Fujairah: Despite a slowdown in the region's real estate and construction, an Indian conglomerate has inaugurated the construction of a new cement factory, J.K. Cement Ltd, that is being built in Fujairah with an investment of Dh550 million.

The plant will have a capacity of 600,000 tonnes per annum for white cement with a flexibility to change its operation to produce up to one million tonnes per annum of grey cement.

N. Gowrishankar, Vice President of J.K. Cement Ltd, said the move reflects his company's confidence in the continuous growth of Gulf Cooperation Council (GCC) economies.

The factory will be commissioned in 2013, that will help increase the country's cement output and help the growing construction sector in the GCC — especially the growth markets — Saudi Arabia and Qatar.

Fitch Ratings said last week that it expects the construction sector in Mena to continue to be supported by government spending in Saudi Arabia, Qatar and Abu Dhabi in 2012 as these markets have undertaken massive infrastructure spending plans backed by government and government-related entities. The key factors in assessing the construction outlook at the national level are government fiscal flexibility and the extent of historical infrastructure spending.

Significant investment

More than $106 billion (Dh389 billion) worth of major projects will be awarded in Qatar between now and 2022, with significant investment in oil and gas, heavy industry, electricity generation and water desalination, social infrastructure and transportation links, which is expected to spur demand in the construction sector.

"In Saudi Arabia and Qatar, infrastructure spending continues to be strong but with lower margins. During the construction boom, Mena region contractor margins have remained higher than international peers," says Bashar Al Natoor, Director of Fitch's Europe Middle East and Africa (EMEA) Corporates team in Dubai. "However, with the recently increasing competition, contractors have started to go for lower margins and Fitch expects this to remain the case over the next few years," Al Natoor added.

The coming 12 months will see a raft of tender announcements with the contractor selection process already under way for the country's $20 billion expressway programme, with the $35 billion Qatar Railways Co's QRail project — the largest railway programme in history — set to post a call for contracts by July.

According to a report by Ventures Middle East, there is an estimated $108.15 billion worth of construction to take place in Saudi Arabia in 2012. The country is the most active in the GCC in the building and construction industry.

With a market heavily fuelled by domestic consumption, as opposed to future projections in other GCC countries, Saudi Arabia represents a significant hub of opportunities for local, national and international industry players.