Construction Sector MENA July 2015

Produced by:

I. Regional Sector Overview 11. Major Construction Projects (cont'd) 1. Definition of MENA Region 12. Major Construction Projects (cont'd) 2. Construction Sector in MENA 13. Major Construction Projects (cont'd) 3. MENA Region: Share of Construction Sector in GDP 14. Investment Climate 4. MENA Region: Share of Construction Sector in GDP (cont'd) 15. Investment Climate (cont'd) 5. MENA Region: Share of Construction Sector in GDP (cont'd) 6. MENA Region: Share of Construction Sector in GDP (cont'd) 7. MENA Region: Construction Sector Growth, 2011-2014 CAGR III. Saudi Arabia 8. MENA Region: Ease of Dealing with Construction Permits 1. Sector Highlights 9. MENA Region: Ease of Dealing with Construction Permits 2. Economic Indicators (cont'd) 3. Construction Industry Forecast 10. MENA Region: Ease of Dealing with Construction Permits 4. Construction Industry Data (cont'd) 5. Major Construction Projects 11. MENA Region: Ease of Dealing with Construction Permits in 2015, Ranking 6. Major Construction Projects (cont’d) 7. Major Construction Projects (cont’d) II. Qatar 8. Major Construction Projects (cont’d) 1. Sector Highlights 9. Major Construction Projects (cont'd) 2. Economic Indicators 10. Major Construction Projects (cont'd) 3. Construction Industry Data 11. Major Construction Projects (cont'd) 4. Construction Industry Data (cont’d) 12. Investment Climate 5. Construction Industry Forecast 13. Investment Climate (cont’d) 6. Residential Building Data 7. Non-residential Building Data 8. Segmentation of the Non-residential and Infrastructure Subsectors, 2014 9. Major Construction Projects 10. Major Construction Projects (cont'd)

IV. United Arab Emirates V. Main Players 1. Sector Highlights 1. Top M&A Deals 2. Economic Indicators 2. M&A Activity, 2013-2014 3. Construction Industry Forecast 3. Arabtec Holding PJSC 4. Construction Regional Data 4. Arabtec Holding PJSC (cont’d) 5. Construction Regional Data (cont'd) 5. Drake & Scull International PJSC 6. Construction Regional Data (cont'd) 6. Drake & Scull International PJSC (cont’d) 7. Construction Regional Data (cont'd) 7. Combined Group Contracting Co. 8. Major Construction Projects 8. Combined Group Contracting Co. (cont’d) 9. Major Construction Projects (cont'd) 9. Galfar Engineering And Contracting SAOG PLC 10. Major Construction Projects (cont'd) 10. Galfar Engineering And Contracting SAOG PLC (cont’d) 11. Major Construction Projects (cont'd) 11. National Marine Dredging Company PSC 12. National Marine Dredging Company PSC (cont’d) 12. Investment Climate 13. Investment Climate (cont'd)

Middle East and North Africa Region

Comments

The current report outlines the development of the construction sector in the Middle East and North Africa (MENA) region, which is composed of 17 countries: Algeria, Bahrain, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates (UAE) and Yemen. The report focuses on three main countries, namely Qatar, Saudi Arabia, and the United Arab Emirates. They were selected because of the huge project pipeline of each country related to ambitions to diversify the economy and also to large scale international events like the World Expo 2020 in Dubai and the FIFA World Cup 2022 that will take place in Qatar.

Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates The economies of these oil-rich countries are highly dependent on the production and export of hydrocarbons. Over the 2011-2014 period, the construction sector accounted for around 5% of their national GDPs, with the exception of Kuwait, High-income where construction accounts for about 2% of GDP. It is worth noting that with a CAGR of 15.2% the Qatari construction Countries sector was the third fastest growing within MENA between 2011 and 2014. In addition, four of countries in this group are in MENA’s Top 5 regarding the ease of dealing with construction permits in 2015. These are UAE, Bahrain, Saudi Arabia and Qatar.

Algeria, Iran, Iraq, Jordan, Lebanon, Libya, Tunisia The contribution of the construction sector to GDP within this group is highly variable. While the sector accounted for Upper- around 9.7% of Algerian GDP between 2010 and 2013 and for 8.6% of Iranian GDP between 2011 and 2014, it stood at middle- 4% to 5% of the economies of Jordan, Lebanon, and Tunisia in 2011 – 2014. income Countries Remarkably, between 2011 and 2014 the construction sector in Iran and Lebanon saw a double-digit increase and grew fastest within MENA at impressive CAGRs of 39% and 26%, respectively. However, due to high costs and extensive waiting time, the two countries are also among those in the region, where it is hardest to deal with construction permits.

Egypt, Morocco, Syria, Yemen Yemen is the only economy in the region where the construction industry registered an average annual decline of 5.7% in 2010-2013. Lower- The downturn was driven by the 2011 recession, coupled with extensive corruption in the country. However, Yemen’s construction middle- sector appears to be on its way to recovery, registering an average growth of 11.2% in 2012 and 2013. income During the 2011 – 2014 period, the construction sector contributed around 4.6% to the Egyptian economy and increased by a CAGR Countries of 14%, ranking the 4th fastest growing in the region. However, the country is among the laggards in MENA as far as dealing with construction permits is concerned, mainly because of long waiting time to obtain all needed documentation.

Source: EMIS, World Bank, National Statistics Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 6 - MENA: Share of the Construction Sector in GDP*

Algeria Bahrain, GDP Value Added

Other sectors Other sectors

89.5% 90.8% 90.7% 90.2% 93.9% 94.0% 94.1% 93.7% Construction Construction sector sector 14.9% 11.8% 8.7% -7.1% 3.6% 5.0% 9.8% Construction 6.0% Construction sector, YoY 10.5% 9.2% 9.3% 9.8% sector, YoY 6.1% 6.0% 5.9% 6.3% change change 2010 2011 2012 2013 2011 2012 2013 2014

Egypt Iran, GDP Basic Prices

Other sectors Other sectors

92.4% 92.1% 90.2% 90.8% 95.4% 95.5% 95.4% 95.3% Construction Construction sector sector 15.9% 14.2% 13.9% 40.7% 12.2% 36.4% Construction Construction 7.6% 24.9% sector, YoY sector, YoY 3.0% 7.9% 9.8% 9.2% change 4.6% 4.5% 4.6% 4.7% change 2011 2012 2013 2014 2011 2012 2013 2014

Source: CEIC, National Statistics, - * Unless specified otherwise, data present GDP and sector shares at current prices. Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 7 - MENA: Share of the Construction Sector in GDP* (cont’d)

Jordan Kuwait

Other sectors Other sectors

95.7% 95.6% 95.6% 95.5% Construction 97.7% 98.3% 98.2% 97.9% Construction sector sector 32.7%

8.3% 10.3% 7.5% Construction 7.8% 8.0% Construction -0.9% sector, YoY -14.1% sector, YoY change change 4.3% 4.4% 4.4% 4.5% 2.3% 1.7% 1.8% 2.1% 2011 2012 2013 2014 2011 2012 2013 2014

Lebanon, GDP Gross Value Added Morocco, GDP Value Added

Other sectors Other sectors

95.7% 95.2% 94.4% 93.3% Construction 94.0% 93.8% 93.9% 93.7% Construction sector sector 29.2% 20.5% 27.7% Construction 10.1% 6.7% Construction 4.3% 3.8% 4.0% sector, YoY sector, YoY -16.6% 4.8% 5.6% 6.7% change 6.0% 6.2% 6.1% 6.3% change 2011 2012 2013 2014 2011 2012 2013 2014

Source: CEIC, National Statistics, - * Unless specified otherwise, data present GDP and sector shares at current prices. Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 8 - MENA: Share of the Construction Sector in GDP* (cont’d)

Oman, GDP Basic Prices Qatar

Other sectors Other sectors

94.8% 94.3% 94.8% 93.8% Construction 95.4% 95.6% 94.8% 94.3% Construction sector sector

14.5% 20.8% -5.8% 24.9% Construction 3.0% 8.7% 24.7% 12.9% Construction sector, YoY sector, YoY 5.2% 5.7% 5.2% 6.2% change 4.6% 4.4% 5.2% 5.7% change 2011 2012 2013 2014 2011 2012 2013 2014

Saudi Arabia Tunisia GDP Factor Cost

Other sectors Other sectors

95.7% 95.7% 95.2% 94.5% Construction 95.3% 95.4% 95.4% 95.4% Construction sector sector

17.9% 10.7% 13.6% 13.7% Construction -1.3% 1.8% 1.5% 1.9% Construction sector, YoY sector, YoY 4.3% 4.3% 4.8% 5.5% change 4.7% 4.6% 4.6% 4.6% change 2011 2012 2013 2014 2011 2012 2013 2014

Source: CEIC, National Statistics, - * Unless specified otherwise, data present GDP and sector shares in current prices. Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 9 - MENA: Share of the Construction Sector in GDP* (cont’d)

United Arab Emirates Yemen

Other sectors Other sectors

90.5% 91.2% 91.2% 91.0% Construction 94.6% 96.3% 96.1% 95.9% Construction sector sector

10.0% 15.4% -0.1% -1.4% 3.4% 6.2% Construction -32.1% 6.9% Construction sector, YoY sector, YoY 9.5% 8.8% 8.8% 9.0% change 5.4% 3.7% 3.9% 4.1% change 2011 2012 2013 2014 2010 2011 2012 2013

Comments

Note: Data concerning the 2010-2013/14 period are not available for Iraq, Libya, and Syria.

Source: CEIC, National Statistics, - * Unless specified otherwise, data present GDP and sector shares in current prices. Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 10 - MENA: Construction Sector Growth, 2011-2014 CAGR

Country Ranking*

33.8%

25.7%

15.2%

14.0%

12.6%

12.4%

8.8%

8.7%

7.8%

6.1%

4.9%

2.6%

1.7%

-5.7%

Iran Lebanon Qatar Egypt Saudi Arabia Oman Algeria Jordan Kuwait Bahrain Morocco United Arab Emirates Tunisia Yemen

Source: CEIC, National Statistics, - * CAGR of Algeria and Yemen is calculated over the 2010-2013 period due to unavailable data for 2014. Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 11 - MENA: Ease of Dealing with Construction Permits

Procedures to legally build a warehouse, number Comments

2010 2011 2012 2013 2014

MENA Average* 19 19 16 17 16 . The procedures to legally build a warehouse are fewest in Iraq, UAE, Bahrain, Saudi Arabia, and Oman. Algeria 22 22 19 19 19 . On the contrary, construction developers need to pass Bahrain 13 13 12 12 12 through the most complex procedures if they are building Egypt 25 25 22 22 21 in Syria, Kuwait, Egypt, and Lebanon. . However, the number of procedures is not completely Iran 17 17 16 16 16 relevant to the ease of dealing with construction permits Iraq 14 14 13 12 10 as it remains unknown how much time they take. For instance, Iran has about the average number of Jordan 19 19 17 17 17 procedures in the region but they take the longest among Kuwait 25 25 24 24 24 all MENA economies. In Morocco there is one procedure Lebanon 20 21 19 19 20 less than in Iran, but the time needed to complete the bureaucratic work is three times less than that in Iran. Libya n/a n/a n/a n/a n/a Morocco 19 19 15 15 15 Oman 16 15 14 13 13 . Note: Procedures to legally build a warehouse include Qatar 19 19 17 16 17 submitting all relevant documents and obtaining all Saudi Arabia 17 12 9 14 12 necessary clearances, licences, permits and certificates; Syria 26 26 23 23 n/a completing all required notifications and receiving all necessary inspections; obtaining utility connections for Tunisia 20 20 17 17 19 water, sewerage and a land telephone line, registering the United Arab Emirates 17 17 14 14 12 warehouse after its completion (if required for use as a collateral or for transfer of the warehouse). Yemen 15 12 12 12 14 Doing Business 2010 -2014 Reports, - * MENA Average is calculated for the 17 countries under analysis and excludes economies, that might be part Source: of the region in other classifications Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 12 - MENA: Ease of Dealing with Construction Permits (cont’d)

Time required to complete each procedure, calendar days Comments

2010 2011 2012 2013 2014 MENA Average* 150 148 140 146 143 . Economies in MENA vary sharply in terms of Algeria 240 240 281 281 241 calendar days needed to obtain all permits related to Bahrain 43 43 43 43 60 the legal construction of a warehouse. . UAE, Bahrain, Qatar, and Jordan are the countries Egypt 218 218 218 218 179 where the procedures are the most streamlined and Iran 322 322 320 320 320 facilitated, and thus take the shortest time. Iraq 215 215 187 187 139 . On the other hand, the time required to complete Jordan 87 87 70 70 70 each procedure is the longest in Iran, where it takes Kuwait almost a year. Legally building a warehouse is a 104 104 130 130 130 lengthy process in Algeria, Lebanon, and Yemen as Lebanon 211 218 219 219 246 well, where it takes considerably longer than the Libya n/a n/a n/a n/a n/a average time needed in the region. Morocco 163 163 97 97 97 Oman 242 186 174 174 174 Qatar 76 76 70 62 63 . Note: Time required to complete each procedure does not Saudi Arabia 94 89 75 103 102 include time spent gathering information. Each procedure Syria starts on a separate day. Procedures that can be fully 128 128 104 104 n/a completed online are an exception to this rule. The Tunisia 84 97 88 88 94 procedure is considered completed once the ﬁnal document is received. No prior contact with officials is United Arab Emirates 64 64 46 46 44 assumed. Yemen 107 116 116 191 186 Doing Business 2010 -2014 Reports, - * MENA Average is calculated for the 17 countries under analysis and excludes economies, that might Source: be part of the region in other classifications. Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 13 - MENA: Ease of Dealing with Construction Permits (cont’d)

Cost required to complete each procedure, % of income per capita Comments

2010 2011 2012 2013 2014 . The cost required to complete each procedure is a MENA Average* 290 270 190 162 131 function of the income per capita within the Algeria respective country. Therefore, income levels should 40 44 23 55 60 be carefully examined and taken into account as they Bahrain 55 78 11 10 9 vary widely within MENA. Egypt 332 294 155 135 108 . Based on World Bank data on GDP per capita in current USD for 2014, Kuwait (USD 50,108), Iran 366 382 356 262 225 Lebanon (USD 35,791), Jordan (USD 27,113) and Iraq 398 507 470 110 17 Saudi Arabia (USD 12,705) were the economies Jordan 697 634 534 530 500 where it was the most expensive to obtain all permits to legally construct a warehouse in 2014. Kuwait 124 173 122 96 99 . The countries where it was the least expensive Lebanon 195 285 235 302 353 during the last year were Yemen (USD 766), Qatar Libya n/a n/a n/a n/a n/a (USD 934), Bahrain (USD 2,268), and Algeria (USD 3,217). Morocco 264 252 235 220 218 Oman 428 106 46 38 35 Qatar 1 1 1 1 1 Saudi Arabia 33 44 19 25 25 Syria 540 568 504 484 n/a Tunisia 998 859 261 256 256 United Arab Emirates 31 36 5 9 12 . Note: The indicator measures official costs only and excludes bribes. Yemen 144 61 61 52 48 Doing Business 2010 -2014 Reports, - * MENA Average is calculated for the 17 countries under analysis and excludes economies, that might be part Source: of the region in other classifications Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 14 - MENA: Ease of Dealing with Construction Permits in 2015

Country Ranking

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 16 United Arab Emirates Bahrain Iraq Saudi Arabia Qatar Oman Morocco Yemen Tunisia Kuwait Jordan Algeria Egypt Lebanon Iran Syria Libya

Overview

The Qatari construction sector, including infrastructure, residential and non-residential buildings, is the fastest growing sector in the country. In an effort to diversify its oil-dominated economy and to prepare for the upcoming 2022 FIFA World Cup, Qatar has entered a phase of massive spending on all subsectors. The country has pledged USD 140bn of investment between 2015 and 2020, as told by Qatar’s minister of transport, Jassim Saif Ahmed Al Sulaiti in September, 2014. However, the rapid growth comes with its numerous challenges - late payments, inflation, recurrent project delays, and bottlenecks in the supply of labour and materials. Notably, bad labour conditions on the construction sites, in particular stadiums, have come under considerable international scrutiny.

