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| MENA Construction Market
Resilience and Continuous
Investment: Characteristics
of MENA Construction Industry
After a devastating economical crisis affecting global economies,
the construction sector the Middle East & North African region is still
showing resilience. Despite the fact that many construction
projects were delayed or put on hold, the
GCC market remains attractive. In the Middle Eastern
region, investment opportunities are still interesting,
especially in Iraq, the giant reconstruction site.
In northern Africa, Gulf States’ investments have finally
reached the region and the future looks even
brighter.
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GCC shows commitment to continuous
development
The Saudi Government has announced an economic
stimulus budget for the 2009 fiscal year, valued at
US$ 126.7 billion. The upcoming budget represents
an increase of 15.8 percent, or US$ 17.3 billion, in
public spending, compared to its 2008 counterpart,
as a symbol of Saudi Government’s ongoing commitment
to developing infrastructure and improving
social services.
Despite the global slowdown, the UAE continues to
be one of the most active construction markets in the
world with more than 750 active projects in construction
and 450 recently completed, according to a recent
report by Dubai-based research house
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Proleads
Global. Although more than 400 projects with a total
value in excess of US$ 300 billion have been placed
on hold or cancelled, (the rest either in study, planning,
design or bidding), the report forecasts stability
returning to the sector this year with some recovery
in cash flow in 2010.
Qatar’s construction sector is set to reach US$ 9.06 billion by 2012,
according to studies conducted by Business Monitor International,
and with over 800 new towers slated to go up in Doha over the next
10 years, the market has been identified as one of the busiest construction
areas in the world. Qatar’s latest budget is characterized
by allocating sizable amounts of money for infrastructure projects
besides education and health. |
Middle East eager for further investments
The real estate and construction sector in Jordan has been one
of the most active sectors of the Jordanian economy lately. Construction
sector accounted for 4.4 % of the Gross Domestic Product
(GDP) on average over the period 2002-07. The sector has grown at
a CAGR of 13.7 %, during the same period. Credit to the construction
sector has also expanded by a CAGR of 20.5 %, with the highest
growth rates of 34.3 % and 24.4 % registered for 2006 and 2007,
respectively.
On another note, the Syrian residential sector is suffering from housing
shortage due to Syria’s 3% yearly population growth and the influx
of Iraqi refugees, but it is currently opening up to private investment,
replacing the public sector’s dominance. |
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The government is also stressing on developing transport infrastructure
with the allocation of around USD 1.5 billion to the
development of a nationwide multi-modal transport
network.
Looking forward to 2009 and 2010, private foreign
investment in Iraqi real state will continue to grow
robustly, with estimated upper-range investment of
US$ 35 billion in 2009 and US$ 40 billion in 2010 according
to Dunia Finance LLC. This is based on the
expected construction of 350,000 new housing units
in 2009 and 400,000 units in 20104 with an average
investment of US$ 100,000 per unit, 5 coupled with a
severe decrease in viable real estate opportunities in
the GCC region over the same period.
Both the real estate and construction industries have
experienced high levels of growth over the past few
years in Turkey, driven by the expansion of local
economy as a whole. A reflection of the slowdown in
the construction and real estate sectors is the recent
sharp fall in the number of applications for building
permits. As early as the second quarter of 2008, the
number of building permits being issued was down
20% compared to the same period in 2007, according
to a study by EFG Istanbul Securities. The contraction
is predicted to continue through 2009. |
Northern Africa fills its construction gap
According to the Business Monitor International
Egyptian Infrastructure report, the government has
abolished the customs duties placed on capital goods (from between
2% and 5%), as part of the Egyptian US$ 2.6 billion stimulus package;
70% of it will aim at supporting the infrastructure sector. BMI
predicted in its report the construction sector growth to reach, or
slightly exceed, 5% in real terms in 2010.
Construction is really on the agenda following the arrival of Gulf investors
in 2006 in Tunisia, contributing to projects worth US$ 48 billion.
The country is encouraging large projects such as a sports city
and Tunis Financial Harbour and hopes to encourage further foreign
investment. The 11th Economic Development Plan (2007-2011) includes
investment in more than 300 thousand new homes and modernization
of the roads, airport and rail infrastructure.
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| Since 2002, Moroccan construction market has witnessed impressive
growth in virtually all segments, and it is likely to continue to perform
well in the near future. The sector employs more than 800,000
people, and it has contributed an average of 6-6.5% to Morocco’s
GDP in recent years. In 2007, the government passed the second
five-year plan, which aims to invest some US$ 36.4 billion between
2008 and 2012.
Sources
Business Monitor International
Dunia Finance LLC
EFG Istanbul Securities
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