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Cash remains king in the GCC construction industry

Deloitte showcased their second annual GCC power construction 2010 report at the sidelines of the conference at the Big-5 event held recently in Dubai. The in-depth report presents a comprehensive outlook for the industry and strategy for big construction companies in the region.


Riz Shah, Managing Director of Deloitte, presented the key findings from the 2010 report on the GCC construction sector. It ranged from from the key lessons learnt from the global economic crisis, a detailed study of how companies can step up in the Saudi market,to  a look at IPO readiness and a review of the regional re-structuring with Libya, Syria and Egypt providing new opportunities for companies to build their strategies around.

Shah presented the report overview under the heading 'Thinking green - cash is king'. Over the last two years companies have learnt the dangers of being short of cash and many are looking at how to maximise revenues. According to Shah, 2010 will be remembered for the various R's; revisiting; restructuring; re-base lining; reassessing and re-investing.

The global economic crisis has forced companies to revisit client plans and restructure project schedules. Companies need to reassesses core principles and restructure project life cycles. A lot of this will come down to good governance which is vital to ensure the right control and the right people.

An area that companies should be focusing on is gearing up for IPO readiness for the global economic recovery but timing will be key and companies need a lot of preparation to get this right. Companies need to choose the right advisors who understand the construction sector, which is where Deloitte fits in as the prefect partner. Shah also discussed the growing emergence of Public-Private Partnerships (PPP) in the region which enable governments and companies to share the risks. Although many PPP's have failed in the Middle East  this will be the preferred method of doing business going forward.

Shah discussed what drives some of the GCC markets with Dubai having great infrastructure and Shah arguing that, ?there is still a lot of value in Dubai.? Abu Dhabi is a very strong and robust market but there are questions if they can do it fast enough. Saudi Arabia with its huge population provides massive opportunities and Qatar has big industry plans and is the country many companies  are looking at.

Deloitte's advice is for companies to use this long term period to look at risk management and to re-focus strategies and prepare IPO readiness. The construction industry remains positive with tenders still going out and investors still coming to the market  but the trading  environment remains tough with most company's margins dropping off. The industry has learnt a lot and Deloitte expects a bounce back in 2012. ?We must make sure we capitalise on the recession,? Shah concluded.