Qatar is intending to reduce its spending, prioritize projects and has also implemented subsidy reforms. All GCC countries plan to introduce a value- added tax by 2018 to raise non-oil revenues, and are considering taxes which are even more unusual to the GCC, such as corporate and income taxes which may become more real prospects.
The pressing need to adjust budgets might have a negative impact on the projects market resulting on slower tender processes, slower decisions and payment procedures. The pipeline of projects planned in the GCC as of May of 2016 amounts to US$2 trillion with Saudi Arabia and the UAE as the biggest project markets, with construction and transport being the two leading sectors with shares of 52 and 19 percent, respectively.
The forecast of contract awards for this year is at is at US$140 billion, about a 17 percent decline compared to 2015. Saudi Arabia has been the most impacted market and the forecast is a US$10 billion fall in contract awards to US$40 billion, though it continues to be the largest project market and the biggest spender among the GCC countries. The forecast of contract awards in the UAE is set to be stable and mainly driven by the robust construction market in Dubai. There is a substantial amount of projects to deliver in Qatar such as stadiums, hotels, rail and roads in order to enable the World Cup and the forecasted value of contract awards stands at US$22 billon. Oman is expected to remain stable with values around US$13 billion, and Kuwait has a strong amount of planned activity for this year in the construction and transport sectors.
“There is a huge amount of project investment due to take place between now and the end of this decade. A growing population in the region will demand improved infrastructure for the cities to function and grow as planned. At a time where governments are facing budget deficits, their ability to adjust to the new environment, innovate and find alternative funding solutions to bridge the funding gaps required for ongoing investment will be key to the long term diversification success,” concludes Corby.