Residential Construction The residential construction in Qatar is fueled by a growing population and a growing economy. The Qatari population is expected to grow by 4% y/y between 2014 and 2019. This demographic outlook, coupled with increased purchasing power will put pressure on housing. Technavio Research experts project healthy demand for both luxury and affordable homes. The latter are mainly needed for the migrant manpower that is working on the construction projects. For instance, a workers’ city in Barwa Al-Baraha, that will have capacity to house around 55,000 people, is about to be completed.

Non-residential Construction Currently, the non-residential segment is fueled mainly by long-term complete city developments. Among them, Lusail and Barwa Al Khor cities are standing out with respective values of USD 45bn and USD 9.9 bn. Naturally, some of the other major projects in the subsector are related to the FIFA World Cup 2022. They include the USD 4bn expansion and construction of 12 stadiums which will host the games. Stadium construction is coupled with extensive USD 20bn investments in hotel infrastructure by the Qatar Tourism Authority. BMI states that approx. 90,000 additional hotel rooms are required to cater for the projected influx of 400,000 supporters.

Infrastructure

Infrastructure is particularly influenced by the preparations for the World Cup 2022 as the country is building transport infrastructure to connect the numerous World Cup sites to each other and to accommodate the huge tourist influx that is expected. The government is currently building its USD 28.8bn national railway network and is implementing a USD 4.4bn expressway programme which provisions the construction of 900 km of first-class roads throughout the country. The state has also allocated a huge investment of USD 36bn to build the Doha Metro. Already having serious traffic congestion problems, the capital will need a working public transport system in order to cope with the tourist inflow coupled with the dense local population.

Selected Economic Indicators 2009 2010 2011 2012 2013 2014 GDP, constant prices 2005 (USD bn) 87 102 116 122 130 138 GDP, constant prices 2004 (QAR bn) 243 284 321 341 362 384 GDP, current prices (USD bn) 98 125 170 190 203 212 GDP, current prices (QAR bn) 356 455 618 693 735 765 GDP Real Growth Rate (%) 12.0 16.7 14.1 5.1 6.2 6.2 GDP, Non Oil: Construction (QAR bn) 26 28 28 31 38 43 GDP, Non Oil: Construction, Growth Rate (%) -6.2 7.8 3.0 8.7 24.7 12.9 People Employed in Construction, thou persons 545 559 498 499 569 636 Foreign Direct Investment, net inflows (USD bn, current) 8.1 4.7 -0.1 0.3 -0.8 n/a Consumer Price Index (%) -4.9 -2.4 1.9 1.9 3.1 3.0

Comments Qatari economy grew at an impressive CAGR of 9.7% in 2009-2014. BMI Research experts maintain a positive forecast for 2015 with a real GDP y/y growth at 6.6%. Growth is mainly attributed to investment spending, especially in transport projects, expansionary fiscal stance, and population growth, as explained by the Qatari ministry of development planning and statistics. The falling oil prices are a key risk to the economic outlook of Qatar, the country being a major oil and gas exporter. However, the ministry considers state finances as a sufficiently strong to shield the wider economy in 2015 with a fiscal surplus of 8.7% of GDP. According to BMI Research, inflation rate is expected to rise at 3.8% y/y in 2015. In 2011 to 2014, the construction sector increased by a CAGR of 15.2% - more than double the real growth rate of the economy which was 5.8% a year. The booming activity in the sector has been coupled with a growing number of people employed in it. Last year, construction workers in Qatar made up 37.7% of the total active labour force in the country.

Source: CEIC, World Bank, Ministry of Development Planning and Statistics – Qatar, IMF, Reuters Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 19 - Qatar: Construction Industry Data

Construction Industry Data 2013 2014e 2015f 2016f 2017f 2018f Construction Industry Value, USD bn 9.7 11.6 13.6 15.9 18.3 20.7 Construction Industry Value Real Growth, % y-o-y 13.60 15.40 13.07 12.35 10.30 9.04 Construction Industry Value, % of GDP 4.80 5.50 6.20 6.60 6.80 7.10 Residential and Non-Residential Building Industry Value, % of total construction 49.92 52.77 55.56 57.64 58.90 59.94 Residential and Non-Residential Building Industry Value, USD bn 4.86 6.11 7.57 9.17 10.76 12.43 Residential and Non-Residential Building Industry Value Real Growth, % 16.57 22.20 19.30 16.71 12.81 11.05 Residential and Non-Residential Building Industry Value, % of GDP 2.40 2.88 3.44 3.80 4.03 4.24 Infrastructure Industry Value, % of total construction 50.10 47.20 44.40 42.40 41.10 40.10 Infrastructure Industry Value, USD bn 4.87 5.47 6.05 6.74 7.51 8.31 Infrastructure Industry Value Real Growth, % y-o-y 7.70 8.60 6.10 6.90 6.90 6.20 Infrastructure Industry Value, % of GDP 2.40 2.60 2.80 2.80 2.80 2.80

Comments

Over the 2015-2018 period, BMI Research experts project 11.2% annual average real growth rate in the sector. Thanks to robust private consumption and rapidly growing population, residential and non-residential building will perform better than infrastructure as it will both create more value and grow faster. Residential and non-residential building is expected to account for an average 58% of the sector’s activity in 2015-2018. It is also projected to grow by an impressive 15% annual average real growth rate, while infrastructure will increase tangibly slower by 6.5% over the 2015-2018 horizon.

Construction Industry Real Growth, % y-o-y

22.2 19.3 16.6 16.7 15.4 13.6 13.1 12.4 12.8 10.3 11.1 8.6 9.0 7.7 6.9 6.1 6.9 6.2

2013 2014e 2015f 2016f 2017f 2018f Construction industry real growth, % y-o-y Residential and non-residential building real growth, % y-o-y Infrastructure industry real growth, % y-o-y

Construction Industry Value 20.74 18.27 Infrastructure, USD bn 15.91 8.31 7.51 13.62 6.74 11.58 6.05 Residential and non- 9.73 5.47 residential building, USD 4.87 bn 12.43 10.76 9.17 7.57 Total, USD bn 4.86 6.11

2013 2014e 2015f 2016f 2017f 2018f

Construction, Output (value-added index, 2015=100)

268

224 202

182 175 168

148 138 122 113 120 100100 107 100 2015 2017 2020 2025 2030

Qatar Middle East Africa

Comments Qatar is set for a steep growth of its construction industry. Experts from Oxford Economics expect an almost twofold increase of the construction output value-added index in 2030 compared to 2015, surpassing by far the projected values for Middle East and Africa. The positive outlook is associated with huge government investments, a stable business environment and growing consumer demand. Residential and non-residential construction, the major growth driver in the industry, is leveraged by the massive infrastructure improvements throughout the country and by the World Cup 2022 preparations. Indeed, developers are building major residential projects and the adjacent social infrastructure, coupled with numerous hotels and stadiums.

Number of New Building Permits Issued Completed Residential Buildings

20.8%

6.8% 7,777 -10.4% -16.3% 3.9%

-25.6% 6,066

4,945 4,733 4,430 -22.0% 4,093 -22.8%

3,962 -27.3%

4,585 4,412

2009 2010 2011 2012 2013 2010 2011 2012 2013

Permits issued YoY change, % Completed residential buildings, units YoY change, %

Area of Completed Residential Buildings Actual Cost of Completed Residential Buildings 4,538

11,296 15.6%

10,264

3,969 3,718

3,609 -1.2% 6.8% -9.1% -9.1%

-18.1% 11,866 5,420

-54.3% 2010 2011 2012 2013

2010 2011 2012 2013 Actual cost of completed residential buildings, QAR mn Completed residential buildings, thou sq.m. YoY change, % YoY change, %

Source: CEIC, Ministry of Development Planning and Statistics - Qatar Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 23 - Qatar: Non-Residential Building

Number of New Building Permits Issued Completed Non-Residential Buildings

59.7% 528

339 11.3% 476 441 10.9%

-6.4% 266

239 152

-25.0% 296 -32.4% -29.5%

-43.9% -42.9% 298

2010 2011 2012 2013 2009 2010 2011 2012 2013

Permits issued YoY change, % Completed non-residential buildings, units YoY change, %

Area of Completed Non-Residential Buildings Actual Cost of Completed Non-Residential Buildings

46.5% 2.6%

15.6%

2,269 9,344

-7.4% 9,082

-20.3% 1,855 -9.1%

3,242

8,373 1,717

1,808 -54.3%

2010 2011 2012 2013 2010 2011 2012 2013

Completed non-residential buildings, thou sq.m. Actual cost of completed non-residential buildings, QAR mn YoY change, % YoY change, %

Non-Residential Building, 2014

Commercial 29.6%

Industrial 59.3% Retail 5.8%

Cultural 5.4%

Infrastructure, 2014

Transport 13.7% Water 9.6%

Power 19.5% Marine 7.0%

Mixed use 5.3% Hospitality 2.6% Education 2.3% Healthcare 2.3% Oil & gas 36.9% Public 0.7% Telecom 0.2%

Major Ongoing Projects Project Name Value, USD mn Capacity/Length Overview Timeframe Commercial Construction Lusail City, Al 45,000 38,000,000 sq m Lusail City is located approx. 15 km north of Doha. Once completed, the city will include 4 exclusive islands 2011 - 2020 Daayen and 19 multi-purpose residential, mixed use, entertainment and commercial districts. The city is expected to accommodate 450,000 people in total, including residents, employees, and visitors. Among the numerous residential and commercial units, 22 hotels with different international star ratings will be built.

Barwa Al Khor City 9,900 5,500,000 sq m This is a complete city development, including more than 17,000 housing units, as well as shopping malls, After three-year leisure facilities, luxury hotels and a golf course. delay, works have started in H1 2013. Estimated end in 2018.

Lusail Golf 4,900 3,659,736 sq m Upon completion, the development will feature an 18-hole golf course, a tennis centre, as well as a 6-hole 2018 Residential Academy Golf Course, a retail village, and a boutique hotel offering 80 rooms. Residential components will Development account for 31% of the development, and sports facilities and green areas - for the remaining 69%. Project

Education City: 2,500 The project includes the construction of a 9-storey hospital (512 beds), 7-storey clinic and research 2008 - Fall of 2015 Research Institute building, as well as accomodation building for 350 nurses with additional service buildings, parking space (QEERI) Sidra and associated facilities. Medical and Research Center

Doha Festival City 1,600 433,847 sq m When completed, the Doha Festival City will have some 250,000 sq m of gross leasable area, offering 2011 - 2016 project shopping, entertainment, leisure, and hospitality services to its visitors. A 5-star hotel will also be featured within the city along with one of the largest conference centres in Qatar. Six-phase 1,100 The first stage will focus on infrastructure modernisation and will cost approx. USD 357mn. At planning stage Redevelopment of Doha's Old Industrial Area

Source: BMI, Lusail, Festival City Doha, Msheireb, Doha News, Construction Week Online, Qatar Construction News, Mazaya Holding, The Peninsula Qatar, Qatar Tenders, Barwa, MEED Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 26 - Qatar: Major Construction Projects (cont’d)

Major Ongoing Projects Project Name Value, USD mn Capacity/Length Overview Timeframe Commercial Construction (cont’d) Phase II(B) of the 657 DCCT is a 551 m tall skyscraper with over 100 storeys located in the West Bay area. It was scheduled for To be completed by Doha Convention completion in 2012 but construction works have been suspended following the discovery that the building end-2015 Centre and Tower would impact flight paths to and from Doha International Airport. However, work has restarted after the New Doha Hamad International Airport was completed in 2014. The tower, shaped like a tapering obelisk, will offer both residential and office space. At the very top, a private club will occupy a 60 m high glass-only cylinder surrounded by extensions of the tower’s facade and supported by a structural helix. DCCT will also comprise a 100,000 sq m convention centre and a 175,000 sq m car parking facility. Msheireb 686 Started in 2013 Downtown Doha project-Phase III Msheireb is a sustainable downtown regeneration project that aims to revive the old commercial district of PPP, Doha Doha. The project will adhere to high standards in green building in order to reverse the energy-intensive 632 pattern of construction in Qatar. Upon completion, it will offer office space, retail, leisure facilities, Started in 2012 Doha Msheireb townhouses, upscale apartments, hotels, museums, civic services, as well as cultural and entertainment Downtown, Phase 2 venues. Interestingly, cars and traditional services will be strategically placed underground in several Msheireb 411.9 basement levels, ensuring a pedestrian - friendly atmosphere. The total cost of the project amounts to USD To be completed by Downtown Doha 5.5 bn and it should be completed in 2016. end-2015 Project (Phase 1C)

Marina Mall 275 Marina Mall, to be built in Lusail City, will offer 57,605 sq m of gross leasable area, with an additional In tender/tender 10,000 sq m hypermarket at basement level. The building will consist of five interconnected retail ‘islands’ launched that link the mall to a body of water that runs through the centre of the scheme. It should be completed in 2018. Residential Construction Msheireb 5,500 370,000 sq m Msheireb is a sustainable downtown regeneration project that aims to revive the old commercial district of 2010 - 2016 Development Doha. The project will adhere to high standards in green building in order to reverse the energy-intensive (formerly Heart of pattern of construction in Qatar. Upon completion, it will offer office space, retail, leisure facilities, Doha), Qatar townhouses, upscale apartments, hotels, museums, civic services, as well as cultural and entertainment venues. Interestingly, cars and traditional services will be strategically placed underground in several basement levels, ensuring a pedestrian - friendly atmosphere. Sidra residential 137 1,165 units Adjacent to the new Sidra Hospital, Sidra Village will provide 1,165 flats for its nursing staff. The village will Under Construction project/Sidra Village (75,995 sq m) consist of 658 one-bedroom apartments of app. 50 sq m each, and 507 two-bedroom apartments of app. 85 sq m each. BMI, Lusail, Festival City Doha, Msheireb, Doha News, Construction Week Online, Qatar Construction News, Mazaya Holding, The Peninsula Qatar, Qatar Tenders, Source: Barwa, MEED Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 27 - Qatar: Major Construction Projects (cont’d)

Major Ongoing Projects Project Name Value, USD mn Capacity/Length Overview Timeframe Residential Construction (cont'd) Barwa Al-Baraha 1,000 1,800,000 sq m Located in close proximity to the Industrial Area, Barwa Al Baraha development is designed to serve as an Launched in 2008. Workers' City integrated workers' city that will accommodate 53,000 low-income expats and employees, making it the Under construction GCC's largest workers' accommodation. In January 2014 the first phase of the project was completed, thus as of February 2015 establishing Qatar's largest truck and vehicle parking space. As of February 2015, the second phase of the development was still underway. It comprises the construction of 64 buildings with 132 rooms each, as well as amenities like dining and laundry services, shops, a mosque, sports fields, used car showrooms and office space. Transport Infrastructure Doha Metro 36,000 230 km and 107 Running underground as well as at elevated and at-grade levels, it will consist of four lines – Red (Coast) stations Line, Green (Education) Line, Gold (Historic) Line, and Blue (City) Line. During the first phase 37 stations will be constructed and over 86.5 km of track will be laid by 2019. In the second phase (2020 – 2026), 70 stations and some 146 km of track will be added to the network.

