Slate of projects underpins construction activity in Qatar

Qatar’s construction sector is nearing the end of a decade of building to prepare for the 2022 FIFA World Cup, as developing infrastructure directly and indirectly related to the event took centre stage since 2011. Focus is now shifting to legacy plans for stadia sites, as well as non-tournament projects that facilitate the goals of Qatar National Vision 2030, the country’s long-term development strategy. Recent milestones that will positively shape the sector in the coming years include the passage of the dedicated Public-Private Partnership (PPP) Law and other measures related to private sector worker protections, which should have a significant impact on labourers in construction. The growing emphasis on sustainability in building is also shaping activity, as is the use of digital technologies in the planning, construction and operation of infrastructure as smart city concepts move to the fore.

Oversight & Policy Direction

The primary government ministry active in the oversight of the construction sector is the Ministry of Municipality. The ministry is in charge of land and building regulation, among other responsibilities, and oversees the Engineers and Engineering Committee as well as the Tenders and Auctions Committee. Of the various departments within the ministry, the Land Acquisition Department oversees land transactions for permanent or temporary use, valuing properties and transferring ownership. The Infrastructure Planning Department is responsible for approving the location and development of services such as roads, water and electricity distribution and transmission systems, and drainage systems, while the Urban Planning Department prepares studies and master plans to adopt urban planning best practices in the sector.

The Public Works Authority (Ashghal), established in 2004, is responsible for the planning, construction and management of all infrastructure and public buildings in the country. The body is also active in beautification projects that span public parks and certain beach developments. Due to this wide remit, Ashghal is the largest client of contractors in Qatar and its policies significantly shape the market. The authority has made a concerted effort to expand the participation of local private companies in the construction sector to boost their competitiveness, and the government publishing the PPP Law in July 2020 was a large part of this vision. Domestic companies have the advantage of local knowledge and trusted relationships. “The most important asset for contractors in the market is their clients’ trust. Having a long-standing relationship with customers, built on mutual trust, allows local contracting firms to better withstand challenges,” Osama Hadid, CEO of Al Jaber Engineering, told OBG.

Qatar had seen PPPs in the construction space prior to the law, but implementing dedicated legislation is intended to spur increased use of such agreements in the government’s pipeline of projects. On its website, Ashghal outlines the requirements and participation terms of PPP projects, and allows companies to view and apply for tenders. Private players of all sizes are welcome to offer materials, equipment, construction and related services for works across various government departments. The first PPP announced after the legislation was passed is for the construction of more than 40 schools across all municipalities under the Qatar PPP Schools Development Programme (see Education & Research chapter).

Performance

The construction sector’s contribution to GDP stood at QR17.4bn ($4.8bn) in the third quarter of 2020, dampened by the wider economic slowdown brought on by the Covid-19 pandemic. It rebounded to QR19bn ($5.2bn) by the end of the year and then grew to QR20bn ($5.5bn) and QR21.6bn ($5.9bn) in the first and second quarters of 2021, respectively. Contribution to GDP for the second quarter of 2021 – the latest available from the Planning and Statistics Authority (PSA) as of early 2022 – was the highest on record and more than triple the historical low of QR7bn ($1.9bn) recorded in the first quarter of 2011. The sector represented 14% of GDP as of the second quarter of 2021. Meanwhile, the added value of industrial activities, including construction, fluctuated between 50% and 60% of GDP during the 2015-20 period, according to the World Bank.

Permit volume, along with building completion certificates, is a clear indicator of the strength of the sector: according to data from the PSA, building permits for 2021 totalled 9505, with a record high of 1382 issued in January. The number of building completion certificates was 3969 for the year. For comparison, 7806 permits were issued in 2020 – 3892 of which were for new buildings and 3645 for additions – with May recording a record monthly low of 271 permits. Building completion certifications stood at 3761 in 2020, split between 2721 for new buildings and 1040 for additions.

Budget & Investment

Qatar’s budget for 2022 outlines total revenue of QR196bn ($53.8bn) and total expenditure of QR204.3bn ($56.1bn) for a deficit of QR8.3bn ($2.3bn). However, these projections are based on a conservative estimate of $55 per barrel of oil for oil revenue of QR154bn ($42.3bn); if oil prices are above this level – such as the $110 per barrel seen in March 2022, then the deficit would likely narrow and more funds could be put towards infrastructure projects.

Capital expenditure for large-scale infrastructure undertakings and public services is set at QR74bn ($20.3bn) for the year. While a share of this funding is earmarked for completing projects ahead of hosting the 2022 FIFA World Cup in November and December, policymakers are also looking beyond the tournament to generate new areas of growth. “The year 2021 was a bit challenging following the setbacks created by the pandemic, but we remain optimistic about the local construction sector moving forwards due to the government work planned after the 2022 FIFA World Cup,” Monjid Othman Abdelmajeed, managing director of Doha-based Redco Construction - Al Mana, told OBG.

