S06 TRME 4 2020 Construction Round-up_Layout 1 30/09/2020 06:21 Page 22
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Construction
Revisiting the business model VEN BEFORE COVID-19, the GCC construction industry was facing challenges from low margins, increased competition and lower project volumes, leading to pressure on liquidity levels. The pandemic has only aggravated the situation, with revised future projections. To tide over the deepening crisis, the GCC Powers of Construction 2020 report by Deloitte underscored that the construction industry can come together amidst the new normal to create a future in which everyone thrives. The report noted what the industry needs to address to create a fair, collaborative and transformed contractual and project controls environment, and how this will create the new normal needed to embrace the opportunities in the GCC and wider Middle East region. “We are currently witnessing the move of the construction industry’s response to COVID19 from a Respond to a Recover phase. In the early Respond phase, the industry’s natural focus turned to ways to effectively and safely execute projects at the pace and scale required to minimise social and economic damage and to contain costs while focusing on cash preservation,” explained Cynthia Corby, partner and construction leader, Deloitte Middle East. “As the regional industry moves into the Recover phase, it is essential to adopt a strategic view where the focus should be on the effective execution of projects and payments to contractors being made in a timely manner to ensure the muchneeded liquidity to complete the projects under execution.” The Deloitte report finds that the COVID 19 has caused significant disruption across all real estate sectors, and the magnitude of the impact due to travel restrictions and lockdown measures will depend on the shape and pace of recovery.
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As stakeholders of the GCC construction industry grapple with the ‘new normal’ that COVID-19 has presented, they also face an opportunity to rethink the way they used to work and discover new opportunities to change the status quo collectively, reveals a Deloitte study.
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The greatest opportunity facing the construction industry is to create winning environments.
“What COVID19 and the oil price fall have done is served to focus minds on the need to accelerate economic diversification and movements toward each country’s national vision. From that, at least many major new opportunities will emerge, and companies which can preempt and grasp these changes will be those that will be best positioned to face the challenges ahead,” explained Oliver Morgan, director, head of Real Estate Development, Deloitte Middle East. “Looking at Saudi Arabia, diversification efforts, social reforms, and governmentled investments in infrastructure, entertainment and the tourism sector will be key to the real estate sector’s recovery and growth in the long term.” Understanding and monitoring of the actual cash profile of each project on a standalone basis in addition to their combined outcome is critical, it added. “As we begin the second half of 2020, the
Technical Review Middle East - Issue Four 2020
effects of the COVID19 pandemic will continue to be felt across the Middle East in all sectors, with construction continuing to be one of the most impacted,” said Corby. “Stakeholders in the region need to collaborate and focus on how to maximise the opportunities which exist in a fairer contractual relationship, to deliver projects in a new decade under a new normal to avoid the pitfalls of the past and thrive in this new and unprecedented landscape,” she concluded. ■ Topics discussed in the Deloitte report include GCC projects market outlook, real estate sector performance, financing contractors, contract renegotiations, technology, project liquidity, and smart design, among others. To view the whole report, visit www2.deloitte.com/xe/en/pages/real‐ estate/articles/gcc‐poc.html. www.technicalreview.me
