Qatar Infrastructure Report Q4 2012

BMI View: There are currently construction and energy projects worth US$150bn in the pipeline, whichare being implemented to support Qatar’s mammoth 2030 Vision and the 2022 FIFA World Cup. Hence,despite disappointing data for 2011, we remain positive toward Qatar's long term construction sectorpotential, and believe its construction industry will maintain its position as one of the region's topperforming markets in the long-term. With vast hydrocarbon wealth inflating public coffers and abusiness environment offering stability at a time of wider regional unrest, we expect Qatar's constructionmarket to be regarded as a safe haven for the region's investors. However, we note that due to long leadtimesthe majority of awarded projects have yet to take off, meaning the impact will not be notable onconstruction sector growth until 2013, and only make a considerable impact beyond 2016. Furthermore,we note the potential risk of decreasing margins due to continuously rising construction costs as a resultof a surge in infrastructure investment.

Key developments in Qatar’s infrastructure industry include:

According to a statement on October 25 2011 by the Minister of Economy and Finance, YousefHussein Kamal, Qatar's spending on infrastructure is expected to reach US$150bn ahead of the2022 FIFA World Cup, in line with the country’s 2030 Vision. A series of infrastructure projectsare in the pipeline, including: a US$1bn transport corridor project in Doha; a US$20bninvestment in roads; US$25bn to be invested in railways; US$15.5bn to be spent on a newairport; US$4bn to be invested in stadiums; US$8bn to be spent on a deepwater seaport; tens ofthousands of hotel rooms to be built; and even a new city.

In July 2011, the Public Works Authority of Qatar announced a road construction plan toconnect Ras Laffan Industrial City with University Road and the Shamal Road, providing threelanes in each direction. The plans were unveiled as part of a larger scheme to build roads aroundthe western and northern borders of the Ras Laffan Industrial City.

The first phase of the Ras Qartas energy plant was completed in August 2011. The US$4bn plantwill generate 2,730MW of power and 63mn gallons of desalinated water. The plant will supplythe Qatar General Electricity and Water Corporation (Kahramaa) under a 25-year contract.The production will then be used to feed the local network or the GCC electricity link-up system.The development marks the commissioning of the biggest electricity generation plant in thecountry.

Work has begun on the US$1.37bn Doha Festival City project. This is just one of a series offlagship projects that have got under way in Qatar since the country was awarded the FIFA 2022World Cup in December 2010.

Preparations for the FIFA 2022 World Cup will instigate major changes in Qatar’s infrastructureindustry. While major international players undoubtedly stand to win from big-ticket stadia andinfrastructure projects, local contractors also stand to benefit substantially, either throughpartnering with foreign firms or undertaking a smaller project, of which there are many.

On the back of the growing numbers of flagship projects Qatar is seeing significantly higherconstruction costs. According to the 2012 International Construction Costs Report, by quantitysurveyor EC Harris, Qatar (now placed 13th out of 53 countries) has surpassed both the UK(15th) and the US (16th) following a surge in infrastructure investment ahead of the 2022 FIFAWorld Cup, and in order to deliver its mammoth 2030 National Vision.

Politically Qatar is taking an increasingly more assertive course within the Middle East andNorth Africa region (MENA), rapidly expanding its political and economic links with countriesnewly reshaped by the Arab Spring. The Gulf state has established close ties with Egypt sincethe downfall of the Mubarak regime. In September 2012 Qatar announced planned investmentsof US$18bn in tourism and industry projects within the Egyptian economy over the next fiveyears.