Infrastructure megaprojects to boost demand for GCC suppliers - Report

Countries that aren't in the Organisation for Economic Co-operation and Development (OECD) are expected to spend over $57 trillion on infrastructure projects in the coming 20 years, compared to OECD nations, which will spend $34 trillion, according to a recent report by management consultancy Strategy& Middle East (formerly Booz & Company).

Saudi Arabia is likely to allocate around $1.1 trillion for infrastructure during the period between 2019 and 2038, while the UAE is forecast to invest $350 billion over the same period, the firm, which is part of the PwC network, noted.

Such megaprojects will allow local companies to grow through enhancing their capabilities, according to the report.

“The trend toward local content requirements reflects an increasing recognition that the trillions of dollars that governments spend on mining, oil and gas, power, water, and transportation infrastructure could potentially fuel economic growth, create jobs, and support broader national strategies,” Raed Kombargi, partner with Strategy& Middle East, commented.

However, GCC governments need to understand that there are many capabilities that the region does not possess because of its small size and hence needs to import to build infrastructure, the report found.

Policymakers also need to stress the importance of economic openness and free trade given the GCC region’s need to export, it highlighted.

“Developing countries can ensure that they retain the bulk of the economic gains from the coming wave of infrastructure spending,” Kombargi added.

The Strategy& Middle East report set three biases that can interfere with robust represented in the false aggregation of demand, fixation on familiar objects and absolutist target-setting.

“Policymakers need to develop a detailed view of procurement spending, establish a baseline of local supply chain capabilities, and quantify the trade-offs from specific initiatives," Shihab Elborai, partner with Strategy& Middle East, said.