AECOM

MENA economic challenges and risks

The MENA region will continue to face specific challenges in 2023, especially as governments
continue to manage economic recovery post-pandemic. Factors such as political instability, extreme
unemployment, economic uncertainty, economic relief disparity and the ongoing conflicts in countries
such as Ukraine, Syria and Yemen, all remain challenges to the stability and recovery of the region. The
MENA region is noted as being especially vulnerable and it continues to require swift and effective
reforms to prevent further financial economic impacts and to expedite recovery in 2023.

The key risks associated with the MENA region include:

Pandemics 1 6 Conflicts
Violence,
New viruses/
protests and
variants
social unrest

Governments
Institutional/
2 7 Human capital
Education and
social fragility
skills gaps
and corruption

3 8
Cyber-attacks
Climate change
Disruption of
Extreme weather,
operations or
rising sea levels,
theft, of data
floods and droughts
or money

4 9
Unemployment
and under-
Food security
employment,
including water
especially for
youths and females

Oil prices
Exporting and
5 10 International
ties and trade
importing
tensions
reliance

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Middle East Property & Construction Handbook 2023

MENA
construction
market review
The overall outlook for the MENA
region’s construction sector continues
to remain optimistic, bolstered by the
GCC’s improving fiscal situation as oil
prices remain buoyant.
Considerable prospects continue to be forecasted in
KSA, the UAE and Egypt and are set to pave the way
forward in the region.

The ongoing driving force behind the MENA region’s

construction resilience is the need to diversify and develop
their economies to meet the demands of its rapidly growing
population, and overall, lessen its economic reliance on finite
and economically volatile fossil fuels.

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The pipeline of projects across Considerable project awards This indicates an upward trend
the Gulf is estimated at around in non-energy construction in project activity post the
USD 3.1 trillion, with the GCC have begun to be seen this challenges faced during the
equating to over 81 per cent year, especially in KSA with pandemic and following on from
(USD 2.5 trillion) of this market an increase of 158 per cent the positive impact of Expo
value. The largest segment of compared to the same period 2020. Although we are seeing
construction projects remains the previous year (2021). Awards a downturn in Qatar’s project
in transportation infrastructure in Egypt are up 254 per cent, the awards, the aviation sector is set
and building real estate, including UAE is up 62 per cent, and as to increase with ongoing Hamad
the development of schools, anticipated, Qatar’s market has International Airport terminal
hospitals and social infrastructure softened, posting a decline of and cargo expansions set for
to advance existing and 49 per cent during 2022 whilst 2023 and onwards.
growing populations. approaching the World Cup.
Project awards are expected to
According to MEED, Middle East In KSA, development parties in grow further looking to 2023. This
project awards for 2022 is set the region are focused on the is bolstered by Saudi Arabia’s
to increase by another 20 per expansion of its infrastructure Vision 2030, Egypt’s continued
cent compared to awards in to support the development commitment to infrastructure, the
2021 (based on Q3 2022 data). and expansion of its PIF led increased business sentiment
This indicates construction giga-project programs. The UAE following Expo 2020, buoyant oil
activity in the region is beginning has awarded 62 per cent more prices, and the overall effect of
to reach pre-pandemic levels projects than in the same period the global economic recovery.
of 2018/2019 and is a further last year, 2021, with a marked
positive increase from the focus on the building sector and
22 per cent experienced residential real estate.
between 2020 to 2021.

MENA projects awarded yearly

250,000

200,000

150,000
USD Mn

102,685
100,000 90,976
74,779 81,349

50,000

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
upto Q3

Source: MEED 2022 Q3

MENA projects awarded 2022

40,000
34,809
35,000
30,000
25,000
USD Mn

20,000
15,000 10,876
10,000
5,000
0
Saudi Egypt UAE Qatar Iraq Oman Kuwait Iran Bahrain Jordan Lebanon
Arabia
Source: MEED 2022 Q3

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Middle East Property & Construction Handbook 2023

MENA awarded contracts GCC Construction Market Value 2022

The country with the highest value of awarded 172 62

7% 2%
projects in 2022 was Saudi Arabia, with an 198
8% Saudi Arabia
approximate total of USD 35 billion (tracked to
198 UAE
end Q3 2022). This equates to a 43 per cent 8%
Qatar
market share (recorded by MEED). This was 1,350
54% Kuwait
followed by Egypt with USD 17.4 billion — a 21
per cent market share. In third place was the 528 Oman
21%
United Arab Emirates with USD 10.8 billion, Bahrain

equating to a 13 per cent market share.

