It has been a tough few years for the projects industry in the Middle East and North Africa. While the region is home to some of the most exciting project markets in the world, the 2014-16 slump in oil prices has created deep uncertainty about the outlook for projects. Tough austerity measures and new taxes have sought to rebalance national budgets but have led to a slowdown in the project spending. Contract awards across the region have fallen to about $168bn a year since 2016, compared to $202bn a year from 2008-15. The outlook is for awards to remain at low levels in 2019 and 2020.
While conditions are challenging, the region still offers some of the best project opportunities in the world. The need for new jobs, better infrastructure and economic diversification is greater than ever. And as home to the world’s wealthiest countries, the financial muscle is available. The recovery in oil prices since 2017 has improved conditions for projects. And a new generation of clients, such as the Renewable Energy Project Development Office and Public Investment Fund, both in Saudi Arabia, and the Kuwait Authority for Private Partnerships are re-energising the market. Private investors are being courted for projects in tourism, housing, renewables and transport. And the return of the Egyptian and Iraqi markets is producing exciting new opportunities.
A new approach to projects is being sought. Governments want greater economic sustainability and are seeking innovative ways to improve efficiency and reduce the need for capacity expansions. Reducing carbon emissions is a priority. Private developers are expected to take a larger share of the capital burden through public- private partnerships, as well as through the privatisations. Future projects must deliver more in-country value through opportunities for local people and companies.
Anyone seeking to do business in the region must be both flexible and patient however. The biggest projects will take time to come to the market, and contract awards may never recover to pre-2016 levels.
That the cutbacks in spending came as many countries were unveiling ambitious national visions was not helpful. The mixed messages have eroded confidence in the outlook for projects leading many to downsize or even leave the region at a time when investment is needed to develop skills and to improve productivity. Better clarity about project spending plans is required. Greater transparency will not only bolster confidence about new business opportunities, it will also support investment in people development and on innovation needed to improve sustainability, safety and efficiency.