Major infrastructure projects still important in region
We are starting a series of interviews speaking with Orange Business Services experts in the Middle East and Africa about the special challenges and opportunities in the region.
In the first interview we spoke with Orange Business Services' VP for EEMEA Lionel Reina about how major infrastructure projects are still the biggest prize in the region, despite the combined impacts of the global economic crisis, uncomfortable international media scrutiny and high profile project cancellations and postponements. He also discusses how the Middle East is continuing to see an influx of international businesses and why still sees Dubai as the regional hub.
Just how big is the market for major projects in the region?
Published sources estimate the scale of planned or committed investment in the GCC at around US$2.25 trillion, dominated by the UAE and Saudi Arabia. That said, however, there is also more than US$600 billion of projects on hold.
The current investment is continuing to fuel regional demand for products and services from large international firms, as well as for thousands of specialized suppliers of equipment and services, and international suppliers are recognizing the advantages of having a commercial presence locally and increasingly to have some local production or service capability.
What is driving the major projects?
Bain & Company, the management consultants, suggests that major infrastructure projects are rooted in strong fundamental needs. As long as the price of oil is above US$60pb, GCC governments will continue to invest substantially in large infrastructure projects because of acute short term needs and the continued growth of populations, longer term.
Is the region still attracting international business?
For those who know the region, it'll come as no surprise that, with Dubai firmly at its centre, it continues to attract international business. And international companies are certainly coming; for example, the French Business Council (Dubai & Northern Emirates) recorded almost 50 per cent growth in the number of member companies over the last two years and many of these are the larger French enterprises, attracted by the prospect of these major prizes. And in the first quarter of 2010, the Dubai Department of Economic Development (DED) recorded a 30 per cent increase in company registrations, compared to the first quarter of 2009.
Why do you still see Dubai as the regional hub?
Despite all the recent challenges, Dubai continues to benefit as the natural regional hub for international business, which means that these ongoing major projects are good for corporate Dubai, as the Dubai domestic market takes a breather. Dubai's traditional role and position as a commercial gateway to the Middle East and beyond maintains its unique position. That's a powerful asset because the overall vision of the region (those visionary plans that many countries or Emirates prepare) is still intact - granted, the time horizons may have receded into the future a little, but the view is still appealing. Meanwhile, some major projects have actually been completed around the region (and even in Dubai, we have the not inconsiderable and tangible evidence of the Dubai Metro and Burj Khalifa).
We will be publishing another interview with Lionel Reina next week.