New construction spending in Qatar plunges

The value of new construction contracts awarded in Qatar during the first three months of this year fell to their lowest levels in more than five years as governments in the region cut back on infrastructure spending because of lower oil prices.

According to figures from Meed, contracts awarded during the first quarter fell to US$830 million – a decline of 92 per cent year-on-year, and a 70 per cent drop on the previous quarter.

The decline was blamed on delays to major investment decisions that were due to be made by Qatar’s government and a number of government-controlled clients. It represents further anecdotal evidence of a slowdown in the country’s construction sector.

Last month, the Philippines’ department of labour and employment issued an update on the decline in oil prices, which stated that 60 Filipino workers had been laid off as a result of downsizing and cost-cutting measures at QDVC – a joint venture between state-owned real estate developer Qatari Diar and French contractor Vinci Construction.

Qatar is expected to run a 46.5 billion riyals (Dh46.9bn) deficit this year, partly because it has maintained commitments to major continuing construction and infrastructure projects such as the new port, the metro systems and major new roads and utilities projects.

Infrastructure expenditure is expected to reach 50.6bn riyals this year.

Speaking at a Qatar Projects Conference last month, the chief executive of Doha Bank, R Seetharaman, said that there were challenges in financing major construction programmes, pointing out that there had been payment delays to contractors on projects even when consultants had approved completed work.

“This, in turn, affects payment to subcontractors and impacts project profitability,” said Mr Seetharaman.

He said that Qatar and other GCC governments should look to develop infrastructure bond markets to finance projects.

“GCC infrastructure bonds need to be issued with sovereign guarantees to stimulate project financing,” he said. “We also need to bring long-term investors such as pension, insurance and mutual funds in [to the] GCC project market.”

A survey conducted by the global law firm Pinsent Masons in December showed that the UAE and Qatar were to be the two bright spots in the GCC for the construction industry this year.

The industry viewed Qatar as offering the strongest regional opportunity, with 33 per cent of respondents upbeat on the country versus 14 per cent last year.

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Michael Fahy

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