National Railway 28,800 350 km It will be built in four phases between 2015 and 2030. Phase 1 foresees the construction of approximately 2015 Network 143 km of operational railway track with 34 turnouts (main tracks), one station, three freight yards, one intermodal yard, 59 bridges and 36 culverts (a tunnel for a road or drain going under a road or railroad). In February 2015, Qatar Rail launched a new prequalification process for the civil works on the first phase. Upon completion, the network will consist of five lines - freight line from Mesaieed Port to Ras Laffan, mixed line (passenger and freight) from Doha to Dukhan, mixed line from Doha to Al Shamal, mixed line from Doha to Saudi Arabia, and high speed passenger line from Doha to Bahrain.

Sharq Road Project 12,000 The project consists of 12 km. series of tunnels and bridges connecting Hamad Intl Airport, Katara Cultural Postponed Village and the Dafna/West Bay business district of Doha. New Doha Port 7,400 26,000,000 sq m The finished port site will have per annum capacity of 1.7 mn tonnes of general cargo, 1 mn tonnes of grains, 500 000 vehicles, and 37 500 tonnes of livestock. The port basin will be approximately 3.8 km long, 700 m wide and 17 m deep. In addition, a new base for the Qatar Emiri Naval Forces (QENF) will be built offshore of the new port to provide technical and logistic support. The Qatar Economic Zone 3 (QEZ3) will also be located adjacent to the port. As of May 2015, the port site is 67% completed, while the QENF base is 17% ready and the QEZ3 is 62% finished. A major contract award by Q2 2015 will be for the construction of 225 buildings in the naval base. The contract for the construction of security facilities to serve the naval base is also expected. BMI, Lusail, Festival City Doha, Msheireb, Doha News, Construction Week Online, Qatar Construction News, Mazaya Holding, The Peninsula Qatar, Qatar Tenders, Source: Barwa, MEED Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 28 - Qatar: Major Construction Projects (cont’d)

Major Ongoing Projects Road Infrastructure Projects

Project Value, Capacity/ Overview Project Name Value, Expected Name USD Length USD mn Completion mn Date Transport Infrastructure (cont'd) New Orbital Highway and Truck route, 145 km Light Rail 2,500 45 km The rail network will have 4 lines and 38 road section 3,760 2017 Network/ stations at at-grade and underground levels. New Orbital Highway and Truck route , 44 km Contract to be awarded as of Lusail City - The first line should be operational by 2018, road section May 2015 Doha while the remaining three lines are to be East West Corridor completed by 2020 1,070 2017 Dukhan Highway East, 9.7 km. of dual four-lane Hamad n/a 300,000 The extension will increase the size of the road 1,020 2017 International sq m passenger terminal to approximately 900,000 sq Lusail Expressway, 5.3 km. four-lane highway Airport m and will add 24 plane gates. Upon completion 962 2017 Extension of the extension project, HIA will have annual 2016 capacity of 50 million passengers, 2 million Rawdat Al Khail Street project, 10 km of new dual 632 tonnes of cargo and 320,000 aircraft landings carriageway and take-offs. Al Wakra Bypass, 11 km. of dual five-lane carriageway 601 2017 North Road enhancements, 95.2 km. of route 594 2016 Dukhan Highway Central, 15 km. of double four- 2016 lane road 385 Al Rayaan Road, Phase 1, 2.9 km. of dual carriageway 280 2016 Al Rayaan Road, Phase 2, 5.5 km four-lane dual 2017 carriageway, 6 km of side roads and 11 km 944 associated service roads Local road projects 6,140 Q2 2016 (approx. total cost)

BMI, Lusail, Festival City Doha, Msheireb, Doha News, Construction Week Online, Qatar Construction News, Mazaya Holding, The Peninsula Qatar, Qatar Tenders, Source: Barwa, MEED, Ashghal Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 29 - Qatar: Major Construction Projects (cont’d)

Major Ongoing Projects - Utilities FIFA World Cup 2022 stadiums Construction, USD 4bn

Project Value, Capacity Expected Status Stadium Planned Capacity Completion Date USD mn Completion Khalifa Intl Stadium (existing) Expansion by 15,000 2017 Ras Laffan D IWPP, Ras Laffan 3,000 2,520 MW 2018 In tender/Tender seats to achiebve total Industrial City launched capacity of 60,000 seats

Mega Reservoir Corridor Main 1 2,000 120 km 2016 Contract Awarded Al Rayaan Stadium (existing) Demolition and 2019 (Packages A&B), Doha reconstruction leading to 40,000 seat capacity North Doha Sewage Treatment Works 1,500 Contract Awarded Project, Umm Slal Ali, Doha (Phase 1) Qatar Foundation Stadium 40,000 seats 2019 (new - confirmed) Ras Abu Fontas (RAF) A2 Seawater 502 58.4 mn m3 2015 Under Desalination Plant, Abu Fontas, Doha per year construction Al Wakrah Stadium 45,000 seats 2018 (new - confirmed)

Al-Dhakhira city Sewerage system 374 Contract Awarded Al Bayt Al Khor Stadium 60,000 seats 2019 project (new - confirmed)

Qatargas LNG Plant Wastewater plant, 125 2016 Contract Awarded Lusail Iconic Stadium 86,000 seats To be specified Ras Laffan Industrial City (new - to be confirmed) Al Shamal Stadium 45,000 seats To be specified Qatar Power Transmission System 948.6 km Contract Awarded (new - to be confirmed) Expansion Plan - Phase 11 (Stage 1) Doha Port Stadium 45,000 seats To be specified Qatar Power Transmission System 173 km 2016 Contract Awarded (new - to be confirmed) Expansion Plan - Phase 11 (Stage 2) Qatar University Stadium 43,000 seats To be specified (new - to be confirmed) Water and electricity plant, Umm Al- 2400 MW 2017 In tender/Tender Haul launched Al Gharafa Stadium 45,000 seats To be specified (new - to be confirmed)

Mesaimeer Surface and Ground Water 9.7 km 2017 Under Sports City Stadium 45,000 seats To be specified Tunnelling project construction (new - to be confirmed)

Doha West Wastewater treatment 63.87 mn m3 Contract Awarded Umm Salal Stadium 45,000 seats To be specified recycling plant Expansion per year (new - to be confirmed)

BMI, Lusail, Festival City Doha, Msheireb, Doha News, Construction Week Online, Qatar Construction News, Mazaya Holding, The Peninsula Qatar, Qatar Tenders, Source: Barwa, MEED Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 30 - Qatar: Investment Climate

FDI regime is primarily regulated by Investment Law No. 13/2000. It generally limits foreign investments to 49% of the capital for most business activities, with a Qatari partner(s) holding at least 51%. Gulf Cooperation Council nationals are treated as Qatari citizens in the ownership of companies listed on the Qatar Exchange. However, the law allows, upon obtaining special government approval, up to 100% ownership by foreign investors in certain sectors, including: agriculture, industry, health, education, tourism, development and exploitation of natural resources, energy, mining, banking, insurance, business consultancy & technical services, information & communication services, cultural services, sports services, entertainment services, and distribution services. Meanwhile, certain sectors are not open for domestic or foreign competition, including public FDI transportation, electricity and water, steel, cement, and fuel distribution and marketing. In these sectors, a single semi-public company has complete Regime or predominant market control. A majority foreign stake in a project could be obtained only if the project fits into the country's development plans. In addition, preference is given to projects that use raw materials available on the local market, manufacture products for export, produce a new product or use advanced technology, facilitate the transfer of technology and know-how to the Qataris, and promote the development of national human resources. In bids for government procurement the country treats preferentially suppliers that use local materials. As a rule, participation in tenders with a value of QAR 1mn or less is confined to local contractors registered by the Qatar Chamber of Commerce, and tenders with a value of more than this amount do not require any local commercial registration for participation, but in practice certain exceptions exist.

The establishment of all private business entities in Qatar is regulated by the Commercial Companies Law, Law No. 5/2002. Law No.15/1990 prohibits that foreign investors engage in a joint stock company with Qatari partners. As a consequence, joint ventures involving foreign partners are usually established as limited liability partnerships. Foreign partners in ventures organised as limited liability partnerships must Right to pay the full amount of their contribution to capital in cash, or in kind, prior to the start of operations. Usually, such firms are required to set aside 10% Private of profits each year in a statutory reserve until it equals 50% of the venture's authorised capital. This requirement is the only legal restriction to a Ownership foreign company desiring to repatriate all of its annual profit after tax deduction. Since August 2014, foreign investors can hold up to a combined total of 49% of the shares of Qatari companies listed on the Qatari Exchange. and Upon government approval, non-Qataris may have the right to land use over real estate for a renewable term of 99 years. Establishment Depending on the case, foreign investors might be offered incentives that include natural gas priced at 0.6-0.75 USD per MBTU (Million British Thermal Units); electricity offered at less than 0.02 USD per KWH; industrial land offered at 0.27 USD per sq m per year for a period of 50 years, including options for renewing the lease; exemption from customs duties on imports of machinery, equipment and spare parts; exemption from export duties; exemption from corporate taxes for up to 10 years and from income taxes; low cost financing through Qatar Development Bank (QDB); and flexible immigration and employment rules to enable the import of foreign labour.

Since 2010, all non-Qatari companies and foreign partners in Qatari companies are subject to a 10% (corporate) flat rate. The only exception is in the energy sector where there is a 35% tax rate on all oil and gas operations, unless exempted by Emiri Decree. Qatari nationals do not pay any kind of Tax Rates corporate or income tax, except the “zakat” that amounts to around 2.5% of profits. Under Law No. 13/2000, the finance ministry may grant a tax holiday of up to 10 years for new foreign investments in key sectors. Other exemptions and .may be granted under Law No. 21/2009 on a case-by-case basis for a period of up to 6 years. Access to There is no restriction on the flow of capital and the US Department of State reports that foreign companies are essentially treated the same as local Credit ones. Almost all import transactions are controlled by standard letters of credit processed by local banks and their correspondent banks in the exporting countries. Credit facilities are provided to local and foreign investors within the framework of standard international banking practices. Foreign investors are usually required to have a guarantee from their local sponsor/local equity partner.

Being a signatory to the 1958 New York Convention and a member of the International Center for the Settlement of Investment Disputes (ICSID), Qatar accepts binding international arbitration in case of investment disputes. Dispute The local legal establishments that facilitate dispute settlement include the Alternative Dispute Resolution (ADR) Centre as well as the International Settlement Court and Dispute Resolution Centre. There is no set duration for dispute resolution and the time to obtain a resolution depends on the case. The Qatar International Court and Dispute Resolution Centre publishes past judgments on its website, which may be used as a reference: http://www.qfccourt.com/Judgement.html.

Qatar's labour force consists primarily of expatriate workers. As of February 2015, non-Qatari residents are estimated to be around 89% of the population in the country, making up for one of the world’s highest ratios of migrant workers to population. The largest group of foreign workers comes from the Indian sub-continent. All expatriate labour must have a Qatari sponsor. Therefore, foreign investors should start discussing labour visa issues with their sponsors/local agents/partners in Labour the early stages of contract negotiation. In order to bring an expatriate employee into the country, sponsors must submit a request to the labour ministry. It controls the number of workers that may come to Qatar through a quota system. The country has labour agreements with some countries that stipulate a minimum wage for Conditions certain types of work, but in general minimum wage is not regulated by the government. Since 2004, Qatari citizens have the right to form workers' committees in private enterprises with more than 100 Qatari citizen workers. Non-citizens are not eligible to form worker committees. Workers in the government sector, regardless of their nationality, are not allowed to join unions. Under the labour law, workers are granted the right to bargain collectively and to sign joint agreements. However, collective bargaining is not freely practiced, and the US Department of State reports that there are no workers employed under collective bargaining contracts.

Growth Drivers

Currently, construction in Saudi Arabia benefits from extensive government investments in the sector. Thanks to its strong oil reserves, the state provides robust support to the infrastructure segment (transport, energy & utilities, social) as it is building a strong industrial base to sustain its economy in the future when oil reserves will eventually shrink. Besides the diversification policy, some other key growth drivers are the rapidly growing demographics (implying increased residential and commercial building), the religious tourism to the Muslim world’s two holiest shrines of Makkah and Madinah (implying expansion of the Grand mosques and the cities around them), as well as beneficial government policies (expected relaxation of foreign investment laws that would permit 100% foreign ownership).

Residential Construction

The residential segment is growing healthily as, among other projects, the government has launched a USD 68bn housing program, aiming to address the housing shortage among lower income Saudis. The construction of 500,000 housing units with adjacent facilities started in 2011 and will be completed in 2016. In addition, more than 17,000 residential villas will be constructed over the same period in order to house the Saudi National Guard personnel and their families.