The busiest sector for project awards was Source: Global Data/BMI Research

transport infrastructure which saw a 28 per Gulf project awards % 2022

cent share, followed by building construction
at 17 per cent. Oil projects came in third with 12% Construction
17%
15 per cent, power projects were at 14 per cent Transport
and gas projects 12 per cent. Water
15%
Chemical
Of Saudi Arabia’s USD 35 billion investments
Power
this year, USD 8.8 billion was committed to the 3%
28% Industrial
commencement of infrastructure packages
for the Government/PIF led NEOM giga- 14% Oil

project, Diriyah Gate Development Authority 3% 7% Gas

(DGDA), Rus al-Madinah Holding (RMH), Royal
Commission of Riyadh City (RCRC) and The Source: MEED 2022 Q1-Q3

Red Sea Development Company (TRSDC).

KSA project awards % 2022
This signals a continued commitment to their
ambitious diversification plans and enabling 1,622
4,989 Construction
4%
works for major construction builds that lead 14%
Transport
7,898
into 2023 and beyond. 23% Water
Chemical
According to MEED, a further USD 16.5 billion 8,753
was awarded for buildings (5bn), power (5.5bn), 25% Power
1,989
industrial (2bn), water (3bn) and chemical 6% Industrial
(1bn) projects. With key projects awarded for 5,478 Oil
Qiddiya Water Park, King Salman International 16% 960 3,120 Gas
3% 9%
Park – Royal Art Complex, Phase 2 of ACWA’s
Renewable Energy Program, Saudi Water Source: MEED 2022 Q1-Q3
Partnership Company’s (SWPC) Shuaibah
UAE project awards % 2022
reverse-osmosis desalination plant and
LUCID’s Electric Car Manufacturing Plant, 645
6% Construction
further highlighting the extent of the Kingdom’s 1,437
13% Transport
diversification efforts.
85 Water
1%
532
In Egypt, USD 10 billion of its USD 17.4 billion 5% Chemical
5,838
that was recorded in 2022, compromised 821 54% Power
7%
projects relating to the expansion of its high- Industrial
speed rail network. A consortium made up of 1,518 Oil
Siemens Mobility, Orascom Construction and 14%
Gas
The Arab Contractors signed contracts with
Source: MEED 2022 Q1-Q3
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the Egyptian National Authority development of technology Key awards in Bahrain saw Al
for Tunnels (NAT) to design, companies, also helps set the Sorouh award the Avenues Mall
install, commission and maintain nation up for positive growth Phase 2 Expansion project to
a 1,800 kilometre high-speed rail in acute juxtaposition to the Nass Group, along with several
network. Other key awards were many struggling economies other social apartments and
in the power sector with the across the globe. infrastructure improvement
USD 2.2 billion Atomstroyexport projects. Looking across the
- El Dabaa 48000MW Nuclear As reported by MEED, of pipeline of projects, the launch
Power Plant, Nuclear Island Qatar’s USD 10.8 billion in of Bahrain’s USD 30 billion
(Block 2) project awarded to awarded projects, circa USD Strategic Projects Plan in late
Korea Hydro & Nuclear Power 6.8 billion, was recorded for 2021, that is set to increase the
Co. and the award of the USD gas projects as they look to total land area by more than
1.5 billion Egyptian Electricity increase production as part 60 per cent, and the tendering
Transmission Company (EETC) - of their long-term expansion of USD 3.5 billion King Hamad
1.1 GW Wind Independent Power strategy to boost LNG capacity Causeway project as a public-
Project (IPP). These projects by 64 per cent for 2027. Further private partnership, show
signify Egypt’s continued investments were seen in considerable prospects in the
investment in strategically Sewage Treatment Works in Al country in the journey to realise
important projects to meet the Wakrah and Al Wukair as part its Economic Vision 2030.
Government’s vision for 2030. of Qatar’s first Public Private Furthermore, in conjunction
Partnership in the field of with Bahrain being known as a
The UAE saw USD 7.4 billion sewage network projects. gateway country for business in
of its USD 10.8 billion awarded Saudi Arabia, the considerable
to building and infrastructure Amidst political restrictions in
uplift in business activity in
works in Q3 2022. This mainly Kuwait, the Public Authority
Saudi Arabia means that the
consisted of residential housing for Industry (PAI) has awarded
outlook for the country is
projects with key developers the infrastructure package
expected to remain strong
awarding the following values; for Shaddadiya Industrial
for years to come.
Aldar USD 0.69 billion, Emaar Area Zone to United Gulf
USD 0.42 billion, Damac USD Construction and signals
0.41, Nakheel USD 0.4 billion, a step forward in providing
ARADA USD 0.34 billion. Other 1,036 industrial plots, ranging
key projects were awarded from 1,000 to 10,000 square
for Abu Dhabi Ports - CMA meters for food, chemical and
Terminals Khalifa Port: Phase industrial activities.
2, Binghatti Developers -
In Oman, improved oil
Burj Binghatti Jacob & Co
prices have seen increased
Residences and Miral - Natural
construction activity in 2022,
History Museum Saadiyat
Island. The outlook for the UAE
for example the joint venture The busiest
between Oman Tourism
remains prosperous due to the
Development Company
sector for
boosted tourism and property
purchases following the start
(OMRAN Group) and Diamond project awards
Developers, named Sustainable
of the Ukraine-Russia conflict,
Development and Investment
was the transport
increased activity in upstream
sour gas production, reworked
Company (SDIC). This group infrastructure
awarded packages for Phase
metro and rail expansions
1 of the USD 1.0 billion Yiti
sector which saw
and the reignition of shelved
development projects. In
Sustainable City project. a 28 per cent
addition, its commitment to the share.”
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Middle East Property & Construction Handbook 2023

