RISING SKYLINES: THE EVOLVING GCC CONSTRUCTION INDUSTRY AND WHAT TO EXPECT

This article was updated on July 10th, 2023

This article has been researched and written by Rehan Abid and the team at Creation Business Consultants and has not used AI in generating this article.

The construction industry remains an important strength for the United Arab Emirates (UAE) economy.  Despite the current climate, the construction industry remains optimistic. Government authorities in the Middle East region have been making efforts and creating positive changes within the market to improve the construction sector, attract foreign investment and new company setups in Dubai. The UAE owned a 13% market share in terms of project awards, with a total MENA total of $142 billion in December 2022, compared to $187 billion in 2021.

As global economic pressures worsened, GCC project awards dropped in 2022, with the overall value of contracts issued in the area falling 18.7% to $93.6 billion from $115.2 billion the previous year. Overall, the projects market has underperformed across different sectors and GCC countries except for Dubai. The real estate market is less reliant on the government budget for infrastructure projects, this motivates new entries in the market through various business setups.

The GCC is focusing on infrastructure projects such as: transportation and residential to create a more flexible environment for residents and visitors. Furthermore, this will enhance and entice investors to enter the GCC market and take advantage of these great investment opportunities. As a result, this will increase new business and lure those towards starting a company in Dubai.

Upcoming projects in the GCC are targeted to help boost the construction and tourism market and include:

• Saudi Vision 2030
• Abu Dhabi Economic Vision 2030
• Qatar National Vision 2030

Let’s take a closer look at the current construction projects for each GCC country in more detail.

UNITED ARAB EMIRATES

DUBAI

• Dubai has many new projects in the pipeline such as public transport infrastructure with a projected value of AED 250 million and expected to start by 2026. The project utilise available FAR by developing commercial / retail building structure, providing space for Bus Station on Ground
• Dubai Municipality Department intends to upgrade the existing system to accommodate Dubai’s growth, and transfer to be a fully gravity system. The deep tunnel system as contemplated to be completed by 2025 would allow for two deep gravity tunnels to replace a large number of smaller collecting pipes connected to energy-intensive pumping stations with an estimated project value of AED 16 billion.

ABU DHABI

• Abu Dhabi’s main upcoming project are Etihad rail, the passenger train prototype was unveiled on the UAE’s 51st National Day, December 2, 2022. When completed, the rail will be used to transport large items before carrying millions of passengers by 2030, cutting travel time between cities.
• Other projects include Abu Dhabi midfield terminal, Saadiyat Grove (which is valued at USD 1.5 Billion), Natural History Museum, Guggenheim Abu Dhabi and The Zayed National Museum are the notable ones.

SAUDI ARABIA

• Saudi Vision 2030 comes with the broad objectives to make the country free from their dependence on the oil sector. Saudi Arabia are planning for the privatisation of the economy. The Kingdoms’ aim is to increase the current GDP from the private sector from 45% to 65%.
• Currently the country is driving towards privatisation of many public entities within the healthcare, services, and energy sector. The purpose is to attract foreign investors to invest and tap into the market by starting a business in Saudi Arabia. With Saudi welcoming direct foreign investment, we expect many multinational corporations will take the opportunity to expand their business to the country and throughout the region.
• Saudi Arabia’s Public Investments Fund (PIF) is a sovereign wealth fund owned by KSA. This fund was founded for investing funds on behalf of Saudi Arabia’s Government. There are approximately 200 investments and 20 of these are listed on the Saudi Stock Exchange Tadawul. PIF provides medium and long-term loans to the large-scale government and private industrial projects. PIF is planning a project in the northwestern region – NEOM, which focuses on developing key economic sectors such as: biotech, energy, mobility and digital science which will boost the confidence of investors looking to do business in KSA.

BAHRAIN

• Bahrain’s Government is focusing on the construction of a Light Rail Transport (LRT) network in the country aiming to ease the traffic issues between the cities. The project is part of Bahrain’s Public Transport Masterplan 2030.
• The project will include 105 kilometres of rail network, with 20 train stations including an airport station and is expected to carry 43,000 passengers per hour.
• LRT will be implemented in a phased manner and is expected to motivate people to expand and setup a business in Bahrain.

 OMAN

• Oman’s market is still relatively small, however, recently the airport started its expansion plans to modify and add new facilities. Through this construction project Muscat International Airport will now have capacity to handle 12 million passengers per annum. The country is injecting more efforts to improve healthcare, education and tourism which is reflected in just some of the most recent construction tenders below.

QATAR

• Ashghal – Qatar public works authority signed a landmark PPP agreement in early September 2022 to create a Sewage Treatment Works (STW) project for Al Wakra and Al Wukair, with a total cost of more than US$1.4 billion.

TAKEAWAY

As we can see, the construction industry is on the rise. With the backing of GCC governments, more privatisation projects, opening markets and the implementation of incentives for doing business within the region this is encouraging news for investors looking to enter the GCC market. We believe it will only be a matter of time before we see even more construction projects in the pipeline.

For more information, contact our expert Corporate Structuring team for your free 30-minute consultation at [email protected] or call +971 4 878 6240.

Scott Cairns,
Managing Director