Non-residential Construction Some of the most impressive non-residential projects that are currently being undertaken in Saudi Arabia comprise the construction of four economic cities at total cost of USD 163bn. Each of them, being designed around at least one globally competitive industry, would become a vigorous driver of growth by attracting foreign and local investments, opening up the economy and ultimately making it less dependent on oil and gas. Other mega projects in the segment include the USD 40bn business and industrial Sudair City, and the USD 7.5bn Waad Al Shamaal Phosphate City.

Infrastructure

The Saudi government has allocated enormous investments for transport infrastructure. The major project in the subsector is the construction of a 9,900 km long national railway network – it is underway and should be finished by 2040 at a total cost of USD 97bn. Public transportation developments are also gaining momentum with multibillion metro networks being built in Riyadh, Jeddah, and Makkah. The USD 28bn expansion of King Abdulaziz Intl Airport stands out among the multitude of airport infrastructure projects in the country. The Saudi government is also heavily investing in social infrastructure. Currently, there are ongoing works on the rehabilitation of 500 schools, construction of 3 universities, 27 new hospitals and health facilities, and 8 medical cities.

Selected Economic Indicators 2009 2010 2011 2012 2013 2014

GDP, constant prices 2005 (USD bn) 406 425 467 493 506 523

GDP, constant prices 2010 (SAR bn) n/a 1,976 2,172 2,289 2,350 2,432

GDP, current prices (USD bn) 429 527 670 734 744 746

GDP, current prices (SAR bn) 1,609 1,976 2,511 2,752 2,791 2,798

Real GDP Growth Rate (%) 1.8 4.8 10.0 5.4 2.7 3.5

GDP: Producer Values: Building and Construction, (SAR bn) 80 91 107 119 135 153 GDP: Producer Values: Building and Construction, Growth Rate (%) 0.9 12.9 17.9 10.7 13.6 13.7

Foreign Direct Investment, net inflows (USD bn, current) 36.5 29.2 16.3 12.2 9.3 n/a

Consumer Price Index (%) 5.1 5.3 5.8 2.9 3.5 2.7

Comments

The Saudi economy grew at a robust CAGR of 5.2% over the 2009-2014 period. BMI Research experts project favorable 3.7% y/y growth in 2015, despite the drop of oil prices. BMI Research claims that economic advancement will be driven by strong fiscal stimulus and high oil production but expects their effect to lessen from 2016 onwards. Moderate inflation is anticipated in 2015 at 3.2% y/y change of the consumer price index. However, in the mid-term inflation may rise following the extended period of robust growth, coupled with loose fiscal and monetary policy. It is worth noting that between 2011 and 2014 construction grew intensively by a CAGR of 12.6% - at a much faster pace than the economy, which increased by 3.8% a year during the same period.

Source: CEIC, World Bank, Ministry of Economy and Planning – Saudi Arabia, Oxford Economics, BMI Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 35 - Saudi Arabia: Construction Industry Forecast

Construction, Output (value-added index, 2015=100)

202 182 180 168 148 138 148 120 113 107 122 100100 108 100 2015 2017 2020 2025 2030

Saudi Arabia Middle East Africa

Comments Experts from Oxford Economics project an almost twofold increase of the Saudi construction output value-added index in 2030 compared to 2015. The development of the sector in Saudi Arabia would thus closely follow the estimates for Africa and would be a bit below those for the Middle East. Sector growth by 2020 will be driven mainly by the huge investments in the four economic cities, in rail and public transportation infrastructure, and in energy and utilities infrastructure. However, BMI experts allow for possible cancellations of major infrastructure projects due to redirection of funds and attention to the possible Saudi military intervention in Iraq or Yemen.

Building Permits Issued Licensed Building Area

25.1% 15.8% 14.6% 16.2% 5.6% -2.4% -3.8% -3.0% -7.8%

-10.3%

53,588

46,772

117,078

112,362

47,549

49,427

40,402

113,519

89,787 100,756

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Building permits issued, units YoY change, % Licenced building area, thou sq.m. YoY change, %

Building Permits Issued by Region, 2014 Licensed Building Area by Region, 2014

Eastern Asir 9.2% Province Qaseem 8.1% Makkah 17.7% 16.0% Madinah 7.1% Qaseem 7.9%

Asir 5.6% Madinah 6.8% Hail 2.8% Hail 3.3% Eastern Tabouk… Makkah 23.6% Tabouk… Province Jazan 2.1% Jawf 2.1% 19.7% Najran 1.8% Northern Border 2.1% Other 4.0% Other 4.0%

Riyadh 25.7% Riyadh 25.3%

Source: CEIC, Ministry of Municipal and Rural Affairs – Saudi Arabia Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 37 - Saudi Arabia: Major Construction Projects

Project Name Value, USD mn Capacity/Length Overview Timeframe Commercial Construction King Abdullah 100,000 181,000,000 sq m Located some 100 km north of Jeddah, KAEC is being built from scratch on previously unoccupied desert Q2 2006 - Q1 2020 Economic City land. Once completed, the impressive mixed-use development will consist of 4 key components – King (KAEC) Abdullah Port, Industrial Valley, Downtown, and Coastal Communities. KAEC will benefit from sophisticated multi-modal connectivity by sea, rail, and road. According to BBC News, as of March 2015 only 15% of the project has been developed. As of May 2015 KAEC’s population was about 3,000 people; it is expected to roughly double by the end of 2015 and hit 50,000 by end-2020, rising to the ultimate target of 2mn around 2035.

Sudair City 40,000 The development comprises the construction of a business and industrial city in Sudair, 120 km north of Expected completion Development Riyadh. The future city, spreading over approx. 265 sq km, will accommodate about 1mn residents and is Q4 2029 designed to alleviate the growing congestion in Riyadh and reduce migration to the capital city. It will include commercial, residential, technological, sports and leisure areas, and will be intersected by several key services, including the north-south railway and the country’s main east-west oil pipeline. Now in execution stage, the budget for the project has subsequently been revised upwards from USD 16bn to USD 40bn, as announced by MEED.

Jazan Economic 27,000 100,000,000 sq m JEC is being built 60 km northwest of Jazan city on the Red Sea coast. It is being developed with a focus Expected completion City (JEC) on energy and labour-intensive industries. Once completed, the development will feature a port, an Q4 2036 industrial zone, commercial and cultural centres, residential areas, and academic and vocational training institutions. Knowledge 8,000 4,800,000 sq m site KEC, which is being built on the outskirts of Medina, is focused on knowledge-based industries, including Q2 2009 - Q4 2020 Economic City area, information technology and life sciences. The project is a mixed-use development offering commercial, (KEC) 9,000,000 sq m residential, educational, and hospitality amenities as well. built-up area Prince Abdulaziz 8,000 156,000,000 sq m PABMEC will be built in the city of Hail with a focus on logistics & transportation, agriculture, minerals and 2009 - 2025 As of Bin Mousaed construction materials. Among its key components will be a logistic & transportation centre, an agro- 2015 the project is on Economic City industrial zone, a knowledge centre, a petrochemical industries district, a residential area, an hold, after the design (PABMEC) entertainment area, and a mining centre. stage has been executed.

Alfanar, MEED, Construction Week Online, Oil & Gas Journal, Dar Al-Handasah, Gulf Business, Arab News, American Council of Engineering Companies, Arabtec, Source: Yasref, Arabian Business, The National, Emaar, BBC, CNN, Ernst & Young, The GCC Power and Water Forum, Business Korea, Creamer Media’s Engineering News, Hajr Electricity Production Company, Arabian Bemco, Parsons, Bechtel, Oxford Business Group Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 38 - Saudi Arabia: Major Construction Projects (cont’d)

Project Name Value, USD mn Capacity/Length Overview Timeframe Commercial Construction (cont'd) Abraj Kudai Towers 3,500 60,000 sq m site area The project is a mixed-use residential and commercial complex that consists of a large podium topped by Q4 2013 - Q1 2019 in Makkah 1,400,000 sq m built- 12 towers. In addition, it accommodates facilities like a shopping mall, restaurants and food courts, a up area convention centre and car parking lots. Jabal Omar 2,700 2,500,000 sq m The mixed-use project foresees the construction of a residential and commercial centre in an area close to Q3 2008 - Q1 2020 Development in the Grand mosque in Makkah. The development, which would be built in 5 stages, consists of 39 Makkah commercial and residential towers. The area of the development has been divided into two areas, the northern area which includes fourteen 6-storey buildings and a 6-storey prayer building, and the southern area with includes the other towers.

Jeddah Gate 1,600 553,000 sq m site Jeddah Gate is a massive development located in the heart of Jeddah. It is positioned on two sites -the Q1 2008 - Q1 2020 Development area first is spread over 413,000 sq m and the second is spread over 140,000 sq m. Upon completion, the project will become the new centre of the city, comprising 6,000 residential units, 230,000 sq m of commercial space and 75,000 sq m of gross rentable area for retailers. Kingdom Tower in approx. 1,230 Height of more than As of June 2015 final height was not yet confirmed. Expected completion Jeddah 1,000 m by the end-2018 Residential Construction Saudi Housing 68,000 500,000 residential After the social discontent uprisings in the Arab world in 2011, the late King Abdullah announced a plan to Q3 2011 -Q3 2016 Project units build 500,000 homes in Saudi Arabia over several years. Aiming to reduce home shortages and Completion date is depressed living standards, that are politically sensitive, the plan foresees the construction of homes likely to be extended throughout the country - spreading out from Tabouk in the north to Khamis Mushayt in the south and from due to bureaucratic Dammam in the east to Jeddah in the west. However, the project timeframe has been delayed due to difficulties sluggish bureaucracies, difficulties in obtaining suitable land and the complexity of allocating aid. To address these bottlenecks, the housing ministry has revised its strategy and in 2014 it adopted a new program dubbed ESKAN - the Arabic word for housing. Under the new scheme, Saudi families seeking assistance, in the form of state-subsidised home loans or subsidised sales of land or housing units, are being given two months to register on a website. Once approved, applicants will pay for their subsidised homes or land, or pay off their loans, in monthly instalments over 10 years through a 25% deduction of their monthly income, as explained by Reuters.

Alfanar, MEED, Construction Week Online, Oil & Gas Journal, Dar Al-Handasah, Gulf Business, Arab News, American Council of Engineering Companies, Arabtec, Source: Yasref, Arabian Business, The National, Emaar, BBC, CNN, Ernst & Young, The GCC Power and Water Forum, Business Korea, Creamer Media’s Engineering News, Hajr Electricity Production Company, Arabian Bemco, Parsons, Bechtel, Oxford Business Group Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 39 - Saudi Arabia: Major Construction Projects (cont’d)

Project Name Value, USD mn Capacity/Length Overview Timeframe Residential Construction (cont'd) National Guards' 3,600 The project aims to provide the Saudi National Guard personnel with comfortable living facilities and 2011 -2016 Housing Project: services. Its second phase involves the construction of 17,200 residential villas and 15 schools in the Phase 2 National Guard residential cities located in Riyadh, Jeddah, Dammam, Hail, Al-Qassim, Madinah, Hofuf, Taif, and Yanbu.

Construction of 1,350 6,000,000 sq m site The residential development consists of 5,000 Villas of Type “A and B” and includes complete Q4 2010 - ongoing 5,000 Villas in area 1,600,000 sq m infrastructure works. The housing site is divided into 5 developments. The project should have been (according to the Eastern Province built-up area finished in Q4 2014, but according to the contractor, Arabtec Construction LLC, the works are ongoing as website of Arabtec of July 2015. Construction LLC)

Energy, Utilities and Mining Yanbu Refinery 10,000 400,000 bpd (barrel Yanbu Refinery, also known as the Red Sea Refining Company RSRC Refinery or YASREF, is an Q3 2010 - Q1 2015 Project (Yasref) per day) integrated petroleum refinery. It processes 100% Arabian Heavy Crude and produces gasoline, high quality diesel, and liquefied petroleum gases (LPG) as well as byproduct sulfur and petroleum coke for export. The refinery includes processing units for the separation and conversion of the feed crude into finished products, utility and offsite systems to support the refinery operation, and associated feed, intermediate and product storage facilities. The refinery is scheduled to reach its full capacity in Q2 2015. However, it has gradually started shipping since January 2015.

Waad Al Shamaal 7,500 440,000,000 sq m Once completed, the city will have a mining complex with seven world-scale phosphate processing 2013 - 2022 Phosphate City facilities. In addition, the city will be able to accommodate about 100,000 people - industrial workers and Development their families.

Rabigh Power Plant 3,400 The plant expansion would boost the region’s generation capacity by 2,800 megawatts. The project 2010 - 2015 Extension: Phase 6 comprises production, installation and test of equipment and facilities at the plant, which will generate power using four 700 megawatt units.

Shuqaiq Steam 3,300 2,640 MW Shuqaiq Thermal Power Plant is scheduled to be built at around 135 km north of Jazan. It is designed as a Q3 2013 - Q3 2018 Power Plant 2,640 MW heavy oil-fired supercritical pressure power plant.

Alfanar, MEED, Construction Week Online, Oil & Gas Journal, Dar Al-Handasah, Gulf Business, Arab News, American Council of Engineering Companies, Arabtec, Source: Yasref, Arabian Business, The National, Emaar, BBC, CNN, Ernst & Young, The GCC Power and Water Forum, Business Korea, Creamer Media’s Engineering News, Hajr Electricity Production Company, Arabian Bemco, Parsons, Bechtel, Oxford Business Group Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 40 - Saudi Arabia: Major Construction Projects (cont’d)

Project Name Value, USD mn Capacity/Length Overview Timeframe Energy, Utilities and Mining (cont'd) Jeddah South 3,120 2,640 MW Once completed, the oil-fired thermal power plant will be able to produce enough electricity for about two Expected completion Thermal Power million people, or 5% of Saudi Arabia’s entire power generation capacity. by the end of 2017 Plant Wasit Gas Plant 1,900 3,000,000,000 cfd The construction of the Wasit gas plant, located north of Jubail, is commissioned by Saudi Aramco. Upon Q1 2011 - Q4 (cu feet/day) completion, it will be one of the largest gas plants not linked to oil wells ever built by the company. The 2015/Q1 2016 plant will have capacity to process up to three billion cubic feet per day of non-associated gas from the offshore fields Hasbah and Arabiyah. Saudi Aramco claims that Wasit and another project, Karan, that has been in operation since 2012, will likely boost Saudi Arabian natural gas output by an estimated 40%. Although construction of the main Wasit plant was almost finished in April, 2015, the complex will not be fully operational before the end of 2015 or the first quarter of 2016, according to Gulf Business and Arab News sources. Jazan IGCC 1,700 Upon completion, the Jazan IGCC complex’s gasification unit will have a capacity to convert vacuum Q2 2014 - Q4 2017 (integrated residue produced in the adjacent Jazan refinery into 2.11 million normal cu m/hr of syngas that will be gasification evenly used to produce purified hydrogen for the refinery and to fuel the IGCC plant. The total output of the combined-cycle) plant is expected to be app. 2,400 MW. Power Plant Rabigh 2 IPP 1,600 2,060 MW The Rabigh II Independent Power Plant will use natural gas as its main fuel and Arabian super light as its Commercial operation backup fuel, with the application of a combined-cycle power plant in a configuration of three groups, each should begin in 2017 comprising two gas turbines of enhanced efficiency, two heat recovery steam generators and one triple- pressure steam turbine, as explained by Engineering News. Riyadh PP10 1,434 1,300 MW The project scope is to convert the Simple Cycle Gas Turbine (SCGT) Plant in Riyadh to Combined Cycle Q4 2011 - Q3 2015 Steam Turbines Gas Turbine Plant for blocks A1, A2, B1, B2 and C1 including supply of common balance of plant for all Power Plant blocks. The configuration of each combined cycle block will include 4 Gas Turbine Generators + 4 Heat Recovery Steam Generating (HRSG) units + 1 Steam Turbine Generator + 1 Air Cooled Condenser with a total of 10 Blocks with provision for installation of TIAC System in the future.

