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Value of Gulf projects increases by 10%, says report

Projects awarded across Gulf Cooperation Council GCC) countries rose in value by 9.9% in the first quarter of 2015, Customs Today said, citing a report from the Abu Dhabi Commercial Bank (ADCB).28 Apr 2015

However, growth was limited to Qatar and Kuwait, which grew by 287% and 72% respectively, the report said. Other GCC countries saw a fall in project value, with Oman down 43.3% and the UAE down 35.6%.

Lower oil prices were to blame for a number of projects being put on hold, Customs Today said, including a chemical project in Qatar and a hydrocarbon project in Saudi Arabia.

In the UAE, falling real estate prices may be behind the cancellation or postponement of projects by smaller property developers, the report said. Larger, mixed-use projects have not been affected.

Construction was the main sector showing delays across the region, with 40% of projects placed on hold, although one major project was responsible for most of this delay, Customs Today said.

"This gives us confidence that most of the core development plans remain largely on track. The cancelled construction projects were also by smaller developers. We believe that the lower oil price and signs of a softening in Dubai real estate prices contributed," Monica Malik, chief economist of ADCB, told Customs Today

The project pipeline for the UAE remains strong, the report said, with many projects due to be awarded in the second quarter. In Abu Dhabi, a number of projects are expected, linked to museums and rail projects, while theme park projects are expected in Dubai.

"The second quarter could potentially see more project value being awarded than the first quarter, though we still see risks of delays and cancellations. Moreover, the strong project pipeline in the second quarter could well be spread throughout 2015," said Malik.

Doha-based Peter Blackmore of Pinsent Masons, the law firm behind Out-Law.com, said: "It is not a surprise to see ADCB reporting a large proportion of GCC project growth coming from Qatar. There were a significant number of new projects awarded in early 2015 including the $1.3bn Lusail Plaza; part of the new Lusail Smart City."

"The second quarter will see 'Building Package 1' of Qatar’s new port project awarded, a $7.4bn project that will result in a further substantial boost in growth," Blackmore said.

"Not all the news is positive, however. This week has seen the cancellation of Kahramaa’s independent water project (IWP) at Ras Laffan, which was originally intended to serve industrial and domestic end users. With the cancellation of neighbouring petro-chemical projects the IWP was first scaled back to potable water only, but has now been cancelled altogether."