Top five awarded contracts in 2022

SAUDI ARABIA EGYPT

Awarded Value Awarded Value

Contractor Contractor
project name USD Mn project name USD Mn
NEOM – NEOM City: Shibh Al Jazira 2,780 NAT - High Speed Rail Siemens, 8,000
Backbone Infrastructure: Contracting, FCC Network: Greater Cairo- The Arab
Drill and Blast Running Construction, Aswan Railway Line Contractors,
Tunnels China State (Phase 2) Orascom
Construction Construction
Engineering
Corporation Atomstroyexport - Korea Hydro & 2,200
El Dabaa Nuclear Power Nuclear Power
ACWA - Renewable China Energy 2,700 Plant 4800 MW: Nuclear Co
Energy Program: Phase Engineering Island (Block 2)
2:2600 MW Shuaibah 2 Corp
Solar PV Power Plant
NEOM– NEOM City: Hyundai 1,850 NAT - High Speed Rail Siemens, 2,000
Backbone Infrastructure: Engineering, Network: Luxor-Hurghada The Arab
Cut and Cover Tunnel Samsung Railway Line (Phase 3) Contractors,
Section Engineering, Orascom
Archirodon Construction

KSPF - King Salman Modern Building 1,333 EETC - 1.1 GW Wind 1,500
International Park: Royal Leaders Independent Power
Art Complex Project (IPP)

DGDA - Diriyah Gate Webuild 1,070 UC Developments Dorra 330

Development: Super - East Tower at New Contracting
Basement Administrative Capital

UAE QATAR
Awarded Value Awarded Value
Contractor Contractor
project name USD Mn project name USD Mn
Abu Dhabi Ports - CMA China Harbour 560 ASHGHAL – Al Wakrah and Metito - 1,480
Terminals Khalifa Port: Engineering Al Wukair STP Mitsubishi
Phase 2 Company (Japan) & UCC
(local)
Aldar Properties - United 435 Chevron Phillips Consolidated 280
Alreeman 2 Mixed-Use Engineering Chemical/Qatar Energy - Contractors
Development: Fay Construction RLPP: Early Site Works Company
Alreeman
Miral - Saadiyat Island: ALEC 400 Qatar Energy - 417MW Samsung C&T 200
Natural History Museum Solar Power Plant in
Mesaieed Industrial City

Binghatti Developers Granada Europe 400 Qatar Energy - 458MW Samsung C&T 200
- Business Bay: Burj Engineering Solar PV in Ras Laffan
Binghatti Jacob & Contracting Industrial City
Co Residences
EWEC - Al Mirfa Sidem 320 ASHGHAL - Road Al-Mohannadi 58
Second IWP Improvement Works Out for Leveling
of Greater Doha Phase 7 and Paving
Roads

Source: MEED

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MENA construction considerations

The growth of the construction (particularly the Middle East), contractors to renegotiate
market will continue to depend it is common to see standard existing prices (as contracts
on MENA governments contract terms and conditions allow) and focus on commercial
implementing stimulus adapted and amended; this will considerations during contract
packages for 2023 and beyond. be an important consideration renegotiation. Overall, there is a
with certain provisions, focus to improve transparency,
The pandemic caused many set like Force Majeure (which encourage healthier agreements
backs in construction activity typically does not explicitly list between client and contractors,
and has provided new focus and pandemics and epidemics), to and enhance the procurement
opportunities as businesses be amended to ensure a balance stance of projects in the region.
are now realigning to drive new of risk between the parties. However, the RICS emphasizes
efficiencies and help rebuild that during negotiations
broken supply chains and seek There are revised mindsets certain considerations should
more collaborative approaches. across construction markets be made, such as reviewing
as clients and construction project value drivers, assessing
An important lesson learned organizations battle with market capacity within the construction
from 2021 and 2022 cautions price volatility and delays to market and allocating risk.
that contractual parties need to project execution and delivery, The allocation of risk and
diligently review and understand specifically over the last two overall security should be key
the relief provisions within years. This is encouraging considerations during the review
construction contracts. In MENA certain developers and and decision-making process.

