GCC construction sector 'upbeat despite lingering issues'

The overall sentiment in the GCC’s construction sector has improved over the last two years by approximately seven per cent (from 32 per cent to 39 per cent), according to recent findings from Pinsent Masons. A global 100 law firm, Pinsent Masons specialises in the energy, infrastructure, financial services, real estate and advanced manufacturing and technology sectors. The findings of Pinsent Masons' GCC Construction Survey show that the UAE remains the number one market expected to deliver 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. Presented to industry professionals at Pinsent Masons' Annual Construction and Engineering Law Conference, the report provides a snapshot of opinion from the GCC construction sector where the majority of the companies are involved in projects with a value of over Dh500 million. Ongoing concerns, however, relating to delayed payment, the rising cost of capital and increased number of disputes, continue to linger on, said the report by Pinsent Masons. Sachin Kerur, the head of Middle East Region 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." "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," he noted. While the survey indicates a slight rise in overall sentiment, the findings revealed that 20 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 earlier. 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 stated they were involved in more disputes during 2017 than had been expected before the year started, as opposed to 59 per cent in 2015, stated the report. Additionally, a sharp rise in positive sentiment towards Saudi Arabia was noted, 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, it added. “Whilst 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,” remarked Kerur. In terms of sector types, close to 60 per cent of respondents believe power (including renewables) will offer the most opportunities during 2018. Meanwhile, 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 inward 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 slightly from 32 per cent for 2016. According to Kerur, PPPs provide an opportunity for the private sector investors and developers to access the various sub-sectors of the region’s infrastructure market. "We anticipate a rise in PPPs now that regional governments and the private sector have developed longer-term strategies designed to adapt to a new reality of lower oil prices," he stated. Similar to previous years, the UAE continues to top the charts when it comes to overall optimism and ease of doing business, according to the survey. When asked which GCC country is the easiest to do business in, the overwhelming majority (89 per cent) of respondents chose the UAE, followed by Oman in second place (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,