Riyadh PP12 1,260 2,175 MW (1,740 The plant site is located 100 km west of Riyadh. It will use sales gas as primary fuel and Distillate and Q2 2012 - Q2 2015 Combined Cycle MW after deducting Arabian Super Light as secondary. The configuration of each combined cycle block will include 4 Gas Power Plant all plant auxiliary Turbine Generators + 4 Heat Recovery Steam Generating (HRSG) units + 1 Steam Turbine Generators + consumption at 1 Air Cooled Condensers. ambient condition) Alfanar, MEED, Construction Week Online, Oil & Gas Journal, Dar Al-Handasah, Gulf Business, Arab News, American Council of Engineering Companies, Arabtec, Yasref, Source: Arabian Business, The National, Emaar, BBC, CNN, Ernst & Young, The GCC Power and Water Forum, Business Korea, Creamer Media’s Engineering News, Hajr Any redistributionElectricity of this information Production is strictly prohibited. Company, Arabian Bemco, Parsons, Bechtel, Oxford Business Group Copyright © 2015 EMIS, all rights reserved. - 41 - Saudi Arabia: Major Construction Projects (cont’d)

Project Name Value, USD mn Capacity/Length Overview Timeframe Social Infrastructure Expansion of the Over 26,000 1,470,000 sq m The Grand Mosque is currently undergoing a third expansion following the expansion works commenced Q1 2010 - Q1 2016 Grand Mosque in by late King Abdullah in 2011. By far, they are estimated to amount at around USD 26 bn, and the third Makkah expansion plan is set to surpass that. It consists of five large projects, including the King Abdullah Expansion Structure, courtyards, tunnels, buildings for service facilities and the first ring road. The plan foresees the construction of 1.47mn sq m of development, capable of hosting 1.6mn worshipers, with 78 gates at the ground floor surrounding the expansion building. King Abdullah bin 6,800 2,600,000 sq m built- King Abdullah bin Abdulaziz Medical City Project encompasses two medical complexes situated in Riyadh 2015 - 2020 Abdulaziz Medical up area and Jeddah. Each one of them costs USD 3.4bn and comprises the construction and fit-out of two medical City complexes with built-up area of 1.3mn sq m each and individual capacity of 1,000 beds for security forces and their families. Rehabilitation 3,400 2011 - 2017 Centres for Prisoners King Khalid Medical 1,200 700,000 sq m King Khalid Medical City (KKMC) will be built some 20 km southwest of Dhahran. The campus will consist Expected completion City in Dammam of a 1,500-bed hospital, as well as residential buildings, a hotel, a commercial complex, educational in 2018 facilities, a research centre, and recreational facilities. King Abdullah 1,067 Among other facilities, the medical city would include a 150-bed cardiac centre, a 100-bed centre The project is in Medical City, specialising in surgery and organ transplants, and a 200-bed cancer treatment and surgery unit, as prequalification phase Makkah specified by Oxford Economics. King Faisal Medical 507 157,862 sq m (Phase The medical city is being built in two phases. Phase 1 that comprises the construction of a 500-bed Expected completion City in Asir, Phases 2) hospital, is scheduled for completion by May 2015 The remainder of the contract should be finished until by April 2017. 1 & 2 April 2017. It will consist of an 850-bed hospital building with 5 centres for cardiac, oncology, neuroscience, ophthalmology and rehabilitation activities

King Fhad Medical 426 The expansion of KFMC foresees the construction of a 510-bed medical city, a 50,000 sq m Neuroscience Expected completion City (KFMC) Centre, a 55,000 sq m Cancer Centre, a 4-storey Cardiac Centre, a 4-storey Service Building, and by the end of 2016 Expansion, Riyadh associated facilities. Prince Mohammad 312 2,000,000 sq m site The project foresees the construction of two 500-bed hospital buildings in two phases. Expected completion Bin Abdul Aziz area for Phase 1 by Medical City in Al October 2015/ Phase Jouf, Phases 1 & 2 2 by October 2017 Alfanar, MEED, Construction Week Online, Oil & Gas Journal, Dar Al-Handasah, Gulf Business, Arab News, American Council of Engineering Companies, Arabtec, Source: Yasref, Arabian Business, The National, Emaar, BBC, CNN, Ernst & Young, The GCC Power and Water Forum, Business Korea, Creamer Media’s Engineering News, Hajr Electricity Production Company, Arabian Bemco, Parsons, Bechtel, Oxford Business Group Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 42 - Saudi Arabia: Major Construction Projects (cont’d)

Project Name Value, USD mn Capacity/Length Overview Timeframe Transport Infrastructure National Railway 97,000 9,900 km During the first USD 16.8 bn stage, continuing from 2010 to 2025, 5,500 km are to be built. In the second Expected completion Network USD 55.7 bn phase 3,000 km are to be built between 2026 and 2033. In the last USD 24.8 bn stage, 1 400 for Phase 1 by km of railway will be constructed between 2034 and 2040. Among other improvements and construction 2025/Phase 2 by works, the first stage foresees the construction of the connection to the GCC railway network with lines 2033/Phase 3 by 2040 between Batha at the UAE border - Hofuf and Jubail - Ras Al Khair - Kuwait border, as well to Qatar and Bahrain. In addition, some other major projects that are part of the first 2010-2025 phase are the railway landbridge between Riyadh and Jeddah, the Haramain high speed railway connecting Makkah – Jeddah – Madinah, and the north-south mineral line between the northern regions, Ras Al Khair/Jubail and the capital Riyadh.

Jeddah Public approx. 35,000 approx. 1,300 km The Masterplan of Jeddah Public Transportation foresees the construction of a 1,356 km multi modal The Project should be Transportation public transport system. It will consist of a metro network of 149 km, a 16 km tram and 74 km light rail completed by 2033 Program (JPTP) transit system, a 308 km rapid bus network and 210 km major bus routes, 350 km of local bus feeder, and 195 km of commuter rail. King Abdulaziz approx. 28,000 KAIA is undergoing a massive expansion that is organised in three phases. Upon completion, the Q4 2010 - Q4 2035 International Airport expansion would lead to ultimate capacity of around 80mn passengers a year. While Phase 1, costing (KAIA) Expansion about USD 7bn, is being finalised in 2014-2015, Phases 2 & 3 are in study stage.

Riyadh Metro Rail 23,000 178 km Once completed, the metro network will comprise six lines and 85 stations including underground, Q3 2013 - Q4 2018 Project elevated and at-grade sections. In addition, an 85 km three-line Bus Rapid Network (BRT) will be built and integrated with the metro stations Makkah Metro Rail 16,000 182 km The Makkah metro will consist of 4 lines and 88 stations, whose construction will be spread over 3 phases. 2015 - 2025 estimated Project Phase 1 will take 3 years and cost USD 6.8bn. Phase 2 should be completed for 5 years at a cost of USD 5bn, and the final USD 4.5bn stage will take 2 years. Asir - Jazan Road 1,600 135 km The road would stretch from Al-Far'a recreation park in the south of Abha to Beesh in the north of Jazan th Connection area. Tender documentation concerning the construction of the road was accepted until April 5 , 2015.

th Makkah - Jazan 1,100 The tender documentation concerning the construction of the road was accepted until April 20 , 2015. Road Connection Alfanar,MEED, Construction Week Online, Oil & Gas Journal, Dar Al-Handasah, Gulf Business, Arab News, American Council of Engineering Companies, Arabtec, Source: Yasref, Arabian Business, The National, Emaar, BBC, CNN, Ernst & Young, The GCC Power and Water Forum, Business Korea, Creamer Media’s Engineering News, Hajr Electricity Production Company, Arabian Bemco, Parsons, Bechtel, Oxford Business Group Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 43 - Saudi Arabia: Major Construction Projects (cont’d)

Ongoing Airport Expansion Projects Road Infrastructure Projects, Saudi Arabia Project City Value, USD Expansion Scope Project Value, Expected mn USD mn Completion Date Abha Regional Airport Abha 1,000 From 9,400 sq m to 78,000 Rennovation of Qulaiba-Abu Ajram road 757.0 Q2 2015 sq m and annual capacity of 5mn passengers Jubail - Al Qassim expressway 97.0 July 2016 King Abdullah bin Abdulaziz Jizan 900 Construction of a new 55,000 Hail - Madina dual carriageway extension 48.0 July 2016 Airport sq m airport with annual Riyadh Roads - Group 20 48.0 Q1 2017 capacity of 3.6mn Abu Hadriyah/ Hafr Al Batin/ Rafha road refurbishment 37.3 H2 2015 passengers. Madina to Tabouk expressway road 37.3 Project in progress as King Khalid International Riyadh 500 of May 2015 Airport Capacity expansion from 15 to 20-25mn passengers a Northern Borders roads rehabilitation 37.1 January 2016 year Al Jamjom to Al Zema highway 37.0 2017 Al Qassim Domestic Airport Buraydah 270 From 5,500 sq m to 36,000 Jazan coastal highway extension 37.0 Project in progress as sq m and annual capacity of of May 2015 1.5mn passengers Al Baha Domestic Airport Al Baha 160 Yanbu to Al Sharaf roads repair 35.0 December 2015 Annual capacity expansion Al Kharj to Al Gwayiyyah dual carriageway 33.4 July 2016 from 200,000 to 500,000 passengers King Fahed and Rawda road intersection 28.8 Q2 2015 Al Jouf Domestic Airport Al Jouf 100 Al Jawf Main Roads - Group 1 27.5 H1 2016 From 2,900 sq m to 13,000 Jazan agricultural roads - Group 26 27.2 July 2016 sq m and annual capacity of 1mn passengers Madina roads extension - Group 17 24.0 July 2016 Arar Domestic Airport Arar 84 Riyadh roads extension 27.2 July 2016 From 1,810 sq m to 7,560 sq m and annual capacity of Jazan roads extension 22.5 July 2015 518,000 passengers Makkah Road Group 21 22.5 September 2016 New International Airport Taif Tender is in Al Kharj to Riyadh/Dammam highway dualisation Upon completion, the 57 sq progress as of diversion 21.5 July 2016 June 2015 km airport will have annual Smaller projects 288.0 Projects in progress as capacity of 400,000 (total value) of May 2015 passengers. Saudi Tenders, Alfanar, Arab News, NACO - Netherlands Airport Consultants, SUSRIS – Saudi-US relations information service, Zawya Source: Projects via KFHR Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 44 - Saudi Arabia: Investment Climate

The US Department of State considers Saudi Arabia as an attractive and relatively stable market for investment. The Saudi foreign direct investment law permits foreigners to invest in almost all sectors of the economy with priority being given to investments in industry, transportation, education, health, communications technology, life sciences, and energy; as well as in the four "Economic Cities" that are at various stages of development. However, there is a “negative list” that currently prohibits FDI in 2 industrial sectors and 13 service sectors, among them real estate investment in Mecca and Medina, some subsectors in printing and publishing, audiovisual services, land transportation services excluding inter-city transport by trains, and upstream petroleum. All foreign investment projects in FDI Saudi Arabia must obtain a license from the Saudi Arabian General Investment Authority (SAGIA). Investments in specific sectors may require additional licences Regime from other government authorities, including, but not limited to, the Saudi Arabian Monetary Agency (SAMA), the Capital Market Authority (CMA), or the Communications and Information Technology Commission (CITC). SAGIA licences should be granted or refused within 30 days of receiving an application and supporting documentation from the prospective investor. In an attempt to ensure that investors do not just acquire and hold licenses without investing, SAGIA performs periodic licence reviews. However, these reviews might be seen as disincentive to longer-term investment commitments as the possibility of cancellation adds uncertainty for investors. While SAGIA has set up the infrastructure to support foreign investment, the US Department of State notes that many companies consider the process cumbersome and time-consuming. Importantly, SAGIA is responsible to maintain and review periodically the activities included in the “negative list” of sectors with prohibited FDI regime.

Foreign investors are not required to take local partners in many sectors and may own real estate for company activities. However, offices practicing law, accounting and auditing, design, architecture, engineering, or civil planning or providing healthcare, dental, or veterinary services must have a Saudi partner with holding at least 25% stake of the total investment. Right to Foreign investors are allowed to transfer money from their Saudi-based enterprises outside of the country and can also sponsor Private foreign employees. The minimum capital requirements to establish business entities range from zero to SAR 30mn (USD 8mn) depending on the sector and the type of investment. Ownership Foreign partners in service and contracting ventures organised as limited-liability partnerships must pay, in cash or in kind, 100% of and their contribution to the authorised capital. Despite the bureaucracy and red tape that accompany the establishment of such an entity, Establishment foreign investment is generally welcome in Saudi Arabia as long as it promotes economic development, transfers foreign expertise to Saudi Arabia, creates jobs for Saudis, and/or expands Saudi exports. There are no legal requirements for foreign investors to purchase from local sources or export a certain percentage of output, and their access to foreign exchange is unlimited. While not required to procure from local sources, investors may avoid import duties on raw materials only if they can prove that these are not available locally. There is no requirement that the share of foreign equity be reduced over time. Investors are not required to disclose proprietary information as part of the regulatory approval process, except where issues of health and safety are concerned.

