UAE, GCC construction set for growth in 2020
The construction sector in the UAE and GCC is poised to see stronger activity in 2020 compared to last year, on the back of increased investments in oil and gas, utility, urban development, and infrastructure projects.
According to the latest figures by BNC Network, a total of $53.8 billion worth of projects were awarded in the UAE in 2019, registering a 17 per cent year-on-year (YoY) drop. It sees a 10 per cent YoY decrease in contract award in the UAE once the late capture projects accounted for in the coming weeks. Based on currently available tender information, BNC expects the contract award in the UAE in 2020 to be $55 billion, an increase of $1.2 billion.
In 2019, a total of $73.1 billion worth of projects were completed in the UAE, an increase of nine per cent. With many Dubai Expo-related projects nearing completion, other sectors such as energy, infrastructure, transport and utility projects will maintain strong activity in the construction sector in the UAE and across the region.
In the GCC, a total of $143.3 billion worth of projects were awarded across the region last year, registering a four per cent YoY growth. BNC forecasts a 13 per cent YoY increase in contract award in the GCC once the late capture projects accounted for in the coming weeks. It expects the contract award in the GCC this year to reach $150 billion.
A total of $198.8 billion worth of projects were completed in the GCC in 2019, registering a three per cent YoY growth.
"Construction activity will be dominated by the oil and gas sector in both the GCC and the UAE. Even though the urban construction sector has contracted in the UAE, it will still contribute to the second largest value of projects across the GCC. The urban construction sector across the GCC is also a strong second primarily due to the rapidly growing contribution of Saudi Arabia. Another sector with significant activity will be the utility sector, in both the GCC and the UAE," said Avin Gidwani, CEO of BNC Network.
Over the last few months, Dubai, Abu Dhabi and Sharjah have announced a number of new mega gas discoveries which will also require billions of dollars in investment and development of the oil fields. Abu Dhabi's Dh50-billion stimulus package Ghadan 21 will also be a major driver of the construction sector in 2020.
Rizwan Sajan, founder and chairman of Danube Group, said after the World Expo 2020 has served its purpose of bringing more investment and job opportunities, giving a boost to the economy, investors and businessmen are optimistic that the UAE government will launch some other long-term projects which will take its economy to the next level of growth.
"Definitely, there is going to be more activity in 2020 because the country has been endeavoring to reduce its dependence on oil and turn itself into a Shangri La of conducting businesses and vacationing. Considering all these things, prospects seem very promising for construction sector in 2020 to achieve these goals," Sajan added.
In the near future, Sajan believes that the construction investments will be driven by hospitality, transport, energy and social infrastructure development projects under various programmes.
Bharat Bhatia, CEO of Conares, doesn't see strong demand for steel, shrinking by 15-20 per cent this year.
"There are multiple reasons for this. We need more clients to consume what we have built, and also longer credit extended by the traders has reduced their buying appetite. New announcement on infrastructure projects and Etihad Railways type of projects will keep the manufacturers in the UAE busy in 2020," Bhatia added.
Ben Greenish, senior vice-president, dmg events, which organises The Big 5 construction expo, said the results of its "Voice of the Construction Industry Report" survey comprising 6,000 respondents from 136 countries showed that when considering where their business may look for opportunities further in the future, and based on where they are not working currently, the GCC and the wider Middle East were the standout opportunities.
"The GCC was the most attractive option for respondents from Asia and Europe, as well as those from other GCC states. Of the GCC countries, respondents felt there were the most opportunities to be found in the UAE - 56 per cent - followed by Saudi Arabia - 44.4 per cent," Greenish said.
Some 36 per cent of respondents said their business would enter the UAE within the next twelve months.
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