Future of Gulf construction looks brighter, survey finds
Concerns linger about payment delays and disputes, respondents warn
LONDON: There are signs of improving optimism in the Gulf construction sector, despite continued worries about delayed payments and contract disputes, according to a new report.
Overall sentiment in the building industry has risen by 7 percentage points in the past two years, from 32 to 39 percent, a survey conducted by law firm Pinsent Masons found. Most companies surveyed are involved in projects with a value of more than AED500 million ($136 million).
The UAE came out on top as the market expected to generate the most growth in the region, with 38 percent of respondents saying they expected the country to generate the most opportunity over the next 12 months.
“The UAE is set to see an increase in the number of projects during 2018 and we expect the country to remain in top position, particularly in the lead-up to Expo 2020,” said Sachin Kerur, head of Middle East region at Pinsent Masons.
Sentiment toward Saudi Arabia also improved, according to the survey, with 29 percent of respondents expecting the Kingdom to provide the biggest opportunities over the next 12 months. In 2016, just 11 percent of respondents said they saw the most opportunities in the Kingdom.
There were also pockets of pessimism, with 20 percent of those surveyed expecting their order books to decline by more than 10 percent in the coming months.
Around 86 percent of businesses said contract conditions have become less favorable during 2017, which is roughly in line with sentiment in 2016, while the same proportion said payment periods were longer in 2017 than the previous year.
Close to 70 percent of respondents said they were involved in more disputes during 2017 than had been expected.
“While analysts predict a slight economic revival across many GCC markets during 2018, the survey results are indicative of what has been a challenging time for the construction sector — which has grappled with the impact of lower oil prices and ongoing geopolitical tensions,” said Kerur.
The report also highlighted the rising importance of public-private partnerships (PPP) to attract inward investment into the industry. The survey found that 40 percent of respondents were involved or expected to be involved in PPP projects during the next 12 months. This compares with 32 percent in 2016.
Construction work on the King Abdullah Financial District, north of Riyadh, Saudi Arabia. (Reuters)