen an influx of international contractors into the region, leading to increased competition in our existing and new markets,” says Lopez-Monis. “As a result, margins have come under extreme pressure and this is likely to continue.”

At the same time, companies are looking to new technologies and techniques to give them a competitive advantage, from prefabricated modular infrastructure elements to more mechanised forms of construction that reduce the amount of labour required.

Another challenge for the region is the political instability that continues to deter investment in post-regime-change markets such as Egypt, Libya and Iraq. Firms also point to the strict regulations on imports of labour and staff into countries such as Qatar and Saudi Arabia as being another issue for businesses.

Despite these concerns, the overwhelming impression given by the leaders of industry is a positive one. With Saudi Arabia finally meeting its project potential and Kuwait looking as though it could do the same, Qatar investing in its World Cup programme, the UAE investing in infrastructure and Iraq making major progress, opportunities for the big hitters of the regional construction industry are continuing to grow. With their mature supply chains, strong asset bases and experts such as the leaders identified in this report, the future looks good for the region’s best construction businesses.

Clients by project value*
1Agence Nationale des Autoroutes, Algeria11,742
2Saudi Railways Organisation11,668
3Saudi Arabia Ministry of Higher Education10,509
4Kuwait Public Works Ministry9,213
5Oman Ministry of Transport & Communication8,984
6Saudi Arabia Interior Ministry8,946
7General Authority For Civil Aviation, Saudi Arabia8,887
8Tehran Urban and Suburban Railway Company8,680
9Aldar Sorouh Properties8,452
10Qatar Public Works Authority (Ashghal)7,821
11Rayadah Investment Company7,183
12Trac Development Group7,000
13Saudi Arabia Transport Ministry6,274
14Qatar Foundation4,766
15Emaar Properties4,229
16General Presidency of the Grand Mosque and Prophet’s Mosque4,000
17Damac Properties3,953
18Qatari Diar3,825
19Saudi Arabia Ministry of Health3,717
20Abu Dhabi Airports Company3,325
21Mubadala Development Company3,143
22Saudi Arabia National Guard3,130
23Iraq Ministry of Construction & Housing3,129
24Dubai Pearl3,080
25Musanada (Abu Dhabi General Services Company)3,065
*=Under execution. Source: MEED Projects
Contractors by project value*
 ContractorValue ($m)
1Saudi Binladin Group23,147
2Al-Shoula Consortium for Haramain Rail7,733
3Hyundai Development Company7,000
4Saudi Oger6,950
5Citic Group Corporation/CRCC (JV)6,402
6Habtoor Leighton Group (HLG)6,330
7Cojaal (JV)5,340
8Al-Rajhi Holding Group4,168
9Khatam Al-Anbia Construction Base/Sepasad Engineering Company4,000
10Ahab Construction Company4,000
11Arabtec Construction3,989
12Arabian Construction Company3,895
13Al-Jaber Group3,505
14ABV Rock Group3,390
15Al-Omrane Chrafate3,000
16China National Chemical Engineering/CSCI (JV)2,950
17CCC/TAV/Arabtec (JV)2,872
18Groupe Etrhb Haddad/FCC (JV)2,687
19The Arab Contractors (Osman Ahmed Osman & Company)2,666
20Azmeel Contracting2,639
21Hyundai E&C/Combined Group Contracting Company (JV)2,600
22El-Seif Engineering Contracting2,572
23China State Construction International Holdings2,526
24Orascom Construction Industries2,424
25Contrack International/OHL (JV)2,300
*=Under execution; JV=Joint venture; CSCI=China State Construction International; CCC=Consolidated Contractors Company. Source: MEED Projects
Leading contractors in Qatar
ContractorContract value* ($m)
Contrack International/OHL (JV)2,300
Arabtec Construction2,190
Qatari Diar Vinci Construction1,735
Six Construct/Midmac Contracting Company1,652
Al-Jaber Engineering/Boeing Construction Company/Bouygues/Midmac Contracting Company1,301
Draieh Contracting1,282
Qatari Diar/Saudi Binladin (JV)1,250
Middle East Dredging Company1,200
Consolidated Contractors Company (CCC)/Hochtief1,100
Hyundai Engineering & Construction968
*=Under execution; JV=Joint venture. Source: MEED Projects
Leading contractors in Saudi Arabia 
ContractorContract value* ($m)
Saudi Binladin Group (SBG)22,737
Al-Shoula Consortium for Haramain Rail7,733
Saudi Oger6,467
ABV Rock Group3,390
Azmeel Contracting2,639
Saudi Oger/SBG/El-Seif Engineering Contracting/Yapi Merkezi (JV)2,149
Al-Rajhi Holding Group1,800
Al-Rajhi Construction1,786
Al-Fouzan Trading & General Construction1,538
Al-Jabriya/Building Construction Company/Gulf Elite/Al-Suwaiket (JV)1,500
*=Under execution; JV=Joint venture. Source: MEED Projects
Leading contractors in the UAE
ContractorContract value* ($m)
Habtoor Leighton Group (HLG)5,400
China National Chemical Engineering/China State Construction International (JV)2,950
CCC/TAV/Arabtec (JV)2,872
Arabian Construction Company2,732
Al-Jaber Group2,542
Al-Naboodah Group2,100
Commodore Contracting2,051
El-Seif Engineering Contracting2,000
Al-Shafar General Contracting1,934
Arabtec Construction1,739
*=Under execution; JV=Joint venture. Source: MEED Projects
Leading contractors in Iraq
ContractorContract value* ($m)
Hyundai Development Company7,000
Tasyakan Construction2,150
Bedo Insaat1,600
Karzan Company1,500
FiberPro Contracting1,500
Anwar Soura General Contracting Company1,166
Al-Radhwan Company1,138
Salah Khadr Aola Group900
Al-Fao General Engineering Company778
*=Under execution; JV=Joint venture. Source: MEED Projects

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