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Construction a Fast-Growing Sector in Arab Countries

By Yemile Mariana Tuma - Arab Mexican Chamber of Industry and Commerce - CAMIC


By Yemile Mariana Tuma | President - Tue, 01/24/2023 - 13:00

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Following the volatility of global markets due to the impact from the COVID-19 pandemic throughout 2020, the Middle East and North Africa region emphasized  among its economic recovery strategies an increase in construction activity by allocating a total of US$156 billion in 2021, achieving annual growth of 4.4 percent. 

The impact of growth in this sector continued throughout 2022, with expectations for a 3 percent year-on-year increase in  construction activity in Arab countries . Although in recent years we could identify portfolios of projects that marked this trend at a regional level, such as the project portfolio for the Expo 2020 held in Dubai, United Arab Emirates, and the FIFA World Cup in Qatar, it is now relevant to analyze the promising outlook for the sector in the coming years in the Arab economies, mainly in the member countries of the Gulf Cooperation Council (GCC).

By GCC countries, we are referring to the economies of Saudi Arabia, the United Arab Emirates, Bahrain, Qatar, Oman and Kuwait. In recent years, this group of countries has positioned itself as a regional and global benchmark for construction. In 2022 alone, the combined activity of these countries was expected to close at US$300 billion, and in 2023 and 2024, the sector in these economies is expected to grow between 3.5 and 4 percent.

This growth trend is due to factors like the available financing of projects as a result of record revenues from oil exports as well as the continuity of long-term development plans to achieve diversification of their economies, which are mostly dependent on the energy sector.

Within this group of countries, it can be identified that the United Arab Emirates and Saudi Arabia are, naturally, at the forefront of the sector, with a project pipeline that in 2022 registered a value of US$11.4 billion and US$20.1 billion respectively. Hence, these two countries account for almost 85 percent of the future projects planned in the GCC in the coming years. 

Given this significant number of projects planned in the Emirati and Saudi markets respectively, it is important to highlight the guidelines that will drive the sector in these economies, which will undoubtedly be an important reference not only at a regional but also at a global level.

United Arab Emirates: Solid Progress Expected After Expo 2020

After the significant allocation of resources in the construction sector to carry out the long-awaited Expo Dubai 2020 and which meant a project portfolio valued at US$156 billion deployed in the construction of airports, transportation networks, exhibition centers, residences and welcoming almost 7 million tourists in 2022, the outlook for this country remains promising. The government continues with its infrastructure plans through diverse initiatives, such as the Energy Strategy 2050, the Sheikh Zayed Housing Program and the Dubai Tourism Strategy.

Construction industry value growth of between 3.7 and 4.7 percent is expected. Prevailing projects are focused on the growth of the country's industrial, transportation, residential and energy infrastructure. Among the main projects of this type are luxury tourist and residential complexes, such as Atlantis The Royal, Abu Dhabi's Jubail Islands and Jumeirah Marsa Al Arab; solar parks, such as Mohammed bin Rashid Solar Park; technology districts, such as Dubai Urban Tech District; and convenient transportation and road projects. 

Saudi Arabia: A Bright Future

Saudi Arabia has embraced the journey to undertake a large-scale economic diversification as part of its Vision 2030, in which the construction sector plays a key part in reducing the economy's dependence on oil. The progress has been promising, as evidenced by the Saudi construction sector experiencing one of its highest growth rates since 2014 in 2022, with an increase of 8.8 percent that accounted for 4.18 percent of the country's GDP.

The construction sector is expected to continue to grow by 4.3 percent      between 2023 and 2025. Construction industry output is expected to be supported by the government's focus on infrastructure development, in general, as well as energy and utility construction projects. 

Projects likes the Red Sea Project, valued at US$8 billion, the Neom High-Tech City with an investment of US$500 billion, the Qiddiyay Entertainment District Project with US$8 billion, King Salman Park with US$19 billion in investment, and transportation projects, such as Jeddah Metro and Mekkah Public Transport, valued at $60 billion and $28 billion respectively, t will ensure Saudi Arabia remains the best-positioned construction industry market in the region. 

Thus, we can see that the range of future project opportunities is huge in the GCC region's construction industry. The broad portfolio of projects in the categories of energy, electricity, water and transportation infrastructure, commercial and residential real estate, industrial developments, and all the inputs that these projects entail, represent wide opportunities for contractors, consultants, and suppliers from Mexico.

The construction industry is one of the main sectors of the Mexican economy and the most important in terms of market value in all of Latin America; within this sector, the supply of construction materials is important. The wide availability and quality of Mexican construction materials have encouraged several Mexican companies to enter international markets. Mexican companies already have a significant presence in Arab countries, with CEMEX and Polímeros de México being among the examples. Thus, the supply of inputs for this fast-growing industry in the region represents another chance for Mexican companies to undertake and explore business opportunities in the Middle East and North Africa.

Photo by:   Mariana Tuma

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