Key considerations:

Project value drivers: Commercial capacity

Reconsider the project from the in the market:
perspective of the outcomes. Have these Is there an unaccounted
changed? What drives the project value? for slack in the market
pricing environment?

Use of investment:
Is the level of bonding Allocation of risk:
necessary? Can an Is the risk model out
improvement in cash flow of balance with regards
provide required advantages? to reward?

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Middle East Property & Construction Handbook 2023

MENA construction—strengths, weaknesses,

opportunities and threats
Post-pandemic, and leading into 2023, a new Looking at the key strengths, weaknesses,
normal is expected in the region with an opportunity opportunities and threats for construction in
for transparency, trust and a collaborative approach the region, it is clear there are many strengths
within supply chains and between stakeholders. and opportunities set to support the buoyancy
and growth of the MENA construction market
The change is anticipated to see greater cashflow moving into 2023. However, this is expected to be
management and improvements to contractual disproportionate across countries.
terms and conditions.

Strengths Opportunities Weaknesses Threats

- Capability of delivering - Sustainable - Payment delays. - Continued

complex and bespoke construction - Procurement coronavirus
structures. processes. timescales restrictions.
- Diversification and - New business and awarding - Supply chain
government incentive markets. contracts before disruptions.
to invest. - Collaboration design completion. - New pandemic
- Creating and among industry - Carbon emission variants.
providing employment stakeholders. and environmental - Delay of adopting
opportunities. - Digital impact. new technology
- Supporting local talent transformation. - Missed and missed
and industries. - New materials/ opportunities innovation
- Economic value construction for lessons learnt opportunities.
creation. techniques. from project to - Communication.
- International input/ - Encouraging career project. - Precedence of
supply/location/ability opportunities for - Resources, transient contract awards
to import. young graduates. population/talent to lowest price.
- Construction speed. - International gap. - Mis-use of value
- Reduced bureaucracy. investment. - Safety issues. engineering with a
- Cheaper cost of - ESG funding. - Cyber security. risk to quality.
labour. - Public Private - Quality issues. - Inflation/escalation.
Partnerships. - Lack of skilled
- Modular labour.
construction.

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MENA construction risk mitigation

In terms of weaknesses and threats, significant According to a MEED report, ‘as the
challenges remain to the construction market and construction industry grapples with higher
its successful delivery and recovery. costs, clear communication and consensual
project adjustments are key to addressing
One of the key challenges to be faced in 2023 is stakeholder interests’.
the pandemic-induced escalation of commodity
prices. Notably, since the start of 2021, average Some of the key topics leading into 2023, in
prices for steel (structures and reinforcements), terms of recovery and mitigating risk in the
aluminium, copper and chemicals remain elevated MENA region, are:
regionally and across the globe.

Alternative
Framework Establish long procurement
agreements term relationship approaches e.g. Incentivizing
Attracting Balanced risk and securing with suppliers/ public-private sustainability
young talent allocation rates supply chain partnerships benchmarks

Mitigating
construction
risk

Investments in Value and risk Improved payment Considerations of Differentiate Health and safety
research and management cycles through open construction and the product laws/procedures
development and transparent operation phases offerings
transaction in project through
platforms planning consolidation
and partnerships

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Middle East Property & Construction Handbook 2023

MENA construction trends and prospects

Key trends and opportunities seen in the region include:

Green environment and technology

In parallel to other regions, carbon footprints and fighting climate change will present
new opportunities on the horizon. Especially as the overall construction industry is a key
benefactor in the matter of environmental conservation.

Innovation and modernization

This is a rising trend focusing on the manufacturing of construction building equipment
and materials, with a drive for greater quality of work and cost-effective solutions. New
innovative IT delivery will look at evolving the construction industry; improving general
service delivery and modernizing buildings, with a fresh safety viewpoint.

Safety
Safety is a focal point on all projects for both construction workers and the public. Revised
safety regulations will soon be applied to construction equipment and machinery on future
construction projects by contractors and developers alike. With the focus on reducing the
spread of coronavirus still present as we head into 2023, maintaining newly adopted safety
protocols are essential in ensuring construction sites remain operational.

Infrastructure
This will remain in the spotlight across the MENA region, with countries highlighting
the service market through stimulus packages, which will also aid the construction
recovery in 2023.

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