Projects that span beyond the event include the expansion of the North Field gas project, as well as water and electricity systems (see Energy & Utilities chapter); the addition of the Doha Metro Blue Line, which is due for delivery in 2026; and Sharq Crossing, a three-part transport link that consists of underground tunnels and above-ground bridges, connecting Hamad International Airport with Katara Cultural Village and the West Bay Financial District for a unique travel experience that would also alleviate congestion on the corniche road. When funds for the project were first included in the 2020 national budget, a completion date of 2024 was set. “The opportunities brought by projects such as the North Field expansion have been significant for strong contracting firms. Local technical capabilities and knowledge have been proven, and Qatari firms are expected to provide critical support to engineering, procurement and construction contractors in the coming years,” Hadid told OBG.

Beyond the national budget allocation, private sector investment is a driving force behind the completion of construction projects. Project Qatar is an annual event for construction technology and building materials players that allows local and foreign private sector companies to explore the project pipeline in Qatar and meet with top government decision-makers. The 2021 iteration of the event hosted 150 exhibitors from 12 countries and saw 14,900 visitors in October of that year. The 2022 edition is set for early June.

Major Players

A sampling of the leading private sector companies in Qatar’s building sector include QD-SBG Construction, Gulf Contracting Company, Consolidated Contractors Company, Al Jaber Engineering, HBK Contracting Company, Bin Omran Trading & Contracting and Qatar Building Company. According to an April 2021 report on Qatar’s infrastructure published by Greece’s Hellenic Federation of Enterprises in partnership with Eurobank, 37% of construction roles in the key project pipeline are held by local companies, demonstrating their expertise in completing large undertakings. Companies from South Korea (8%), the UAE (7%), Turkey (5%) and India (4%) are also involved, while the remaining 39% of roles are completed by companies from other countries.

Foreign presence in the construction sector is typically in the form of joint ventures (JVs). Examples of recent JV projects include the Lusail Tram, undertaken by Qatari Diar along with French companies Vinci Construction and Alstom; the Doha Metro’s Red Line North by Galfar Al Misnad, Italy’s Salini Impregilo and the UK’s GK Engineering; and the Al Thumama Stadium by Al Jaber Engineering and Turkey’s Tekfen Construction. Turkey, in particular, has become more active in Qatar’s construction scene in recent years; the two countries formed closer ties in light of the economic blockade imposed on Qatar by some of its regional neighbours from mid-2017 to early 2021. Turkish companies STFA Group and Yapı Merkezi also participated in laying the Gold Line of the Doha Metro, which opened in 2019.

Building Materials

The largest local manufacturer of building materials is the Qatar National Cement Company (QNCC), which was established in 1965. The company produces ordinary portland cement, sulphate-resistant cement, hydrated lime, calcined lime and washed sand. In 2018 it began operation of its fifth plant, which brought total cement production capacity to 19,250 tonnes per day (tpd) and clinker production capacity to 16,000 tpd. However, QNCC decommissioned its first plant that same year due to age, which lowered capacity to 14,500 tpd of cement and 11,000 tpd of clinker. Net profit for the company was QR347.7m ($95.5m) in 2018, falling to QR172.2m ($47.3m) in 2019 and QR148.5m ($40.8m) in 2020, the latest year for which data is available.

Iron and steel, meanwhile, is largely sourced from abroad: Qatar imported $1.16bn worth of iron and steel in 2020, according to the most recent data from the World Trade Organisation. While this was down from the $1.29bn imported in 2019, it was more than the $1.12bn purchased in 2018. Prior to the economic blockade many building materials came from the UAE, although they were not necessarily produced there. In the years since, Qatar has built direct relationships with suppliers in other countries such as India.

Ashghal maintains a building materials price list on its website, which is updated monthly. In February 2022, 1 tonne of ordinary portland cement cost QR250 ($68.62) and 1 tonne of sulphate-resistant cement cost QR270 ($74.11) – both QR20 more than in October 2020. Meanwhile, 1 tonne of 8mm reinforced steel was priced at QR3170 ($870) and 1 tonne of 10-40mm reinforced steel was QR3040 ($834) that month, higher than the QR2485 ($682) and QR2350 ($645) in July 2020, respectively. The most recent listing for washed sand was in December 2021, at a cost of QR22 ($6.04) per tonne.

Construction materials costs have been relatively stable in recent years. According to the “International Construction Costs 2021” report published by Dutch design, engineering and consulting firm Arcadis, Doha’s annualised tender price index for the first quarter of the year was stable at 0%, indicating that movement in material prices was not significant enough to affect the cost of construction projects. Some 100 cities were covered in the report, with results spanning from -4% in Amsterdam to 10% in Singapore and Istanbul, with Buenos Aires an outlier at 40%.

