The robust economic performance enjoyed by the Gulf region for much of the past half-decade has been closely associated with massive infrastructure development plans - ranging from the tourism and real estate sectors to oil and industry. However, as the economic environment has deteriorated, the fate of many of these plans has become much less certain, NBK said in its latest GCC brief. By the end of the second quarter of 2009, a total of $2.1 trillion worth of projects in various stages of planning or completion across the GCC, worth two-to-three times the size of the region's expected GDP this year, and some $55,000 for each inhabitant of the Gulf. The value of tracked projects has increased by an average of nearly 50 percent per year from $490 billion in June 2005. These figures include projects at all stages of completion - from the early stages of planning (the ‘planned', ‘feasibility study' and ‘outline design' stages), to advanced stages of planning (at the ‘invitation to bid' stage) and to those projects actually underway (where the main contract has already been awarded). The numbers exclude, however, projects that are currently on hold. Of the current $2.1 trillion of projects, some 29 percent ($610 billion) are already underway, with the remainder still at the planning stage, the report said. The overwhelming majority - some 73 percent - of all projects are civil construction-type projects, emphasizing the sector's crucial role not just in developing the region's future, but in the GCC's recent economic performance as well. (Construction includes everything from houses, hotels, malls and offices to ports, bridges and railways.) Three quarters of these construction projects are still at the planning stage, suggesting that - if they are followed through - the medium-term outlook for the sector remains encouraging. By contrast, the amount of spending taking place in other sectors is relatively small. The value of projects in the region's all-important hydrocarbon sector, for example, totaled some $236 billion, of which more than one-third is underway. “This bias toward the construction sector may partly reflect the region's underlying economic structure: a relative lack of opportunities in the broader manufacturing/industrial sphere leaves investment spending weighted towards buildings used by the service sector,” the report said. Nevertheless, the absolute size of the construction sector's plans is impressive, it pointed out. The report said UAE accounts for by far the biggest share of project activity, totaling $929 billion and affirming its position as the leading GCC country in attracting capital investment. Some 81 percent of Emirati projects are in the construction sector. Nontheless, while the total value of projects in the UAE is far higher than anywhere else, Saudi Arabia has a much larger base of non-construction related projects - some $224 billion, which is 28 percent larger than in the UAE, reflecting the larger size of the Saudi economy. The higher value of non-construction-related projects in Saudi Arabia stems largely from the petrochemical, power and utilities sectors, where, at a combined $127 billion, the value of its projects are 35 percent larger than in the UAE, the report noted. Data revealed a sharp surge in the size of projects on average. While projects planned to start in 2003 averaged less than $500 million, the average size of project already planned for 2012 is $4 billion. “Overall, the data showed that a huge pipeline of potential projects in the GCC remains, though largely in the construction sector and weighted toward the UAE. If executed as planned, the schemes would provide a major stimulus to the regional economy and help it pull through the current economic downturn. But in the light of a weakening growth outlook and credit constraints, a number of current investment proposals are likely to end up being rethought,” NBK said. __
