Down but not out

CEO Middle East takes a look at the Gulf's construction industry to discover which projects are still going ahead, despite the economic downturn.

If the first industry to be hit hard by the global recession was real estate, then it was only a matter of time before construction followed suit.

Throughout the world, projects have been halted, postponed and forgotten about as developers frantically attempt to fill in holes and finish off apartments in a bid to recoup their losses. Announcements of projects in the region have been few and far between since the start of the crash, which has left many developers struggling to find new work.

But while the failures will always make the headlines, it is easy to forget that there are still a number of large scale regional projects that continue to emerge from the sand, despite the economic slowdown.

Even in the UAE, one of the most affected Gulf countries, work on a number of projects is continuing. Last month a Kuwait National Bank study revealed that there is still $930bn worth of projects underway in the country's construction and other sectors, equating to 45 percent of all projects planned in the Gulf.

Qatar's burgeoning liquefied natural gas (LNG) supplies are fuelling its construction growth this year. While the United Development Company's flagship project, Pearl Qatar, a multi-billion dollar man-made island, still continues, so too does Qatari Diar's Lusail. The city, which is being built on 35 sq km of undeveloped waterfront, is expected to take 15 years to complete and will house a population of 200,000.

The key decider between the projects that are being constructed and those that developers are trying to forget is, in its simplest form, demand.

In cities such as Dubai, this could spell disaster as an oversupply in housing and reportedly declining population can only escalate problems for local construction companies. Increasing populations in other cities across the GCC are, however, ensuring their continued growth.

One only has to look to the capital of the UAE, Abu Dhabi, which has a renowned shortage of housing stock, to perceive that there are still opportunities available for developers.

Whilst Abu Dhabi has announced no new projects during 2009, many of the developments currently underway, such as Aldar's Al Raha Beach, look not only to be on schedule, but are tipped to be a success.

The new Formula 1 track, also an Aldar project, similarly remains - quite literally - on track.

Abu Dhabi is not alone. The region's largest country and biggest oil producer, Saudi Arabia has continued with its commitment to investing in its future, and only last month signed a $533m contract with China Railway Construction Corporation to build 200 new schools across the country. Work also continues on Emaar's $26.6bn King Abdullah Economic City, the first stage of which is on track to be completed is by 2011, with final completion of the city set for 2025. Once complete the city will house a staggering 1.4 million people.

Fahd Hamid Al Din, general manager of marketing for Saudi Arabian General Investment Authority (Sagia), told Zawya that the impact of the global financial crisis "is by no means solely negative," but that prior to the economic slowdown  "we were literally chasing construction companies and contractors to deliver and we had to go very high on costs.

"Nowadays we are enjoying an advantage of up to 40 percent in cost reduction, an abundance of equipment and we are being chased by contractors. Our immediate focus now is to leverage this advantage, because we don't think this advantage will be sustainable - we see it lasting for another year or so."

But it is not just the oil rich countries that are continuing with construction. Both Jordan and Bahrain are still going through with many of their projects. Work on the $5bn Abdali project in Jordan is still going strong and the company is expecting to welcome its first visitors to the new 384,000 sq m downtown area in Amman, by 2010.

Likewise, Bahrain's Diyar Al Muharraq has announced that land reclamation progress on one of the country's biggest mixed-use urban developments ever undertaken by the private sector, is actually ahead of schedule. The Diyar Al Muharraq City, located off the northern shores of Muharraq, will eventually house 100,000 people in around 30,000 dwellings.

So whilst it is an unavoidable truth that many construction and engineering companies are struggling, there is still the occasional bridge being built across the troubled water. And those companies which manage to survive the next year could certainly find themselves in an excellent position as soon as development in the Gulf begins to pick up.

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