Low Contract Awards Belie Positivity
New Gulf Cooperation Council contract awards hit a record low in 2018, with US$88.5 billion committed in the region in 2018, the audience at a Breakbulk Middle East “View from the Top” panel session heard.
Drawing on figures from MEED Projects, Finn Roden, head of Middle East for Höegh Autoliners, said that the commitment marked a 14-year low and was down 28 percent from the previous year.
However, Roden was confident that 2019 would bring better news.
“If you look at just the named, awarded projects in 2018 in the Middle East, it was the worst year in terms of monetary value. However, this doesn’t take into account the named and awarded contracts that happened 2015-2017 that do not have funding yet. When we look at that, we do see signs of gaining momentum,” he said. “I think we will start to see opportunities in infrastructure start to happen in the third and fourth quarter of this year.”
The final stages of preparations for Expo 2020 in Dubai are expected to bring last-minute shipments, and other developments in the region promise better medium- to long-term prospects.
Roden gave the example of the Saudi Arabian budget for 2019, which is the highest in its history. “What will that mean for the breakbulk and project cargo community in Saudi Arabia? We hope that some of these named contracts will get funded, will start to be built and that we start to see raw material moving in.”
Saudi Arabia has also introduced a foreign investment initiative to encourage outside investment in its projects and is particularly focused on renewables growth. Infrastructure for solar installations is expected to be “a huge opportunity going forward,” Roden said.
Another project of interest is Saudi Arabia’s Neom City, a smart city that will be built from scratch in the northwest of the country. Manufacturing is expected to be a “growth sector” for the whole GCC, Roden added.
However, there was a caveat to growth potential. “Projects will be dependent on the oil price for this region in the medium term and unfortunately, we haven’t had a good revenue spike in oil. If we don’t have the oil revenues, we don’t have the incubator in the Middle East,” he said.
That said, once economies in the region have diversified away from oil revenue dependency, there will be long-term transformation. “There will be different cargoes and different projects throughout the region. The opportunity is tremendous, and in the long term, I believe it will happen,” Roden said.