Labour

Employment is another important factor of the construction sector, as building is still dependent on manual labour. According to the PSA’s latest “Labour Force Sample Survey” for 2019 published in June 2020, about 42% of Qatar’s 2.1m economically active people were employed in construction. The sector predominantly employs non-Qatari males, and half of all foreign men in the country work in construction.

To better protect the rights of workers in the sector and throughout the economy, three new laws were introduced in 2020 that took effect in 2021. The first, Law No. 17 of 2020, set the Gulf region’s first minimum wage for all private sector workers, including domestic workers. The new minimum wage is QR1000 ($274) per month, with additional allocations of QR500 ($137) for accommodation and QR300 ($82.34) for food if not already sufficiently supplied by the employer. The other two – Law No. 18 and Law No. 19 of 2020 – together effectively ended the kafala (sponsorship) scheme, with the former allowing workers to freely transfer from one job to another without the approval of their current employer, and the latter allowing for more flexible movement into and out of Qatar.

Stadia

Building for the 2022 FIFA World Cup has been under way since the announcement that Doha won hosting responsibilities in December 2010 (see Tourism, Culture & Sport chapter). While more general infrastructure building has taken place in the form of hotels and transport links to ensure a positive experience for visitors, works directly related to the tournament include eight stadia, all of which were either built from the ground up or renovated over the last decade. The most recently completed stadium as of early 2022, Stadium 974, was finished in November 2021 and can hold 40,000 fans. Its outer shell is made of 974 repurposed shipping containers that saved on building materials and contribute to the venue being the first fully dismountable stadium in the tournament’s history. After the competition the waterfront site will be converted into a public area for residents. Lusail Stadium, which was completed in December 2021, is an 80,000-seat venue hosting the 2022 FIFA World Cup final. The seating will be removed and donated to arenas and stadia abroad after 2022, while the exterior and roof are slated to enclose a community space that will house schools, shops, health clinics and sport facilities.

Indeed, there has been a focus on sustainability in the construction, renovation and after-use of the 2022 FIFA World Cup stadia since planning began. An April 2021 report by the Gulf Organisation for Research and Development, and Qatar’s Supreme Committee for Delivery and Legacy evaluated progress on this front, specifically in terms of waste management at the stadia sites. The report covered moves in line with the Global Sustainability Assessment System (GSAS) to reduce waste; reuse and recycle materials; and segregate, weigh and dispose of all types of waste – from building materials to food. The Supreme Council mandated that all eight venues be eligible to receive Class-A certification under the GSAS Construction Management scheme.

Building Trends

Sustainability has moved to the forefront in terms of adherence to environmental, social and governance (ESG) standards. As evidenced by the 2022 FIFA World Cup stadia, the focus is moving beyond concerns such as energy-efficient cooling systems to a greater emphasis on infrastructure’s social impact, and the need for contractors to be transparent and responsible in all of their activities. “The adoption of ESG standards constitutes a mega-trend for the construction sector,” Oussama El Jerbi, managing director for Qatar at Consolidated Contractors Company, told OBG. “It encompasses the integration of efficiency-driving technologies such as artificial intelligence (AI), cloud systems and comprehensive waste-management systems into planning, building and operation.”

Digital technologies are proving a key enabler of ESG adherence in the construction sector and were a primary focus of the 2021 Project Qatar event in line with smart city construction plans. Urban development planners in Qatar are actively working towards building the cities of the future, where environmental sustainability and residents’ needs are put first. Tools such as AI and big data are helping contractors shrink their projects’ environmental impact by gathering information that can lead to the use of reduced materials and more efficient inputs, while legacy planning can ensure infrastructure serves the needs of society well into the future. Equipping buildings and other infrastructure such as traffic lights and street lamps with internetof-things solutions, meanwhile, alerts the appropriate authorities when an issue needs to be addressed to facilitate responsible public service delivery by the government. As the country moves towards a knowledge-based and digitally enabled economy in pursuit of Qatar National Vision 2030, construction activities are set to become more intertwined with technology.

Outlook

Construction expected to expand in the coming years, with varying predictions for growth. In a 2021 report Fitch Solutions forecast that the industry will expand by a compound average growth rate (CAGR) of 1.8% between 2023 and 2030, after growing by an estimated 4% in 2021. Ahead of Project Qatar 2021, in September of that year Haidar Mshaimesh, general manager of IFP Qatar – the organiser of the exhibition – told local media that industry experts foresee a CAGR of 10.5% for the sector over the 2021-26 period.

While certain segments of the construction sector will see less activity following the 2022 FIFA World Cup, building will continue in projects that support Qatar National Vision 2030, such as the Blue Line of the Doha Metro, Sharq Crossing, and the continued development of energy and utilities infrastructure. Indeed, industry stakeholders expect that the electricity and water project pipeline will be the least impacted after 2022. Furthermore, amid Qatar’s ongoing diversification drive, the new city of Lusail and the development of Qetaifan Island North will be large sources of construction activity over the medium term (see Real Estate chapter).