x Abu Dhabi, UAEWednesday 17 January 2018

UAE project spending to increase next year

Three in four industry figures believe that project spending in the Middle East will increase next year, with the UAE tipped to invest the most.

Three in four industry figures believe that project spending in the Middle East will increase next year, according to a survey, with the UAE tipped to invest the most.

An upgrade to the energy sector, and massive government spending on infrastructure will boost the projects market next year, finds the survey by PricewaterhouseCoopers (PwC).

"In terms of where that growth is coming from, it's predominantly the energy sector, and large government infrastructure programmes," said Jonathan Roe, an author of the report at PwC.

In the GCC alone, oil and gas contracts worth US$50bn (Dh183.65bn) will be awarded in 2013, according to Meed Insight, which tracks the region's projects market. That is almost double the amount invested this year.

Seventy-two per cent of those surveyed by PwC believe that more money will flow into projects in the Middle East. Respondents ranked the UAE as the country with most investment opportunities, ahead of second-placed Qatar. Saudi Arabia and Egypt are also expected to spend significantly.

The survey also indicates that the requisite funds are not always readily available, as half of the respondents reported they suffered from funding constraints.

Access to finance will remain a thorny issue in the coming year, with two thirds of those surveyed anticipating that project delivery will be impacted by finance constraints. The trend will lead to a bigger role of private sector financing, according to PwC.

"That is driving interest in alternative sources of funding," said Charles Lloyd, the head of capital projects and infrastructure at PwC. "As liquidity is squeezed a bit, people see access to either bank debt funding or bond funding, and maybe export credits, becoming increasingly important."

One way to access private funding is public private partnerships (PPPs), in which private developers front much of the cost in return for a share in future projects. This model has been widely deployed in Abu Dhabi's power and water industry.

The Abu Dhabi Water and Electricity Authority has pioneered the use of PPPs in the region, using its subsidiary Taqa as a majority shareholder in power and desalination plants and giving international power providers minority stakes.

"The energy sector is probably the sector with the most history of private funding," said Mr Lloyd. Energy projects will remain a focal point for private investment in the emirate as government- related entities push into the domestic market.

Mubadala and the International Petroleum Investment Company, two government-owned investors, have recently announced plans to invest in Abu Dhabi itself, after previously focusing on overseas investments.