Abu Dhabi's construction industry is undergoing a slump. The fact that more than 60 small contractors have gone bankrupt has raised doubts on whether the industry will be able to survive without being sustained by the government. Amid falling oil revenues, will construction activity in Abu Dhabi pick up once again?
Civil works for major construction projects will be in demand in the GCC states as heavy investment in oil, gas and petrochemicals increases. The World Bank expects Middle Eastern countries to invest about four per cent of GDP in infrastructure over the next decade. For the GCC states this amounts to about $100 billion.
However, there are constraints. State spending on capital projects remains tight amid falling oil revenues. Although the UAE is in better financial condition than its immediate neighbours it, also, has called for restraint in state spending.
It has been recently reported that the Abu Dhabi government has decided to postpone 35 per cent of the projects which were due to be completed in the emirate between 1998 and the year 2000 till after that date. The decline in crude oil prices, whose revenues constitute 90 per cent of the emirate's income, is believed to be behind the decision.
As a result, growth in construction has begun to slow and analysts now expect large gas-related and utility construction projects in Abu Dhabi to keep the sector buoyant. The emirate is investing heavily in downstream facilities and contractors are gearing up for oilfield expansion.
Until recently the majority of work in Abu Dhabi has been funded by four state-owned concerns: the Abu Dhabi National Oil Company (ADNOC), the Water and Electricity Department (WED), the Public Works Department (PWD) and the Department of Social Services and Commercial Buildings, or Khalifa Committee.
The role of the latter has now declined and contractors say the committee is now refusing to finance any new work and that, from now on, new residential developments will only be undertaken by private investors. Non-urgent schemes have, therefore, been postponed until 1999, or even beyond. Given the excess of office and apartment space, urgent work is rare, and the demise of the Khalifa Committee has been widely predicted.
That makes ADNOC the single largest investor. The company has awarded nearly $2 billion worth of work in the first half of the year and has contracts worth even more in the pipeline for petrochemicals, refining and gas development.