In July 2003, the corporate tax rate on foreign investors was lowered to a flat 20%. It replaced a tiered system with tax rates as high as 45%. While this has been a step towards a more balanced treatment of foreign and Saudi-owned capital, the government tax policy still favours Saudi companies and joint ventures with Saudi participation. Hence, Saudi investors do not pay corporate income tax, but are subject to a 2.5% tax, or Tax Rates “zakat,” on net current assets. and After the financial crisis of 2008, followed by the default on USD 20bn in debt by two Saudi business concerns and the debt restructuring in Dubai, Access to credit availability has been limited to all parties. Credit became somewhat more available in 2011 and 2012, but extraordinary public spending has Credit limited the demand for private lending. In addition to large-scale supplemental programmes, credit is available from several government institutions, such as the Saudi Industrial Development Fund, which allocate credit based on government-set criteria rather than market conditions. In order to qualify for credit, companies must have a legal presence in Saudi Arabia. The private sector has access to term loans, and there have been a number of issuances of sharia-compliant bonds, known as "sukuk," but there is no fully developed corporate bond market.

The US Department of State notes that Saudi Arabia does not offer a transparent and comprehensive legal framework for resolving commercial disputes although the government is making progress in this direction. The indicator that affects most negatively the country’s ranking in the World Dispute Bank’s “Doing Business” report is resolving insolvency, on which it ranks 163rd out of 189 economies (data from June, 2014). Disputes with the government and over commercial issues generally fall under the jurisdiction of the Saudi Board of Grievances. The Board also Settlement reviews all foreign arbitral awards and foreign court decisions to ensure that they comply with Sharia law. This review process can take years, and outcomes are unpredictable. Even after a decision is reached in a dispute, enforcement of a judgment can take years. Therefore it is highly advisable to consult with local counsel prior to investing in order to review legal options and appropriate contractual provisions for dispute resolution.

Recruitment of expatriate labour in Saudi Arabia is regulated by the labour ministry and the interior ministry. The large majority of the private sector workforce consists of workers coming from Bangladesh, Egypt, India, Pakistan, the Philippines, and Yemen with Westerners making up less than 2% of the labour force. However, the labour ministry aims to reduce the expatriate population from approximately 30% currently to 20% of the total population. Hence, the government encourages the so-called “saudisation” - recruitment of Saudi employees - through a series of incentives and limits placed on the number of visas for foreign Labour workers available to companies. The “Nitaqat” plan, which was rolled out in 2011, has divided companies into sectors, each with a different set of quotas for Saudi Conditions employment based on company size. In 2013, the labour and interior ministries launched a campaign to deport illegal and improperly documented workers, which has resulted in higher labour costs for many businesses. In addition, all companies operating in Saudi Arabia, regardless of sector or size, are currently obliged to pay USD 640 per year for each expatriate employee in excess of the number of the company’s Saudi employees. Saudi labour law forbids union activity, strikes, and collective bargaining. However, the government allows companies that employ more than 100 Saudis to form "labour committees". The minimum age for employment is 14.

Within the UAE, the emirate of Dubai is the undisputed leader in terms of construction activity. The emirate is far ahead of the other emirates in terms of buildings that are completed or are under construction. In 2014, some 7,400 buildings were finished there with 57% of them being residential villas (built both for private and investment purposes) and 32% being commercial space. The number of completed buildings in 2014 grew by 5.6% y/y and continued the trend of recovery after the 2009 crash of the real estate market in Dubai. Within the 2010–2014 period, the residential Construction and commercial segments were the most volatile ones. The number of completed buildings dropped sharply in 2011-2012 but also led the 2013- Activity 2014 recovery, reflecting directly the market instability. The value of completed buildings in 2014 was AED 27.1bn – a 25% increase compared to the previous year. Value was mainly contributed by multi in the storey developments – tall mixed-use buildings accounted for 39% of the total value in the sector in 2014. Emirate of Over the 2010–2014 period, construction in Dubai hit rock bottom in 2012. The value of completed buildings, which was around AED 16bn that year, Dubai was grossly half the value realised in 2010. However, the sector has recovered rapidly and is now on its way to reach its 2010 value levels thanks to tighter regulations, coupled with strong fundamental demand. In 2014, approximately 21,000 buildings were under construction in the emirate of Dubai. Their number decreased by 24.1% y/y mainly due to the sharp decrease of stores under development, which dropped by almost 63% y/y. On the other hand, investment villas under construction have partially offset the decline of commercial space. Notably, their number almost tripled in 2014 compared to 2013.

The construction activity in the emirates of Abu Dhabi, Ajman, and Fujairah was weaker than that in Dubai. For instance, in 2014 around 3,300 buildings were completed in the emirate of Abu Dhabi – less than half of the number for the same year in Dubai. Marking a substantial 51% y/y decline, the drop in Abu Dhabi is mainly attributed to the residential segment. Indeed, the completed residential buildings in 2014 were 53% less than in 2013. Construction BMI experts note that the biggest risk in the Emirati construction sector over the 2015-2020 period stems namely from Activity private investment in Abu Dhabi - it could be adversely affected by lower oil prices as the economy of the emirate is In strongly dependent on oil. Other In 2014, some 2,600 building permits were issued in the emirate of Fujairah, almost half of them concerning residential Emirates developments. Although over the 2010-2014 period the number of permits issued per annum remained relatively stable, the emirate saw a major increase of the licensed area in 2014. More than 1.6mn sq m were licensed for construction, almost double the previous year.

Selected Economic Indicators

2009 2010 2011 2012 2013 2014 GDP, constant prices 2005 (USD bn) 200 203 213 223 235 243

GDP, constant prices 2007 (AED bn) 1,155 1,104 1,059 990 941 926

GDP, current prices (USD bn) 254 286 347 372 402 402

GDP, current prices (AED bn) 931 1,051 1,280 1,371 1,422 1,467

Real GDP Growth Rate (%) (5.2) 1.6 4.9 4.7 5.2 3.6

GDP: Construction, (AED bn) 121 122 122 120 125 132

GDP: Construction, Growth Rate (%) (1.3) 1.4 (0.1) (1.4) 3.4 6.1

Foreign Direct Investment, net inflows (USD bn, current) 4.0 5.5 7.7 9.6 10.5 n/a

Consumer Price Index (%) 1.6 0.9 0.9 0.7 1.1 2.3

Comments

The Emirati economy grew steadily at a CAGR of 4% over the 2009-2014 period. BMI experts anticipate 4% y/y real GDP growth in 2015. Dubai will continue to account for a larger share of the growth compared to Abu Dhabi thanks to increased activity in trade, tourism and real estate. The private sector’s access to credit in 2015 will be constrained as commercial banks increase provisioning to safeguard against potential loan losses due to the debt funding cliff. According to BMI, inflation is set to rise to 4% y/y. Over the 2011-2014 period, construction grew quite slowly by a mere 2.6% a year. Indeed, UAE was among the three MENA countries with slowest growth during the time, together with Tunisia and Yemen. The country is recovering slowly after the real estate crisis that hit it in 2009. During the 6-year period under analysis, the Emirati construction sector registered a growth of over 5% only in the last year. Nevertheless, the high growth trend will continue as the UAE is hosting the World Expo 2020 event – a sure boost for the industry in the upcoming years.

Source: CEIC, World Bank, BMI, Euromonitor Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 49 - United Arab Emirates: Construction Industry Forecast

Construction, Output (value-added index, 2015=100)

202 182 168 177 151 138 148 126 113 120 111 100 100 107 2015 2017 2020 2025 2030

United Arab Emirates Middle East Africa

Comments Experts from Oxford Economics forecast an almost twofold increase of the Emirati construction output value-added index in 2030 compared to 2015. Like in Saudi Arabia, the development of the construction sector in the United Arab Emirates follows closely the dynamics in Africa and lags slightly behind the Middle East. Within the UAE, Dubai is forecast to be the outperforming market over the 2015-2020 period as the city will be the host of the World Expo 2020 – a major driver for the construction industry. However, healthy growth is generally expected throughout the UAE, according to BMI experts. Indeed, in an attempt to offset the drop in oil prices, the UAE would continue to see major investments in tourism related projects, infrastructure and non-residential building segments. For instance, some of the major growth drivers between 2015 and 2020 would be projects related to airport expansions, rail and public transport infrastructure, energy and utilities infrastructure, as well as mixed-use cities and man-made islands designed to become huge tourist attractions.

Source: Oxford Economics, BMI Research, EMIS Insight Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 50 - United Arab Emirates: Construction Regional Data

Number and Type of Completed Buildings, units – Emirate of Dubai Value of Completed Buildings, AED mn – Emirate of Dubai

7,397 7,007 30,821 6,394 81 57 220 27,507 27,146 4,548 146 165 48 219 358 21,732 4,309 Floor Floor area 309 3,651 183 area ratios 243 7,660 15,984 4,616 ratios 183 1,743 Multi storey Multi 2,362 storey Public 13,291 62 2,119 facilities 4,267 Public 195 facilities 35 10,643 163 Industrial 8,244 171 2,394 167 1,817 Industrial 116 1,654 Stores 8,941 836 1,176 129 Investment 5,543 6,797 Investme 1,230 2,434 villas 5,006 nt villas 1,017 Private villas 3,276 309 1,974 Private 1,770 2,215 1,639 839 villas 2,656 2,842 2,320 2,557 Total 699 800 1,358 1,522 539 Total 1,661 1,529 4,970 4,353 3,436 3,239 3,857

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Source: Municipality of Dubai, CEIC Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 51 - United Arab Emirates: Construction Regional Data (cont’d)

Number and Type of Buildings Under Construction, units – Emirate of Dubai Number and Type of Completed Buildings, units - Emirate of Ajman

27,740 1,551 27,200 274 297 24,861 793 1,208 867 23,771 745 590 1,089 Others 296 258 981 453 641 Floor area 870 779 ratios 705 21,056 743 632 Commercial Multi storey 445 410 409 937 651 Public 454 181 Public 721 facilities 230 43 facilities 15,477 16,884 8 Industrial 808 43 13,806 33 6,298 21 34 Industrial 13,573 180 28 47 53 Stores 37 23 46 64 29 18 29 Residential/c Investment 29 26 ommercial villas 50 6,307 2,412 Private villas 50 Residential 2,256 1,448 2,298 742 608 624 618 Total 416 Total 6,671 7,046 6,483 6,163 5,733

2009 2010 2011 2012 2013 2010 2011 2012 2013 2014

Source: Municipality of Dubai, Licensing and Engineering Control Section - Building Department in Ajman, CEIC Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 52 - United Arab Emirates: Construction Regional Data (cont’d)

Number and Type of Completed Buildings, units – Emirate of Abu Dhabi Average Estimated Cost per sq m, AED - Emirate of Abu Dhabi

8,804 3,669 161 3,567 3,491

170 3,377

4,126 3,966

214 3,907

3,735 3,702

754 3,696

3,624

3,620

3,585

3,509 3,483

6,793 3,475

3,427

3,411

3,378 3,365

274 Commercial 3,271 3,148 6,118 3,148 212 240 2,944 197 132 43 Public 256 facilities 889 Industrial

3,298 7,505 117 Residential/c 105 ommercial 6,067 191 Residential 46 4,601

Total 2,839 2011 2012 2013 2014

Below 300 sq m 300-599 600-899 900-1200 2011 2012 2013 2014 More than 1200 sq m Average

Source: Statistics Center – Abu Dhabi Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 53 - United Arab Emirates: Construction Regional Data (cont’d)

Number and Type of Building Permits Issued, units - Emirate of Fujairah Licensed Area for Construction - Emirate of Fujairah

2,582 2,587 2,577 2,470 2,503

Others 319 96.6% 483 731 494 Commercial 606 54.0% 732 289 360 2,186 272

249 Public 1,751 98 296 facilities

91 185 1,656 260 0.0% 192 107 117 132 Industrial -19.9% 125 77 87 178 119 73 -38.6% Residential/c

ommercial 1,075 1,076 1,260 1,262 1,208 1,180 1,137 Residential

Total

2010 2011 2012 2013 2014

2010 2011 2012 2013 2014 Licenced Area, thou sq m YoY change, %

Source: Fujairah Municipality, Dibba Municipality Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 54 - United Arab Emirates: Major Construction Projects

Major Ongoing Projects

Project Name Value, USD mn Size/Length/Capacity Timeframe Commercial Construction Yas Island Development 37,000 25,000,000 sq m land area Expected completion in Q4 2018

Al Reem Island 37,000 6,300,000 sq m land area Expected completion in Q1 2023

Saadiyat Island Development 27,000 27,000,000 sq m land area Expected completion in Q4 2018

Masdar City 22,000 6,000,000 sq m site area Expected completion in Q4 2025

Downtown Burj Khalifa 20,000 2,000,000 sq m land area Expected completion in Q1 2020

Al Raha Beach Development 15,000 5,000,000 sq m Estimated completion date in Q4 2021

Ghantoot Green City 15,000 60,000,000 sq m site area Estimated completion date in Q1 2020

Dubai Marina 12,300 6,100,000 sq m land area Expected completion in Q4 2015

Meydan City 10,000 Expected completion in Q4 2019

Desert Rose City, Dubai 9,500 140,000,000 sq m Construction works are expected to start in 2016 and could take around 10 years. Mohammed bin Rashid City 8,168 5,016,764 sq m of land area Q1 2013 - Q1 2027 (estimated)

Al-Marjan Island Development 8,000 A cluster of five islands covering 2,700,000 sq m Expected completion in Q4 2017

Construction of 37 Towers in Abu Dhabi and Dubai 6,000 84,000 sq m total plot area Q1 2014 - Q1 2018 1,300,000 sq m total built-up area Dubai Pearl 6,000 1,858,060 sq m total built-up area After the project has been delayed, it is due for completion by 2018 Arzanah Development 6,000 1,400,000 sq m land area Expected completion in Q4 2016

Construction Week Online, MEED, The National, Reuters, Al Habtoor City Brochure, World Nuclear Association, Aldar, Arabian Business, Gulf Today, Arab News, Source: Zawya Projects, Trade Arabia, Gulf Construction Online, Business Insider, Emirates 24/7 News, Dubai World Central Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 55 - United Arab Emirates: Major Construction Projects (cont’d)

Major Ongoing Projects

Project Name Value, USD mn Size/Length/Capacity Timeframe Commercial Construction (cont'd) Port of Arabia (Mina al-Arab) 5,500 1,500,000 sq m land area Expected completion in Q1 2017 International City, Dubai 5,000 22,000 residences 5,000 retail units Expected completion in Q1 2020 Nujoom Islands, Sharjah 5,000 5,574,182 sq m Expected completion in Q4 2015 Al Habtoor City, Dubai 3,000 Over 3,000 hotel and residential units Q3 2012 - Q3 2016 Al Mamzar Beachfront Development, Dubai 2,723 4,000 residential units, 300 hotel rooms, and As of April 2015, design works were underway. 250,000 sq m of retail outlets Expected completion in Q4 2018

Dubai Parks and Resorts Complex 2,722 Complex of five theme parks Q1 2014 -2016 (Phase 1) Al Manhal Development, Abu Dhabi 2,000 600,000 sq m of land area Q1 2012 - Q1 2017 (estimated) Bluewaters Island 1,600 Man-made island located off the Jumeirah Beach Q2 2013 - Q1 2018 Residence (JBR) coastline. Saraya District of Abu Dhabi 1,400 136,000 sq m land area Expected completion by the end of 2015 Jewel of the Creek Development 1,360 123,955 sq m site area Q1 2012 - Q1 2017 Address Residence Fountain Views 1,000 A three-60-storey-tower complex. Q1 2014 - Q1 2017 (estimated)

Damac Towers 1,000 Over 1,800 residential units and 800-room 5-star Expected completion in 2016 hotel Taj Arabia at Falcon City of Wonders in Dubai 1,000 743,000 sq m land area, 213,677 sq m built-up Expected completion in Q4 2017 area Expo 2020 Venue, Dubai Complete project cost Site area of 4.38 sq km, including residential, In January 2015, a consortium was appointed to manage undisclosed hospitality and logistics zones. all construction-related activities

Deira Islands Complete project cost Land area of 15.3 sq km, comprising four islands, Tender bids were being accepted by January 2015. undisclosed 21-kilometre beachfront and accommodating over 357,000 people upon completion.

