Construction industry leaders from across the Gulf Cooperation Council (GCC) countries will seek to identify strategies for tackling the changes taking place in the region as a result of the fall in oil prices at the influential MEED Construction Leadership Summit (MCLS) in Dubai.
The conference, scheduled on May 25, will put the spotlight on markets that offer the strongest growth opportunities for GCC construction companies as well as assessing new ways of delivering projects at a time when governments are reviewing their spending plans.
The GCC construction market is facing downward pressure from cuts in government spending, late payments, increased overseas competition, bureaucracy and staffing challenges. As a result, the market is being forced to reinvent itself, especially in areas such as financing projects where public private partnerships (PPP) have seen increasingly broader support.
“A lack of liquidity is the biggest issue facing the GCC construction industry today,” said MEED editorial director Richard Thompson.
“And the central theme of this year’s MCLS will be identifying new and alternative ways to finance projects. In particular, the event will look at the opportunity of governments and private investors coming together to deliver key projects using PPP. These have worked well in the power sector over the past decade and the opportunity now is to adapt the model for social infrastructure and transportation projects. The GCC construction industry is at an important turning point and this year’s MCLS is a vital opportunity for the industry to discuss how it can respond to the new market landscape.”
Addressing the impact of low oil prices on bank liquidity for projects within the region and how businesses should look at financing their projects in this new economic era, Mashreq Bank’s Executive Vice President and Group Head of International Banking, John Iossifidis along with Frank Beckers NBAD’s Managing Director, Head of Project Finance Advisory for Global Banking and Steve Perry, Global Head of Debt Markets and Syndications for First Gulf Bank’s Wholesale Banking Group will have a candid discussion on the reality of the bank liquidity situation and how businesses should look to finance projects in the current era of low oil prices.
“There is a huge opportunity for both private and contract financing to step in. There has been a massive asset depletion in the GCC on account of the drop in oil prices,” said Mashreq Bank’s Iossifidis. “On top of this the GCC has to re-finance $94 billion of debt over the next two years of which $52 billion is bonds and $42 billion is syndicated loans, the large concentration of which is in the UAE and Qatar.
Much of this will be re-financed through issuance of Sovereign paper. This compounded with tightening regional liquidity, recent downgrades and rising rates presents a perfect opportunity for both private funding and contract financing to cherry pick quality assets to align the risk-reward ratio in a smart manner.
“This does not necessarily mean that all deals on hand are “fundable” but certainly begs the question of re-insuring the risk through other agencies where the risk-reward ratio is skewed. This ‘buying of protection’ will create more opportunities as there will be a clear distinction for banks to be at the debt level and the others at an equity level. This is a key metric that need to followed in a disciplined manner.”
Tapping into private sector funds will be key to successfully funding major projects during a time of low oil prices. Bill Smith, Partner at Pinsent Masons will moderate a discussion with local and international public and private sector organizations that will discuss the true meaning of PPPs and whether contractor financing or export credit solves the liquidity issues facing the region.
David Barwell, Chief Executive Middle East at AECOM; Campbell Grey, Managing Director, Faithful+Gould; Ayman Abutaleb, an RTA financial expert in the Rail Agency CEO’s office and Ali Sherwani from UK Export Finance will participate.
Though there has been a spate of bad news from all across the region ranging from jobs cuts to delayed payments, among others; there is still some glimmer of hope. Oil prices have risen 80 per cent since January.
World demand is growing. Crude could be about $60 a barrel in 2018. By that point, value added tax (VAT) will have been imposed in the six-country GCC market, adding at least $20 billion to government incomes across the Gulf. National oil company restructurings will be complete and trade with Iran should have recovered.
The UAE will be looking forward to Dubai’s Expo 2020. In the meantime, the market will be tougher for everyone. It is going to be a long, slow summer for the GCC. But for those with the capacity to wait, 2018 is the year it will start getting better.
How the market can survive until then will be a key focus of the summit’s agenda, with top construction leaders, such as Samer Khoury, President – Engineering & Construction, CCC; Tom Hasker, Managing Director, Property, Atkins; Pierre Sironval, Managing Director, Six Construct; and Sameer Daoud, Managing Director, Arcadis discussing geopolitical and economic outlook for the construction in the Gulf.
They will be joined by over 250 of the region’s leading construction executives, including Ashghal, Arabtech Jardaneh, China State Construction Engineering Corporation, Parsons, CH2M, and Atkins to deliberate the challenges and help stakeholders navigate the new construction landscape to succeed in 2016 and beyond.
The Summit encompasses the MEED Construction Leadership Summit and the MEED Quality Awards for Projects, in association with Mashreq (MQAP), where the regional winners will be announced at a gala ceremony that will be the culminating highlight of the event. It is the annual meeting place for the GCC’s construction leaders to deliberate on the challenges threatening the performance of the industry.
This article first appeared in the Saudi Gazette on May 22, 2016.SHOW MORE