Mena planned projects total $1.9 trillion
Dubai, October 21, 2012
Project awards in the Middle East and North Africa (Mena) region reached $65 billion in the year to end September and projects planned and underway in the GCC are now worth $1,903 billion, up 8 per cent year-on-year (yoy), according to a new report.
Year-to-date 230 projects have been awarded across Mena to 222 different contractors. This compares with 214 awarded over the same period in 2011, according to a report prepared by Citi Investment Research & Analysis (CIRA) team. This is broadly in line with the same period for 2011.
About $30 billion of contracts would need to be awarded from September to December for a flat FY performance, the report said.
The report said Q4 is expected to be slower given the oil price volatility on global economic uncertainty; rising bureaucratic delays (e.g. administrative bottlenecks in Saudi Arabia as the market has grown over 20 per cent yoy); and attention diverted by regional geo-political risk (e.g. tensions with Iran).
In Iraq, specifically, decision-making has been slowed by ongoing domestic political tensions between northern and central governing bodies.
Dubai's real estate contracting has seen something of a mini-revival recently with developers reporting robust demand in certain segments, the CIRA report said.
"We believe this is has been driven by 'refugee capital' from buyers facing geo-political risk and currency depreciation in their domestic markets, e.g. India, Iran, Pakistan and Egypt. While this lends some support to the market we believe development activity is centred on specific buildings rather than large-scale projects," said the report.
Abu Dhabi has awarded some mega-projects but its pipeline lacks growth, it said.
For the near term, the Qatari market has support from upcoming Metro and road projects, which are targeted for completion ahead of the hosting of the 2022 World Cup. However, pipeline growth seems limited, the report said.
Egypt has announced a 24 per cent increase in early stage projects, to ~$85 billion and weighted to transport projects. This is after a long period of inactivity (since the 'Arab Spring'). While early stage projects take time to evolve we believe IMF financing will need to be secured, in any event, ahead of any major spending plans.
"Overall we would favour contractors that have strong working capital management (given the recent rise in average days of receivables from 90 to 150 in the last 12-15 months); can successfully execute on projects (this is proving a key requisite for new project wins); develop expertise in growth niche sectors (such as Oil, Gas, Water and Power projects)," it said.
Generally margins remain under pressure, underlined by ongoing stiff competition, especailly since preference is often given to locals over internationals; plus the requirement to hire and increase salaries for nationals, it said.
"Specifically for Saudi, we believe that smaller players, such as Khodari, should be able to benefit from the exit/fall in market share of some larger players. We believe OCI remains relatively well placed in this market given its JV rather than subcontracting relationship with market leader BinLadin,
" the report added.
The projects planned and underway in the GCC are now worth $1,903 billion, up 8 per cent year-on-year. All markets across the GCC have risen, except the UAE which is down 7 per cent yoy to $544 billion although this has picked up pace from July when projects planned and under way were down 11 per cent.
While Saudi Arabia is up 21 per cent yoy, it has slowed from July (+28 per cent yoy). Saudi Arabia remains the largest market within the GCC with projects planned & under way at ~$773 billion. The slowdown to some degree reflects the delay to a number of project awards for Saudi’s six new economic cities.
Projects planned in Qatar is up 2 per cent yoy to $220 billion.
In terms of the other smaller markets, Bahrain has
seen a 22 per cent increase yoy to $67 billion. This growth comes as a result of the revival of some previously stalled projects.
Oman is another standout at +13% yoy to ~$114 billion, as is Kuwait at +10 per cent to ~$186 billion.
Projects planned in the Gulf (GCC plus Iran and Iraq) are up 4 per cent yoy to $2,475 billion.
Meanwhile, cancelled and delayed projects for the main Mena markets are up almost 2 per cent when compared with July. The total has now reached $1.5 trillion, the report said.
The split maintains its increase in weighting to cancelled versus delayed. This stands at 43:56. Egypt, Kuwait and Qatar are marginally down, while Iraq and Saudi Arabia are up 11 per cent and 7 per cent, respectively. The UAE remains relatively flat at $757 billion, but continues to account for the largest proportion of total cancelled and delayed projects - over 50 per cent.
Saudi Arabia accounts for the largest change in delayed projects which are up ~$18 billion to ~$128 billion. This mostly relates to the delay of $12.5 billion of projects relating to the King Abdullah Economic City (KAEC).
The total project pipeline (projects in the Feed, EPC bid and EPC pre-qualification) stages for the main Mena markets stands at ~$292 billion. This is down 7 per cent from CIRA's July report, it said. All markets are down barring Kuwait, which is up 3 per cent to ~$71 billion (driven mainly by Oil & Transport projects).
Saudi still accounts for the largest proportion of projects and is only down marginally to $73 billion. Other larger markets such as Qatar, Iraq and the UAE show more meaningful falls of 13 per cent, 8 per cent and 15 per cent, respectively.
From a sector perspective, Oil projects continue to dominate the pipeline at 35 per cent of the total, but are down 6 per cent (to ~$103 billion) from July. This segment is driven mainly by projects in Iraq, it said.
The most significant change is to the Construction sector, which is down 45 per cent to ~$45 billion. The Power and Chemical sectors have also seen substantial falls of 33 per cent (to $18bn) and 26 per cent (to $11bn), respectively. - TradeArabia News Service