Aladin City, Dubai Project cost undisclosed as Six towers, linked by air-conditioned bridges. Construction works are expected to start in 2016 of February 2015 Construction Week Online, MEED, The National, Reuters, Al Habtoor City Brochure, World Nuclear Association, Aldar, Arabian Business, Gulf Today, Arab News, Source: Zawya Projects, Trade Arabia, Gulf Construction Online, Business Insider, Emirates 24/7 News, Dubai World Central Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 56 - United Arab Emirates: Major Construction Projects (cont’d)

Major Ongoing Projects

Project Name Value, USD mn Size/Length/Capacity Timeframe Residential Construction 2,300 homes situated on Yas Island, in Al Falah, and in 1,552 Expected completion in 2016 Al Ain Social Infrastructure Al Ain New Hospital 1,170 358,000 sq m, 719-bed capacity Q1 2014 - Q1 2018

Energy, Utilities and Mining Four Nuclear Reactors, Barakah 20,000 5,600 MW total capacity Q1 2012 - Q1 2020

Al Gharbia Chemicals Industrial City 20,000 12 plants Expected completion in Q2 2017

Upper Zakum Full Field Development 15,600 Expansion should lead to capacity increase of Expected completion in Q4 2015 250,000 bpd

Fujairah Oil Refinery 3,500 Processing capacity of about 200,000 bpd of crude According to Zawya Projects, the EPC contract should oil. be awarded by June 2015 and the project should be completed by end-2018.

Nasr Full Field Development Project, Packages 1,2,3 2,936 EPC contracts were awarded in November 2014. The start-up of the project is scheduled to be achieved by end-2018 and final commissioning by Q2 2019.

North East Bab Field Development, Phase 3: Al 2,250 2014 - 2018 Dabbiya Field

Abu Dhabi Alumina Refinery, Shaheen 2,000 Capacity of 2 mn tonnes of alumina annually in an 2014-2020 initial phase and additional 2 mn tonnes in a second phase.

Hassyan Power Plant, Dubai Estimated cost of over 1,200 MW Q1 2014 - Q1 2021 (estimated) 2,000

Construction Week Online, MEED, The National, Reuters, Al Habtoor City Brochure, World Nuclear Association, Aldar, Arabian Business, Gulf Today, Arab News, Source: Zawya Projects, Trade Arabia, Gulf Construction Online, Business Insider, Emirates 24/7 News, Dubai World Central Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 57 - United Arab Emirates: Major Construction Projects (cont’d)

Major Ongoing Projects

Project Name Value, USD mn Size/Length/Capacity Timeframe Transport Infrastructure Al Maktoum Intl Airport, Dubai 32,000 Annual capacity of 220 mn passengers and 16 mn The expansion will be carried out in two phases over a tonnes of cargo once the expansion is completed. six to eight year period.

Dubai Metro 14,352 Includes the construction of the Red, Green, Blue, Expected completion by 2030. Purple, Gold, and the Pink lines.

National Rail Network, Phases 2 & 3 9,620 907 km long Tendering for final design and build contracts for Phase 2 is in progress.

Dubai Intl Airport, Dubai 7,800 Annual capacity increase of 30 mn passengers Expected completion in 2018. upon completion.

Abu Dhabi Metro 7,000 130 km two-way track metro network Expected completion in Q4 2018

Midfield Terminal, Abu Dhabi Intl Airport 2,960 Construction of 700,000 sq m main terminal Expected completion in Q3 2017. building with initial annual capacity of 27-30 million passengers.

Dubai Water Canal 2,000 3 km long, 80 - 120 m wide, 80,000 sq m public Expected completion in Q4 2016 space

Mafraq-Ghweifat Main Road 1,400 327 km long Expected completion in 2017.

Al Ain International Airport Expansion Undisclosed Q1 2014 - Q1 2017

Construction Week Online, MEED, The National, Reuters, Al Habtoor City Brochure, World Nuclear Association, Aldar, Arabian Business, Gulf Today, Arab News, Source: Zawya Projects, Trade Arabia, Gulf Construction Online, Business Insider, Emirates 24/7 News, Dubai World Central, Airport Technology, Airport Data Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 58 - United Arab Emirates: Investment Climate

At present, the Emirati regulatory and legal framework favours local over foreign investors. The UAE maintains non-tariff barriers to investment in the form of restrictive agency, sponsorship, and distributorship requirements. In order to do business in the UAE outside one of the free zones, a foreign business in most cases must have a UAE national sponsor, agent or distributor, with at least 51% ownership of the business. The US Department of State reports that government tendering in UAE is not conducted according to generally accepted international standards, and re-tendering is the norm. Federal tenders must be accompanied by a bid bond in the form of an unconditional bank guarantee for 5% of the value of the bid. However, UAE federal government entities can tender internationally since foreign companies sometimes are the only suppliers of specialised goods or services that are not widely FDI available. Incentives are given to foreign investors in the free zones. Outside the free zones, no incentives are given, although the ability to purchase property as Regime freehold in certain favoured projects in Dubai would appear to be an incentive aimed at attracting foreign investment, as noted by the US Department of State. Four major laws affect foreign investment in the UAE: the Federal Companies Law, the Commercial Agencies Law, the Federal Industry Law, and the Government Tenders Law. These laws, especially the Federal Companies Law, are seen as the largest obstacles to foreign direct investment in the UAE. In addition to the mandatory Emirati majority stake in businesses involving foreign partners, these laws stipulate that branch offices of foreign companies must have a national agent, that distribution of foreign companies’ products in the UAE is only possible through exclusive commercial agents that are either UAE nationals or companies wholly owned by UAE nationals, that industrial projects must either be managed by a UAE national or have a board of directors with a majority of UAE nationals, among others.

The UAE restricts foreign ownership of land, with rules varying from emirate to emirate. Individual emirate policies allow non-GCC nationals to have freehold or leasehold rights in designated areas, but as codifying and procedures for title documentation remain to be established, it remains unclear Right to whether the "freehold" title means the same as it does in Europe or the United States. In December 2010, Abu Dhabi Executive Council (ADEC) Private issued Resolution No. 64 of 2010 on Regulations of Property Ownership stipulating that non-UAE individuals or legal entitites have the right to own, Ownership buy, sell, rent, mortgage and invest in investment areas. Non-UAE nationals may hold “mustaha” rights for up to 50 years (subject to renewal for a similar duration) and sign “usufruct” contracts for up to 99 years in properties located inside the investment areas. and The major attraction of the free trade zones (FTZ) is the waiver of the requirement for majority local ownership. Hence, in the free zones, foreigners Free Zones may own up to 100% of the equity in an enterprise. In addition, all free zones provide 100% import and export tax exemption, 100% exemption from commercial levies, 100% repatriation of capital and profits, multi-year leases, assistance in labour recruitment, and advanced infrastructure and logistic environment including easy access to sea and airports, buildings for lease, and energy connections (often at subsidised prices). Moreover, the free zone authorities provide significant support services, such as sponsorship, worker housing, dining facilities, and security. According to the UAE Embassy in the UK, there are 21 FTZ around the UAE, the biggest ones among them being Jebel Ali Free Zone, Sharjah Airport Intl Free Zone, Dubai Airport Free Zone, Dubai Media City, Dubai Internet City, and RAK Free Trade Zone.

Source: US Department of State, June 2014 Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 59 - United Arab Emirates: Investment Climate (cont’d)

There is no personal income tax in the UAE. Foreign banks, outside of the free zones, pay 20% tax on their profits. Foreign oil companies with equity in concessions pay taxes and royalties on their proceeds. There are no consumption taxes, and the GCC states formally implemented a single import tariff of 5% on most goods. Companies located in the numerous "free zones" across the UAE are exempt from Tax Rates the tariff on imports and re-exports that do not leave the zones. However, some exceptions do exist. and Dubai imposes a rental housing tax on expatriates equaling 5% of the rental charges. Access to UAE’s financial system is highly integrated and concentrated, thus remaining exposed to global vulnerabilities. However, in 2013 the IMF Credit noted that “the banking system maintains significant capital and liquidity buffers, and non-performing loans may finally have peaked at 8.7% in December 2012,” suggesting a significant turnaround in the UAE banking sector’s post-2008-2009 crisis health.

In 2006, UAE entered effectively the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards. As a result, arbitration awards issued in the UAE are enforceable in all 138 states that have acceded to the Convention, and any award issued in another member state is directly enforceable in the UAE. In general, disputes are resolved by direct negotiation and settlement between the parties themselves, by recourse in the Dispute legal system, or arbitration. In order to enforce arbitration judgments rendered in the UAE, a court certification that may take a long time is required. Settlement Commonly, commercial disputes involving foreign parties are heard in the civil courts in the federal system in front of a three-judge panel. However, commercial disputes might also come before the criminal courts, if one of the parties alleges criminal fraud or theft arising from a contractual dispute. All cases involving banks and financial institutions are required to be heard by civil courts. Interestingly, the Court of Dubai International Financial Center (DIFC) is also instrumental in commercial disputes resolution. The DIFC Court system operates independently of the UAE legal system on commercial disputes as part of the DIFC free zone. In October 2011, the Vice President and Prime Minister of the UAE and Ruler of Dubai signed a law allowing any Dubai-based business to use the English language DIFC Courts to resolve commercial disputes. The US Department of State reports that around 85% of UAE residents are non-Emiratis and approx. 98% of private sector labour are foreign workforce. To alter this ratio, the government has set a goal to increase UAE nationals’ participation in the workforce, dubbed “Emiratisation”. As of December 2010, all private corporations were required to reserve at least 15% of positions for UAE nationals. At banks, Emiratis must comprise at Labour least 40% of the workforce. The UAE National Human Resource Development and Employment Authority (Tanmia), is the federal body responsible for fostering Emiratisation. In May 2009, the cabinet approved the establishment of the UAE Emiratisation Council (UEC), which is responsible for Conditions formulating policies and standards to promote Emiratisation and for supporting the development of skills and competitiveness among nationals. Given Emiratis’ strong preference for public sector employment, in 2013, the UAE labour ministry proposed changes to its labour law to attract more citizens into the private sector. The changes include proposals to bring private and public sector salaries in line; adjust working hours and days, and increase the number of private sector holidays. Visas, residence permits, and work permits are required of all foreigners in the UAE except nationals of the GCC countries.

Top 15 M&A Deals in the Construction Sector in MENA, 2013 and 2014

Deal Value Stake Date Target Company Deal Type Buyer Country of Buyer USD (mn) (%) 18-Jan-13 Orascom Construction Industries SAE Acquisition OCI NV Netherlands 7300.00 97.44 (Official data) 29-Sep-14 Emaar Malls Group PJSC IPO Undisclosed buyer(s) n/a 1579.61 15.37 (Official data) 11-Nov-14 Arabtec Holding PJSC Minority stake Aabar Investments PJS UAE 962.67 15.99 purchase (Market estimate) 8-Jan-13 Sorouh Real Estate PJSC Acquisition Aldar Properties PJSC UAE 920.00 100.00 (Official data) 8-Jul-13 Arabtec Holding PJSC SPO Undisclosed buyer(s) n/a 641.10 50.00 (Official data) 11-Jul-13 Archirodon Group NV Minority stake n/a 190.00 40.00 Undisclosed buyer(s) purchase (Official data) 18-Feb-13 Aldar Properties PJSC Minority stake UAE 188.92 8.84 Mubadala Development Co PJSC purchase (Official data) 13-Jul-14 Rooya Group Acquisition Pioneers Holding Co Egypt 171.95 60.00 (Official data) 17-Jun-14 Al Hammadi Company for Development and n/a 168.00 30.00 IPO Undisclosed buyer(s) Investment (Official data) 12-Jun-14 Arabtec Holding PJSC Minority stake Undisclosed buyer(s) n/a 160.60 2.75 purchase (DW estimate) 3-Dec-14 Residences Dar Saada SA IPO Undisclosed buyer(s) n/a 127.45 20.00 (Official data) 26-Nov-13 Target Engineering Construction Co. LLC Minority stake UAE 73.50 38.00 Arabtec Holding PJSC purchase (Official data) 18-Jul-13 Petrofac Emirates LLC Acquisition Nama Development Enterprises; UAE; United 70.00 51.00 Petrofac Ltd Kingdom (DW estimate) 13-Nov-14 Eshraq Properties Co UAE 58.72 10.00 Eshraq Properties Co Buy-back of shares (DW estimate) 14-Aug-14 Arabtec Holding PJSC Open market n/a 48.00 0.95 Undisclosed buyer(s) purchase (Market estimate) Source: DealWatch Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 62 - M&A Activity, 2013-2014

Number and Value of Top Deals in MENA’s Construction Sector Distribution of Top Deals by Deal Value, USD (%)

3 3 3 3 > 1000mn; 2 500.1-1000; 22.2%

1 33.3% 8,409 0 0 1,800 901 1,149 0 74 0 329 0-50mn; 11.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 50.1-100mn; 2013 2014 33.3% Total value of deals (USD mn) Number of Deals

Distribution of Top Deals by Deal Type (%) Distribution of Top Deals by Region of Investors (%)

UAE 37.5% IPO 20.0% Acquisition 26.7% SPO 6.7% Netherlands 6.3% Buy-back of United shares 6.7% Kingdom 6.3%

Undisclosed Egypt 6.3% Open market 43.8% Minority stake purchase 6.7% purchase 33.3%

Income Statement (Consolidated, USD mn) Highlights . Arabtec Holding PJSC is a United Arab Emirates-based company that was established in 1975 and acts as a holding 9.6% company to its subsidiaries, primarily investing in the 8.7% construction sector through the acquisition of contracting and related companies. Listed on the Dubai Financial Market 6.1% since 2004, the company is one of the largest heavy

2,667 2,667 construction players in MENA.

