All Gulf Cooperation Council (GCC) countries have plans for large scale spending in the next five years, in turn providing means for the viability of the construction sector and regional economies at large.

The mighty projected spending patterns reflect expansionary fiscal policies across the GCC, a welcoming development for partly serving the purpose of overcoming challenges associated with the global financial crisis.

Among others, stronger public sector spending serves the purpose of encouraging private sector investors to follow suit, a welcome development.

GCC states prepared budgets for the fiscal year 2009 using a relatively low oil price as part of conservative policy options. On an average, the petroleum sector accounts for three quarters of treasury revenues in GCC countries.

For example, Bahrain prepared budgets for the fiscal years 2009 and 2010 using an oil price of $40 (Dh146.9) per barrel. To be sure, Bahrain stands out by developing budgets for two consecutive fiscal years, as part of a policy designed to provide stake holders of the country's economic directions for a relatively long period of time. Still, Oman used an average rate of $45 per barrel in developing 2009 budget.

Poor conditions

The relatively low oil prices assumed in developing fiscal spending reflected poor market conditions at the start of 2009.

Oil prices dropped to below $40 per barrel by year-end 2008 in the aftermath of the global financial crisis.

Fortunately for GCC economies, oil prices regained strength from the second quarter of 2009 on the back of a return of confidence in many parts of the world thanks to efforts by the G20. Leaders of the G20 have gathered for three summits within a year, twice in the US and once in the UK.

In 2010, leaders of the G20 plan to hold separate summits in Canada and South Korea.

Sizable spending

Happily, figures compiled by Trowers & Hamils, an international law firm, point to sizable spending plans in different GCC countries for the next five years.

Saudi Arabia has plans to spend some $442 billion, of which some $421 billion remains to be spent.

Yet the UAE, in turn the second largest economy among GCC countries after Saudi Arabia, stands out in terms of projected spending statistics.

More specifically, the UAE is projected to spend just over $1 trillion in the next five years on 2,674 projects. Still, some $856 billion of the projected amount is yet to be spent.

However, Dubai suffers from the phenomenon of delayed projects. Also, it remains to be seen to what extent Dubai's debt restructuring programme will affect the implementation of construction projects in the emirate.

In addition, other GCC countries have their own sizable spending plans on numerous projects for the next few years. The figures range from $166 billion in Kuwait, $51 billion in Qatar, $49 billion in Bahrain and $45 billion in Oman.

The same report advises on trends including the drive for affordable housing and moves away from high-end residential projects in GCC economies.

Recently, Bahrain's authorities opted for Chin-ese-style smart housing projects to meet demand. The fact is that many Bahrainis depend on the government for their housing needs.

Meeting variables

Hundreds of Chinese workers are expected to arrive in Bahrain in early 2010 to help construct some 4,000 residential units. The selection of the Chinese smart housing scheme is designed to meet variables such as speed, cost and efficiency.

Clearly, much is at stake with regard to GCC countries in the next few years. For instance, Oman has plans to spend some $16 billion on airport infrastructure, tourism and heavy industry.

International firms need not miss emerging opportunities in industrial, logistics and infrastructure projects.

 

The writer is a Member of Parliament in Bahrain.