Competition emerges as the biggest challenge in Qatar’s construction industry
The Q2 2014 report on levels of business optimism in various sectors of Qatar shows construction as the most promising non-hydrocarbon industry, but with opportunities also come challenges.
According to Dun & Bradstreet’s Q2 2014 report sponsored by Qatar Financial Centre, Business Optimism Index – Qatar, the construction sector has shown the highest level of optimism among non-hydrocarbon sectors. With a composite business optimism index (BOI) of 54, the sector has relatively outperformed its outlook in the last three years. Among the reasons for improved BOI, the report states, are “higher scores for selling prices, net profits and hiring… A high optimism with respect to sales volumes is driven by expectations for new projects from government (infrastructure projects) as well as private sector (commercial as well as residential projects)”.
However, with opportunities also come risks and challenges. While 48 percent of the respondents indicated no negative factors, some of the main challenges mentioned in Dun & Bradstreet’s report include competition (14 percent), payments/receivables delays (11 percent), government regulations/policies (nine percent), availability of labour (seven percent), demand for products/services (four percent), cost of rental/leasing (three percent), political uncertainty in the region (three percent), and availability of finance (one percent).
Contradictions
Ironically, despite concerns about the limited capacity of Doha’s seaport, availability of raw materials did not emerge as a key issue in the latest BOI for the construction sector in Qatar. Similarly, despite the ongoing debate about regional competition, particularly the influence of the United Arab Emirates’ winning bid for Dubai Expo 2020 material prices, the BOI did not mention cost of raw materials as a significant challenge. Cost of labour is another unmentioned factor, though it is attached to availability of labour and can be a potential threat to Qatar’s construction scene. Other
business challenges for the construction sector that did not appear in the survey include inflation, government fees and currency fluctuations.
The Edge spoke to professionals to gauge the foremost challenges facing the construction sector in Qatar. Khalifa Al Misnad, partner, Al Misnad & Rifaat and president of Entrepreneur’s Organization Qatar, said a major challenge in the sector is frequent disputes, “Disputes are a natural occurrence among parties in the construction sector due to various factors, and these disputes have several consequential effects such as delaying delivery and negatively impacting cash flow, etcetera.”
Vasanth Kumar, CEO, Arabian MEP Contracting, said, “The greatest challenge facing the construction industry, especially contractors, is project delays… Any delay in receiving approvals seriously affects projects progress and also hurts the contractor due to expense overruns.” Speaking about resolution strategies, Al Misnad said, “Effective and swift resolution of disputes is essential in the sector in order to progress required construction works, and to boost confidence and protect the respective investments of all parties involved in
the industry.”
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