Undoubtedly 2016 was a very challenging year with falling order books month on month for most companies across the GCC due to government spending reprioritisation, low oil prices, falling consumer demand, cash flow and liquidity management as well as political uncertainty in some areas of the region.
Accordingly securing timely payment has certainly been top of the list for most companies. Ensuring strong cash management will be the differentiator to leading companies moving forward, allowing them to better invest, strengthen their business and talent for when the market starts to recover in mid-2017.
We believe the winners will be those companies who more quickly adopt leaner operating models and use technology to maintain margin despite falling tender prices. Time and cost overruns look likely to continue as a result of all of the above as well as the need to slow things down in some geographies as budgets are reprioritised.
On the upside, Expo 2020 and WC2022 are increasingly looming and so will present more and more opportunity. The KSA NTP offers the biggest game changer, by size, for the region when its publicised project pipeline start coming to market in 2017.
Unfortunately we see the headwinds of 2016 continuing well into 2017. In this context it seems inevitable that some of the larger International companies will choose to exit some of the regional markets while others may merge to provide better scale and stronger balance sheets.
The funding and payment of projects will continue to be a challenge with increasing levels of bonds likely. The focus on KSA for most companies looks to increase as the KSA NTP moves from strategy into delivery. PPP will continue to be an area of interest.