UAE dominates GCC construction sector

The UAE continued to dominate the construction sector in the oil-rich Gulf despite a sharp fall in its real estate and building activity in 2009 following the global financial crisis, a Kuwait bank has said.

Construction activity in the UAE, the largest Arab economy after Saudi Arabia, grew by 7.9 per cent to $25.6 billion in 2009 compared with an annual growth of 35.3 per cent during 2003-2008, Global Investment House (GIH) said in a study on the building sector in the six-nation Gulf Cooperation Council (GCC).

The value added in the UAE’s construction sector accounted for nearly 46.3 per cent of the GCC’s total construction activity of $57.5 billion in 2009.

“As per latest data, the UAE contributes the largest share to the GCC’s construction output…its share reached 46.3 per cent in 2009, far higher than its share of around 26.8 per cent in 2003,” the report said.

It noted the UAE’s share of the region’s construction activity largely increased despite a sharp slowdown in growth in its building activity last year.

“The reason for such decline is linked to UAE projects activity market which suffered from a severe blow last year as the total project value plunged by around 21.4 per cent to nearly $968.1 billion, of which about $450.7 billion are on hold, constituting a frozen construction market.”

It said this depressed the combined revenue of UAE cement companies by nearly 27.8 per cent to $1.2 billion in 2009 while their share of the total construction output dipped to 4.6 from 6.8 per cent in 2008.

“As for the GCC as a whole, the surge in their hydrocarbon revenue prompted them to step up efforts to expand the non-oil sector. GCC countries accumulated huge surpluses to spend it on projects of various activities,” it said.

“This has led to a steady expansion in the share of the building and construction sector in the total GDP of the GCC countries.”

In 2009, the GCC construction sector’s output reached $57.5 billion, up by around one per cent from the previous year, the report showed.

In addition, the sector’s GDP grew by around 15.7 per cent during 2005-2009 compared to a growth of 9.4 per cent in the GCC’s overall GDP.

 “The sector’s share of the GCC’s GDP rose to 6.6 per cent in 2009 from 5.4 per cent in 2008. The sector proved to be strong and resilient during the crisis.”

Turning to the GCC cement sector, the report showed its sales revenue dropped by around 11.5 per cent year-on-year to $2.5 billion in the first nine months of 2010 mainly due to the decline of about 29.8 per cent in revenues in the UAE.

It said the UAE cement sector continues to suffer from slowdown in construction activity and intensification of competition which has pushed down prices.

On the other hand, GCC’s largest cement market Saudi Arabia saw an increase in sales revenue by around three per cent on the back of strong domestic demand which has helped in improving the overall picture for the region.

According to the study, the net earnings of the GCC cement companies declined at a more modest pace despite a sharp fall in sales due to effective cost control measures implemented by some firms. It showed the net income dipped by nearly 5.2 per cent to $1.03 billion in the first nine months of this year.

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