Big jump in project contracts

April 30, 2014 - 6:31:33 am

by Satish Kanady

DOHA: Qatar’s projects market, the third largest in the GCC with a value of $277bn, is set to gain further momentum in 2014. The first quarter of 2014 saw Qatar awarding contracts worth a total of $4.6bn, an increase of 58 percent year-on-year.

Last year, the country’s projects market grew by an impressive 26 percent after $20bn in development contracts were awarded. Qatar was the second fastest growing projects market in the Gulf Corporation Council. 

“This comes as welcome relief for project owners after a couple of years of relatively underwhelming movement, both in terms of contract awards and capital spending. This also represents a boost for the government’s Central Planning Office (CPO), which was established in 2012 to coordinate the country’s projects amid concerns that organisational expertise and capacity constraints were leading to significant delays in the rollout of projects”, NBK’s latest Economic Update on Qatar noted in its report.

So far in 2014, more contracts have been awarded for work relating to the Doha Metro Red Line and Ashghal’s Expressway programme. 

Contracts worth at least $40bn are expected to be signed this year, the bulk of which will be construction and transport-related, the report said citing latest market intelligence data .

As well as continuing work on the Doha Metro, high profile projects anticipated to kick off this year include the $7.4bn Al-Sejeel petrochemical complex, the $6.4bn Al-Karaana petrochemical package. 

Both are currently in the bidding phase and both are key components of Qatar’s downstream development and revenue diversification plans as per Qatar’s National Vision 2030. 

As to Qatar’s World Cup 2022 stadia, five will see actual construction commence in 2014, according to the Precinct for the Supreme Committee for Delivery and Legacy. 

The long-delayed $15.5bn Hamad International Airport is also finally set for a phased opening this year.

The government spending on projects was given a further boost with the announcement of its expansionary budget for 2014-15 fiscal. 

Development expenditures on ‘key projects’ are forecast to rise by almost 17 percent on last year to $24bn and account for 40 percent of total expenditures.

The report, however noted, Qatar’s actual development spending has consistently fallen short of budget forecasts, averaging 30 percent of total outlays and approximately 8.7 percent of Gross Domestic Product (GDP) during the last five years.

Reflecting the difficulties of project implementation on such a grand scale given the country’s capacity and organisational constraints, Qatar’s development spending growth was noticeably muted during the 2012-13 fiscal year, increasing by only 0.5 percent. 

Recent reports indicate that the authorities may be considering to adopt a more phased approach to the rollout of projects and may be considering rescheduling at least 15 percent of planned construction projects in order to direct spending towards higher priority projects, such as the World Cup 2022.

Apart from capacity issues, the authorities may need to be cognizant of the potentially rising costs of manpower and materials in view of increased competition for such resources from Dubai’s Expo 2020 and other ambitious development projects in the Gulf.

Nevertheless, projects and spending momentum is expected to continue through 2014 given the strategic importance of the projects mentioned above and in view of recent measures adopted by the government. These include the establishment of the CPO and the introduction of a new law setting penalties on developers who fail to start projects six months after securing approval from the authorities.The Peninsula

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