22 Feb 2018 – 0:00
By Satish Kanady / The Peninsula
DOHA: Driven by social needs, initiatives associated with economic transformation plans, government’s commitment towards investment in infrastructure, as well as tourism related projects, there is a robust pipeline of projects currently in the planning stages in the GCC region, including in Qatar, according to Deloitte’s just launched GCC Powers of Construction report.
Deloitte’s report, which provides an overview of the construction industry performance in the gulf countries, highlights the importance of greater private sector participation to improve the delivery of social services, including healthcare, education, transportation and utilities infrastructure.
On Qatar, the report noted: “The government continues its policy of prioritising projects related to World Cup 2022, including the roads and public transport networks, stadiums and other commercial developments, such as Lusail City. Transport projects expected to be awarded by mid-2018 are the metro connection to the airport terminal, phase 2 of Doha Metro, which comprises the extension of four lines, and Hamad International Airport’s main terminal extension. The Lusail City mixed-use development is currently under construction and will see some sub packages awarded next year.”
Cynthia Corby, Audit Partner and Infrastructure & Capital Projects Leader for Deloitte Middle East said:“The use of different forms of private sector participation in the gulf economies such as public-private-partnerships, attracting foreign direct investment through the easing of restrictions and privatization of state-owned assets are key elements to achieve the GCC leaders’ visions for socio-economic reform and fiscal balance”.
In the current economic environment, investment into construction projects by governments, regional private and international investors is less aggressive than it used to be. Construction companies also face challenges in raising debt as GCC banks remain risk-cautious on the sector.
Kosta Georgiadis, Head of Debt Advisory at Deloitte said the region’s several local banks are able and willing to avail financing to feasible projects based on acceptable debt and equity levels (usually 60-70 percent loan to construction arrangements), provided that developers are capable and prepared to stand behind the project with additional equity and debt servicing support should the project experience any unanticipated delay or softening in revenues.
Also examined in the Deloitte report are the challenges associated with the recent introduction of a Value Added Tax (VAT), suggesting options to mitigate related risks through adopting appropriate processes and controls.
The Deloitte GCC Powers of Construction 2017 report is a set of insightful thought provoking articles by subject matter experts, and in-depth interviews with prominent industry leaders from the region, on various topics of current importance, the diverse challenges contractors continue to face on their daily business operations, as well as opportunities and innovative practices the industry is moving towards.