The UAE and Qatar not only offer a robust business environment to construction companies, but also have the strongest project pipeline in the MENA region. A new report by BMI Research says that North African markets remain risky in comparison and are not investing in their infrastructure as much as the GCC countries.
Qatar remains the stand-out market, recording the highest investment ratio within the GCC and a strong operating environment.
Investment ratio is calculated by dividing total value of the construction project pipeline with total construction industry value. In the region, Qatar's is the highest investment ratio of 17.5, BMI said. While the investment ratio is a good indication of the level of growth and opportunity in a market, realizing these opportunities for companies can often be difficult.
In North Africa, political risk elevated in the wake of the Arab uprisings, while the GCC markets are struggling with the sheer volume of work they are undertaking. Both deficient institutional capacity and holdups in the supply of labor and materials are causing interruptions in work.
Along with Qatar, BMI highlighted two other major GCC markets – the UAE and Saudi Arabia in the report. The UAE in particular is a well-established favorite for international construction firms. BMI forecast solid growth in the UAE construction sector in the run up to the Expo 2020 event.
Although Saudi Arabia scores lower on the operational risk scores, once established in the market, companies will enjoy significant opportunities – with the market achieving an above average investment ratio and operational risk scores.
The GCC contains BMI's preferred infrastructure markets across the MENA region. The report said: "Not only are the GCC countries investing more in projects (in order to diversify their economies) than their North Africa counterparts, but they also offer a much stronger business environments for those operating on the ground."
While activity in North Africa has been much more downcast as governments wrestle with edgy populations and fraught economies, the GCC counties have stepped up their investment into infrastructure in recent years.
At the same time, the GCC construction industries have begun to recuperate ground from 2008’s financial recession. This has seen the value of the project pipelines across the GCC grow, leading to higher growth rates in the construction sector.