Economic Update

Published 26 Mar 2018

Rising demand for hard infrastructure in Qatar is providing more opportunities for local construction firms, with smaller-scale businesses set to be key beneficiaries of nationwide development projects.

At the end of December the Public Works Authority (Ashghal) announced plans to invest QR21.8bn ($6bn) in infrastructure projects during 2018 across a range of sectors, including real estate, transport, and health and education.

The authority has allocated around QR11.1bn ($3bn) for establishing new highways, QR8.8bn ($2.4bn) for infrastructure and secondary roads, and QR1.8bn ($494.5m) for wastewater processing facilities.

A total of 19 infrastructure projects will be carried out, Saad bin Ahmad Al Muhannadi, president of Ashghal, said in a statement at the end of last year. Residential real estate will be a key focus, with plans to build hard infrastructure on more than 5000 plots of land. In addition, there are 11 other projects in the pipeline that were begun in 2017, including new health care facilities, schools, and highway and road expansions.

The rollout of infrastructure projects has been gaining momentum since last June, when the authority launched several major new tenders, including improvements to key road arteries and bridges for the Qatar 2022 FIFA World Cup.  

Sharper focus on smaller-scale businesses

Ashgal also aims to expand the role played by local firms in development projects, with a particular emphasis on small and medium-sized enterprises.

In early January the authority announced tenders for five road maintenance contracts under its Rehabilitation of Small Contractors initiative. The scheme, which aims to encourage skills development and boost the local economy, offers smaller construction firms the opportunity to upgrade or construct new facilities to ensure they can meet the technical criteria necessary to bid for state contracts.

As part of a wider initiative to increase participation of local firms in national engineering and construction projects, since July last year Ashghal has rehabilitated 47 manufacturing plants and accredited 54 products, according to officials.

Construction materials demand helps drive port traffic

The pipeline of infrastructure projects, coupled with efforts to ensure 90% of the 2022 FIFA World Cup infrastructure is completed this year, is contributing to a rise in port traffic, as contractors step up imports of construction materials.

In December 2017 the number of vessels handled at the main ports reached 417, almost double the total of the previous June, according to the Qatar Ports Management Company. Hamad Port, in particular, saw a substantial rise in port traffic, receiving 182 vessels in January, 15% more than the previous month, and the highest ever recorded since operations began in 2016, according to local media reports.

The increase in shipments has helped to allay concerns of materials shortages resulting from the closure of air, road and sea links between Qatar and three of its Gulf neighbours. According to analysts, moves to establish trade links with new markets have been largely successful, with Hamad Port launching new shipping lines to several countries, including Oman, Turkey, Malaysia and China, just three months after the blockade was established.

“Previously, building materials were imported from a limited number of places and often by way of other countries in the region,” Bader Mustafawi, board director of Qatar Building Company, told OBG. “Now the middle man has been eliminated and the sector’s supply chain has opened up to the world significantly, which will have beneficial long-term implications, regardless of the future status of regional trade.”

Still, as large-scale construction projects gather pace in the run up to the 2022 FIFA World Cup, supply bottlenecks could emerge as a result of congestion around the ports. However, in March 2018 authorities said logistics infrastructure was coping well with the increased activity and that materials were arriving on time, with construction of stadiums and a number of other projects related to the 2022 FIFA World Cup at an advanced stage. 

Move towards self-sufficiency

Local industry could also experience long-term benefits as a result of the current situation, particularly in the materials and supplies segment of the construction industry, as firms look to source more of their inputs domestically.

While expansion would require increased investment, the results of the latest OBG Business Barometer: Qatar CEO survey, published in February, suggests that local businesses are feeling confident about capital spending.

Almost 80% of respondents surveyed said the firm they represented was likely or very likely to make capital investments in the coming year.