Bricks and Mortar

Qatar

Economic News

22 Jul 2010
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A new report released this week shows some healthy times ahead for Qatar's construction sector, which seems to have left far behind its former, darker days. The building boom looks set to continue after the Asian Games in 2006, with this Doha-based event already turning large parts of the country into a building site.



The report, put together by the Kuwait-based Global Investment House (GIH), said the Qatari construction sector grew last year at the rate of 3.35% at current prices, as compared to a negative growth of 3.1% in 2002. This left the sector representing 7.5% of total GDP in 2003, making it the third largest contributor to the total from the non-oil and gas sector.



The number of building permits issued back then rose significantly by more than 19% year on year, outstripping largely single-digit growth in earlier periods. The number of building permits issued increased to 4,237 in 2002, up from 3,556 in 2001.



Behind all this, GIH pointed out, lay a huge increase in public spending. This is set to continue too, with projects in sectors such as health, education, housing and infrastructure allocated an awesome QR8.8bn in the 2004-2005 budget.



Meanwhile, there has also been a major increase in population in recent years. Official figures showed Qataris numbering around 600,000 in 2001, but in 2004 they numbered over 817,000. This has gone along with a demand boom for tourist accommodation. Rents in the Emirate have in consequence gone up by 25-30% over the last year, while demand for residential units and hotel rooms has far exceeded the supply.



On top of all this, the 15th Asian Games are also coming to town in 2006, explaining much of the public sector investment and the private sector's renewed interest in building projects. Some 10,000 athletes and officials, 10,000 non-athletes and around 150,000 spectators will all have to be put somewhere, with the government committing some $2.8bn in January to upgrade Qatar to meet the rush.



Some of the luckier ones might get to stay in one of several major new hotel and leisure complexes currently under construction.



There is, for example, the Pearl of the Gulf Island development, which will be built 350 metres offshore close to the West Bay lagoon area of Doha, while other Asian Games-targeted developments are also looking to extend their lives far beyond 2006 - flexible complexes such as the Al Dafna Towers project is one such example.



The construction boom has not been without its hitches, however. One of the most aggravating for building firms has been periodic shortages of basic materials, with cement supply occasionally drying up. This has been a problem throughout the Gulf this year, and has global as well as regional origins.



Meanwhile, soaring steel prices this summer have also been a growing concern, with growing global demand forcing up costs and even in some cases leaving building projects frozen while fresh stocks are awaited.



These issues and others are likely to be up for discussion in Doha later this month at the Project Qatar 2004 exhibition. Scheduled for September 19-23, it already looks likely to be the major construction sector get-together in the Gulf this year.



One company that has recently announced it will be attending and using the exhibition to try and expand into the Qatari market is the UAE-based Gulf Extrusions. Makers of aluminium profiles, the company has targeted Qatar precisely because of its current construction boom.



"In Qatar, Gulf Extrusions is already manufacturing custom-built profiles for certain important projects," Robert Holtkamp, the company's director of sales and marketing told reporters back at the end of August. "But the construction industry is booming in the country and the market has huge untapped potential that we are targeting."



Naturally enough, this boom in construction has a major knock on effect elsewhere too. The Qatari service sector in particular is set for major expansion, as companies vie to provide services for the tourism and office sectors, as well as for the Asian Games. Not surprising then that the World Bank predicts GDP growth of some 8.2% this year.



Can all this expenditure be backed up though? Well, most analysts think it can, as booming energy prices provide a continued windfall for the Qatari government. Budget surpluses have been around for a number of years, and Qataris seem to be showing no difficulty these days in spending them.

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