MENA and the Culture of Construction
An Ever-Expanding Story

The MENA construction sector has been experiencing unparalleled growth; the merits of high oil prices, attractive business opportunities, and liberal government policies have attracted substantial capital investment into the region. There are now 3,339 projects estimated to be worth in excess of US$2.8 trillion underway in the region. A massive wave of projects in the GCC, Egypt, Iraq, and Libya has turned the region into the world’s biggest market for plant, construction machinery, vehicles, and equipment; demand for which is expected to grow by up to 20% over the next four years.
 
Overall, Saudi Arabia tops the table for active construction, with 1,026 projects valued at US$1.102 trillion currently underway in the Kingdom. Saudi Arabia represents the largest construction market in the MENA. In recent years, large oil revenues have made it possible for the construction industry to employ the extra liquidity for its development. The growth of the country’s construction industry is also sustained by the government’s efforts to liberalize the economy. Provision for total ownership of property and projects by foreign nationals, together with relaxation of taxation norms for foreign companies who are allowed to participate in the public procurement system, has ensured attractive capital flows into the nation. At present, the focus of the construction industry is on the development of mega cities, such as King Abdullah Economic City and Knowledge Economic City (KEC).

Kuwait is in third spot with 267 projects worth US$274 billion of infrastructural development in the country is being spurred by high levels of population growth. A robust economy, bolstered by surging oil prices, has provided the government the necessary liquidity to undertake large-scale construction projects. The government is expected to invest US$3 billion in the construction industry in the next five years, while private sector investment to the tune of US$8 billion is also anticipated. The Public Authority of Housing has taken up an ambitious welfare project for providing 69,000 new housing units by 2014, while the Ministry of Education has promised to build 340 new schools by the same period. The first phase of the ambitious Boubyan Island Project has commenced, while Project Kuwait, which aims to increase production in the country’s northern oil fields, is now in its final stages of being drawn up. Other major projects include US$14-billion al-Zour refinery, US$3.3-billion Failaka island development, the US$2-billion planned expansion of Kuwait International Airport (KIA), and a major road development program including the construction of an eighth ring road.
 
The Arab Republic of Egypt in North Africa is home to a vibrant construction industry. The sector has witnessed strong growth in the recent past because of growing investments from the Gulf countries and state-led programs of economic reform. With major privatization and investment activity expected in the Egyptian infrastructure sector during 2007-2008, this uptrend is likely to continue. It is forecasted that Egypt’s domestic construction industry to log an average growth rate of 5.71% over the 2008- 2012 period. Recent state initiatives to evolve an integrated transport strategy, construct 14 new cement plants, and implement eight new oil and natural gas projects have added impetus to the rising infrastructure investments. Other major infrastructure projects span across tourism, transport, development of airports and ports, and industrial construction. Further, investments in development projects under the State Development Plan 2007-2012 are soon expected to top US$2 billion.
 
The UAE, in second place for overall construction project value, has the largest number of active projects in the Middle East. There are currently 1,248 projects worth US$931 billion underway in the Emirates. As it transforms from a buyers’ market to a sellers’ market, the UAE construction industry is witnessing a construction boom with Dubai and Abu Dhabi at the heart of this impressive expansion. Home to nearly 6,000 construction companies, the UAE figures globally at the top in terms of per-capita expenditure on construction. The UAE construction industry is relatively free of entry barriers. In fact, the liberal business environment, tax-free status, and political stability of Dubai have been major drivers for the industry to expand.
 
Several new mega projects underway, including Sama Dubai’s City of the Century in the capital’s center and Bukhatir’s Tunis Sports City, are expected to draw the construction sector out of its slump in Tunisia. Most foreign investment actually comes from the UAE, which has overtaken Italy as Tunisia’s leading foreign investor. Although the state government still plays a major role, the construction sector in recent years has become an increasingly private affair. In 2007, other Arab property developers, such as Al Maabar, Damac, and the Gulf Finance House, have also expressed an interest in investing in Tunisia. In terms of infrastructure, Tunisia continues to improve its roads and highway network. Looking to the future, despite rising prices for all kinds of construction materials, Tunisian construction firms stand to profit from all these developments and investments, as foreign investors are likely to outsource part of their projects. Moreover, under the country’s 11th development plan (2007-11), the government plans to construct 300,000 new homes.

There are almost US$95-billion worth of ongoing and planned projects in the Levant, US$40 billion in Syria, US$30 billion in Jordan, and US$25 billion in Lebanon, while more is in the pipeline. Lebanon is expected to attract even further investments in the construction sector. Lebanon’s booming property sector is fueling a huge demand for construction materials and services. Overall real estate values in Beirut have increased by more than 30% just from 2007 to 2008, spurring additional high-caliber residential and touristic projects. Oil-driven revenues continue to pour in from Arab neighbors, who are investing billions in construction projects, making Lebanon the 4th largest recipient of Arab investment. Likewise, Lebanese expatriates esteem their homeland as a relative bargain compared to the region’s exorbitant property values. Here’s just a glimpse at the scope of Lebanon’s development projects: recent residential and tourist projects in Beirut alone are estimated at US$8 billion; current infrastructure projects total US$2.376 billion; and more than US$5-billion worth of projects planned by Solidere.
 
Coming to Syria, government is actively encouraging private investment in the traditionally state-dominated construction sector as part of its drive to counteract falling oil revenues with growth in other areas. Indeed, contractors regard 2006 and 2007 as witnessing the beginning of real growth, marked as they were by the entry onto the scene of several high-profile Gulf investors backing big projects. In terms of new developments, tourism is drawing a lot of the attention while there is a growing level of private sector interest in Syria’s infrastructure. This has been buoyed by the announcement in February 2008 of a partnership between three Kuwaiti firms and Syria’s Al Sham Holding Company for large-scale public-funded infrastructure programs, focusing on the electricity, wastewater and energy sectors. In terms of retail construction, mall culture is taking root in Syria, offering good and relatively fast returns to investors.
 
Construction activity in the Middle East continues to expand at rates more commonly associated with rapidly developing economies such as China. Residential construction comprises a perhaps surprisingly large share of the region’s construction activity. Though there are suggestions that investment activity is outpacing demand, particularly in the area of residential construction; yet, there are compelling reasons to believe that the expansion has considerable room to run.