Challenges galore for GCC construction sector

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Challenges galore for GCC construction sector
A significant number of GCC companies said payment periods were longer in 2017 compared to the same time last year.

dubai - Longer payment periods, less favourable contract conditions and rising disputes persist

By Staff Report

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Published: Sun 28 Jan 2018, 3:07 PM

Last updated: Sun 28 Jan 2018, 5:09 PM

The GCC's construction sector has seen an improvement in overall sentiment over the last two years. However, concerns relating to delayed payment, less favourable contract conditions and increased number of disputes persist, according to findings from Pinsent Masons' GCC Construction Survey.

Riding the Expo 2020 wave, the UAE is expected to deliver most growth in 2018, with 38 per cent of respondents expecting the country to provide the most opportunity over the next 12 months, compared to 35 per cent in 2016.

Sachin Kerur, head of Middle East at Pinsent Masons, said: "Optimism towards the GCC's construction sector saw an increase from our 2016 survey, despite ongoing challenges with lower oil pricing and headwinds facing the private non-oil sector."

Twenty per cent of those surveyed across the GCC expect their order books to decline by more than 10 per cent in the coming months, compared to 16 per cent two years ago. Asked about contract conditions, 86 per cent of businesses said they had become less favourable during 2017, representing a similar sentiment in 2016 which stood at 92 per cent.

In addition, a significant number of companies (86 per cent) said payment periods were longer in 2017 compared to the same time last year. Finally, 67 per cent of respondents said they were involved in more disputes during 2017, as opposed to 59 per cent in 2015.

There was a sharp rise in positive sentiment towards Saudi Arabia, with 29 per cent of respondents expecting the kingdom to provide the most opportunity over the next 12 months, compared to just 11 per cent in 2016.

"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," added Kerur.

In terms of sector types, close to 60 per cent of respondents believe power (including renewables) will offer the most opportunities during 2018. Sentiment towards the real estate sector improved, with 32 per cent of respondents expecting growth from this sector in 2018, compared to 25 per cent in 2016.

With public private partnerships (PPPs) increasingly being used as a means of attracting more investment, the survey revealed that more than one-third (40 per cent) of respondents are currently involved or expect to be involved in PPP projects during the next 12 months, up from 32 per cent for 2016.

Similar to previous years, the UAE continues to top the charts when it comes to overall optimism and ease of doing business. When asked which GCC country is the easiest to do business in, the overwhelming majority (89 per cent) of respondents stated the UAE. Oman followed in second place at 46 per cent. Dubai, in particular, is viewed in a positive light with 71 per cent of respondents viewing the emirate as the most appropriate location to solve regional disputes.

- deepthi@khaleejtimes.com


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