Economic Update

The Qatari government has increased its budget allocation for major works this year, with many of the projects being undertaken in preparation for the 2022 FIFA World Cup well under way.

Qatar Construction

Key indicators

Indeed, in the third quarter of 2016 the construction industry grew by 12.4% year-on-year (y-o-y) and contributed 1.9 percentage points to y-o-y non-hydrocarbon growth. By comparison, financial services contributed 0.9 percentage points, according to Ministry of Development Planning and Statistics data.

This expansion looks set to continue this year, with the total value of contracts awarded expected to climb approximately 40% to $26.6bn, according to the “Qatar Construction 2017” report released by Project Qatar in January. 

As of last month the Qatar Public Works Authority (Ashghal) was working on projects worth $200bn. In terms of the value of contracts currently under way, buildings contracts account for 49% of the total, with infrastructure and energy works representing 33% and 18%, respectively.

To support the ongoing projects and the rollout of new ones, $26bn of Qatar’s $54bn spending plan for 2017 was allocated for major projects this year. By comparison, $24.9bn was set aside for the same purpose in last year’s budget.

Steady progress 

Speaking at a weekly cabinet meeting in February, Sheikh Abdullah bin Nasser bin Khalifa Al Thani, prime minister of Qatar and minister of the interior, said work was being carried out at “a steady pace”, with 90% of World Cup-related projects already awarded.  

Other significant public infrastructure projects are also nearing conclusion. For instance, all major tenders have been awarded for the $40bn Lusail City north of Doha, with an estimated 80% of infrastructure work already finished, according to media reports. Slated for completion by 2018, Lusail City aims to accommodate more than 200,000 inhabitants in 19,000 multi-purpose districts.  

Work is also progressing quickly on the country’s planned rail networks. As of December, the Lusail Light Rail Transit (LRT) was 44.8% finished, Markus Demmler, senior programme director of the Qatar Integrated Railway Project, told local media. Comprising 32 km of lines and 35 stations, the LRT is set to come on-stream by 2020. Demmler also revealed that Doha’s 163.8-km metro network was 54-59% complete, with operations on schedule to start in 2019. 

Future prospects

With many of the country’s large infrastructure projects already tendered, industry players from some of Qatar’s biggest construction companies have highlighted that they expect contracts in the future to be mainly for medium-sized projects.  

“The days of projects valued at QR7bn-QR10bn ($1.9bn-$2.7bn) are over. One of the main reasons larger projects are being conducted in phases is to keep the amount of work consistent, as the overall industry will not have as much work in the coming years.” Philippe Tavernier, CEO of local construction firm QDVC, told OBG.

Supply chain improvements

To deal with the increase in imports precipitated by the construction pipeline, the Qatar Primary Materials Company (QPMC) – which supplies the country with the majority of its building materials through its Port of Mesaieed terminal – teamed up with Australian management and consultancy firm Aurecon last year. 

Efficiency strategies developed by Aurecon via simulation modelling are expected to help boost the terminal’s annual throughput capacity from 16.6m tonnes currently to 30m tonnes, while also helping reduce unloading times from 50 to 20 hours. 

The Port of Hamad is also undergoing major expansion. The first phase of the project came on-line in early December, increasing total container handling capacity from 750,000 to 2m twenty-foot equivalent units (TEUs) per year. Once all phases are complete, the port will have a capacity of 6m TEUs a year and comprise a general cargo terminal, multi-use terminal, offshore supply base and centralised Customs area.  

One segment expected to profit through in the coming years is the equipment rental sub-sector, with the high cost of equipment and the entry of foreign companies to the market on a per-project basis prompting an increase in rental contracts. 

According to a report from market research company TechSci Research, the rental equipment market is forecast to surpass $1.9bn by 2022, with cranes and earthmoving equipment singled out as likely to experience particularly strong demand. 

Upcoming tenders that might feed into this segment include the Hamad International Airport expansion project. The airport announced plans last month to increase capacity from 30m passengers to 65m per year by adding a new concourse to the existing terminal. The expansion will be open to international contractors; however, dates for the tenders have yet to emerge.