2,009 2,009 . Its projects vary greatly and include offshore and onshore oil

1,542 1,542 and gas installations, airport development, aircraft

193

162

134

103 58 38 maintenance hangars, passenger terminals, departure lounges, fuel tank farms, drainage & electrical high and low 2012 2013 2014 voltage, contracting services to residential projects, luxury Net Revenues EBITDA Net Profit EBITDA margin villas, hotel interiors, cinema complexes, hypermarket fit outs, food courts. Balance Sheet (Consolidated, USD mn) . The company has organised its operations in the following business lines: o High Rise Development 1.14

o Residential Development 3,911 3,911

3,490 3,490 0.28 o Hotels and Hotel Interiors o Airport Development

2,441 o Commercial Development

1,625 o Luxury villas

1,571

45 152 912 o Stadiums -2.17 o Mixed Use Development o Industry Projects 2012 2013 2014

(417.82) o Oil & Gas Total Assets Shareholders' Equity Net Debt Net Debt/EBITDA

Share Price Statement, 2014 Highlights 8.71 . Arabtec is a key contractor in some of the largest airport 6.09 infrastructure projects in UAE. They include the 5.26 4.96 construction of: 4.32 5.03 4.73 4.56 3.61 o Midfield Terminal Building at Abu Dhabi Intl Airport – a 3.91 3.51 3.18 USD 2.9bn contract awarded to a JV between Arabtec,TAV and CCC, o Air Traffic Control Tower at Dubai World Central Intl Airport (DWC) in 2007-2008 – a USD 40mn contract, Q1 Q2 Q3 Q4 Highest price, quarter average o Cargo Terminal Building at DWC – a USD 76mn contract, Lowest price, quarter average o Passenger Terminal at DWC – a USD 26.7mn contract Closing price, quarter average awarded to Arabtec/Max Boëgl JV, o Central Utility Plant at - a USD 7.1mn contract, Allocation of Shareholders’ Equity by Geography, 2014 o TD-119 VIP Pavilion & Crew Access Building at Dubai Intl Airport – a USD 1.9mn contract,

Arab 17% o Expansion of Terminal 2 at Dubai Intl Airport – a USD 163mn contract, o Renovation and expansion of Dubai Intl Airport Terminal 1 – a USD 50.1mn contract. Local 68% GCC 6% . Currently Arabtec employs over 40,000 people.

Others 9%

Income Statement (Consolidated, USD mn) Highlights

7.4% . Drake & Scull International PJSC, or DSI, became a publicly listed company in 2008 when it rolled out its IPO on the Dubai Financial Market. 6.7%

. The company specialises in mechanical, electrical and 1,330 1,330 1,298 1,298 plumbing services along with infrastructure, water and power 6.2%

905 905 and civil construction services.

. DSI has streamlined its operations in the following units:

45 27 26 o Drake and Scull Construction offers general construction services for commercial, industrial, power and water as well 2012 2013 2014 as heavy general contracting projects. Net Revenues EBITDA Net Profit EBITDA margin o Drake and Scull Engineering offers engineering (MEP and Water and Power) services for large scale projects in Balance Sheet (Consolidated, USD mn) aviation, education, mixed use, residential, tourism, district cooling, hotels, commercial offices and data centres. 5.18 o Drake and Scull Rail offers complete EPC solutions for all systems and services for stations, depots and tunnels. o Drake and Scull Oil and Gas offers construction and

2,333 2,333 construction management contracting services to the

3.12 1,953 petrochemical industry.

1,753

839 811

755 o Drake and Scull Development focuses on public-private partnerships for large scale infrastructure projects in the 1.84 418

181 MENA region, South Asia and Europe. 188 o Passavant Energy and Environment develops technologies 2012 2013 2014 and processes in municipal wastewater, sludge, water and Total Assets Shareholders' Equity Net Debt Net Debt/EBITDA industrial wastewater treatment.

Backlog by Business Stream, 2014 Highlights

Engineering . DSI has executed mechanical, electrical and plumbing 38% engineering works on airport infrastructure projects including: o International Airport Terminal phase II, Abu Dhabi – UAE, Oil & gas 15% o Extension for Military Airbase, Dubai – UAE, o Kai Tak Airport - Hong Kong, o Phase I Air Cargo Terminals - Hong Kong, General o New Doha International Airport CP15 – Qatar, Water contracting o Dar Es Salaam International Airport,Dar Es Salaam – 42% treatment 5% Tanzania. • The company has also incorporated HVAC (heating, Backlog by Geography, 2014 ventilation, and air conditioning), smoke ventilation, general air extraction, fire protection & alarm systems, exit Dubai 10% Abu Dhabi 8% systems, and electrical distribution systems in railway Algeria 6% infrastructure projects that include:

Jordan 7% o Channel Tunnel Rail Link Line Infrastructure - London UK, o St. Pancras Station Redevelopment -London UK, Egypt 18% Qatar 5% o Jubilee Line Extension Project - London, UK. Kuwait 2% . DSI has established offices in UAE, Saudi Arabia, Kuwait, Iraq 1% Oman, Qatar, Egypt, Jordan, Algeria, Iraq, Thailand, Vietnam, India, China, Germany, Romania, and Turkey. Saudi Arabia Others 8% 35%

Income Statement (Consolidated, USD mn) Highlights

21.0% 19.1% . Combined Group Contracting Company, or CGC, was 16.5% established in 1965 in Kuwait as a limited liability company. The company became a publicly traded shareholding company in 2006, when it was listed on the

847 Kuwait Stock Exchange with a capital of approx. USD

694 40mn.

162

444

114 93

92 . The company operates in the construction industry and its 56 24 activities include carrying out civil, mechanical and contracting work, trading of loose and packaged cement, 2012 2013 2014 manufacturing and selling building materials and related Net Revenues EBITDA Net Profit EBITDA margin products. Balance Sheet (Consolidated, USD mn) . Through its branches and subsidiaries, CGC is present in Kuwait, Saudi Arabia, UAE, Qatar, Syria, Iraq, Lebanon and Oman. 1.48 . Among the assets owned by the company are a concrete 1.15 mixing plant with a production capacity of 160 cubic meters / hour, asphalt plants with production rate of 440 tonnes/hour, and an extensive fleet of earth moving, road

paving and construction vehicles, as well as pumping

915 911

838 equipment together with numerous other transportation

1,390 1,390 1,329

0.43 1,326 vehicles 169

108 . Currently CGC employs around 10,000 people. 69

2012 2013 2014 Total Assets Shareholders' Equity Net Debt Net Debt/EBITDA

Revenues by Division in 2014, KWD thou Highlights

52,357 . In the Roads & Infrastructure sector, the company has executed projects in countries like Kuwait, UAE, Qatar, 38,486 Indonesia, and Mongolia. . Some of the major road infrastructure projects that CGC 19,026 17,489 has worked on include: 5,532 5,015 o Design, construction and completion works on a sea bridge connecting Kuwait City and Subiyah (project still in 1 progress). CGC’s share of total works on the bridge amounts to approx. USD 570mn. Construction Highways Water & Electricity o Infrastructure development of small and medium scale Oil Maintenance & Services Others industrial area in Doha, Qatar. The USD 189.6mn project was completed in March 2012. Revenues by Geography in 2014 o Infrastructure development for north residential and west waterfront areas at Lusail City, Doha, Qatar, The USD Qatar 21% 183.2mn project was completed in January 2013. o Construction, completion and maintenance of the interchanges of the main highways (Sixth Ring Road) connecting to new housing area at South Jahra, Kuwait. Kuwait 66% The USD 140.2mn project was completed in November, UAE 13% 2013.

Income Statement (Consolidated, USD mn) Highlights

12.2% . Founded in 1972, Galfar Engineering & Contracting 10.5% SAOG, also known as Galfar, is the largest construction 9.1% company in Oman with capabilities in the Oil & Gas, Roads & Bridges, and Civil & Utilities sectors. It operates

1,104 1,104 in Oman, and in other GCC countries as well as in India. 969 969

855 855 The company is listed on the Muscat Securities Market.

. It offers to its clients various services in the fields of

116

104 88

24 engineering, procurement, construction, operations & 20.16 0.44 maintenance, and project management. 2012 2013 2014 . Galfar’s Roads & Bridges Unit was established in 1989. Net Revenues EBITDA Net Profit EBITDA margin Since then, it has completed the construction/ rehabilitation of over 1,500 km of roads in Oman. The unit Balance Sheet (Consolidated, USD mn) has a central full-fledged materials testing laboratory for soil, asphalt and concrete testing in addition to various site laboratories. It is also self-sufficient in the production 5.95 of major road building materials such as aggregates and asphalt. 4.42 . Galfar owns 1,134 heavy machines, 794 light machines, 4.03 811 miscellaneous machines, 977 electrical machines, 69

stationary plants, 1,614 heavy vehicles and 2,178 light

1,306 1,306

522 513

1,284 1,284 vehicles.

1,187

421

276 267 237 . It employs more than 23,000 people and is the largest employer of Omani nationals in the private sector. 2012 2013 2014 Total Assets Shareholders' Equity Net Debt Net Debt/EBITDA

Source: Company Data, EMIS Insight Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 70 - Galfar Engineering And Contracting SAOG PLC (cont’d)

Segment Results, OMR thou Highlights

9,009 . Some of the major roads & bridges projects that are already completed include the dualisation of Wadi Adai Al Amerat Road, Rushtaq-Miskin Road, the rehabilitation of Batinah Highway, and the USD 340mn value Muscat Expressway. 1,083 1,550 1,054 107 5 61 . Transport infrastructure projects that are currently being executed by Galfar include: December, 2013 December, 2014 o Construction of Batina Expressway (Package 1), value of (126)(2,343) (2,620) contract USD 422mn, Construction Manufacturing Hiring of equipment o Development of Salalah International Airport Project, Training Inter segments value of contract USD 236mn, o Rasl Al Hadd Airport Development Project (Package 2, Segment Assets, OMR thou Airfield Development), value of contract USD 104mn, o Construction of Hasik - Ash Shuwaymiyah Asphalt Road, 496,539 514,568 value of contract USD 288mn, o Dualisation of Nizwa - Thumrait Road (Izz - Adam Section), value of contract USD 132mn, o Dualisation of Taqah - Mirbat Road, value of contract USD 105mn, 4,641 3,138 178 6,387 2,893 133 o Construction of Grade Separated Junctions along Batinah December, 2013 (8,738) December, 2014 (21,696) Highway - Stage 3 (Part 1), value of contract USD 59mn, o Procurement and construction of asphalt road in the Construction Manufacturing Hiring of equipment Khazzan area, value of contract USD 24.2mn. Training Inter segments

Income Statement (Consolidated, USD mn) Income Statement (Consolidated, USD mn) Highlights

21.0% 19.1% 16.5% . The National Marine Dredging Company was established in 1976 as a unit of Abu Dhabi National Petroleum

847 847 Company. It became an independent shareholding

694 694 company in 1979. The company is listed on the Abu

162

444 444

114 93

92 Dhabi Securities Exchange. 56 24 . It is primarily engaged in the execution of dredging contracts and associated land reclamation works in the 2012 2013 2014 territorial waters of the United Arab Emirates and Qatar. Net Revenues EBITDA Net Profit EBITDA margin . The dredging and reclamation works, the company’s main business, comprise capital and maintenance dredging Balance Sheet (Consolidated, USD mn) (inclusive deepening of water passages); artificial island construction; land reclamation using dredged material; 1.48 and creating water channels, intakes and outfalls. . Since 2009, the company has diversified its operations 1.15 into marine construction as well. It includes activities like construction of breakwaters, revetments, groins and

related rock works; concrete armour protection;

915 911

838 construction of gravity quay walls, retaining and

1,390 1,390 1,329

0.43 1,326 diaphragm walls; boat ramps and slipways; beach 169

108 construction and nourishment; and marinas and pontoons. 69

2012 2013 2014 Total Assets Shareholders' Equity Net Debt Net Debt/EBITDA

Growth in 2013 vs. 2010 Highlights 19% . Among the projects undertaken by the National Marine Dredging 18% Company are dredging works to construct a “Destination Village” to host the Volvo Ocean Race in Abu Dhabi in 2011; dredging works to nourish the beach of Yas Island; rehabilitation 11% and 2.7 km. extension of the Corniche public beach in Abu Dhabi; land reclamation on Sir Baniyas Island; dredging and sand reclamation to create the Nareel Island in 2007; site preparation works on Al Maryah Island (Abu Dhabi); and 0.29% dredging and sand reclamation works to create Al Gurm Island Resort. 1 . Marine construction projects include dredging the channel and basin of the Sulphur terminal at Ruwais Port and creation of 20 Revenue growth Fixed assets growth mn m³ artificial island; dredging a navigation channel at Equity growth Share price growth Ghantoot Harbour; capital and maintenance dredging at berths 14 & 15 at Jebel Ali Port in Dubai; dredging and reclamation for Market Capitalisation vs. Equity to Market Value the new central areas of Fujairah Port, deepening of the then 1.70 existing port to a depth of -15 m. and dredging of a complete new basin to a depth of -18 m.; dredging, reclamation and 1.36 1.35 marine works for the New Fishing Port at Abu Dhabi (2009- 2011); construction of the Mussafah Channel, Abu Dhabi, (63.5 2,276 km. long, 200 m. wide; 9 m. deep); and design and 1.05 2,278 construction of a private marina (Al Bateen Marina) for the

berthing of yachts with a design depth of – 8.5 m., New Abu 2,087 Dhabi Datum.

1,959 . The company’s fleet consists of cutter suction dredgers (CSD) with capacity from the small Beaver dredger Jananah (1,795 KW) to the most powerful automated dredger the Al Sadr 2006 2007 2008 2009 (20,725 KW). The dredgers are supported by tugs and multicat crafts, and A-Frame barges wherever necessary. Market capitalisation, AED mn Equity to market value

Corporate Headquarters Americas Headquarters Asia Headquarters 6-8 Bouverie Street 225 Park Avenue South Eucharistic Congress Bldg. No. London EC4Y 8DD New York, New York 10003 III UK US 4th Floor, 5 Convent Street Voice: +44 20 7779 8100 Voice: +1 212 610 2900 Mumbai 400 001 Fax: +44 20 7779 8224 Fax: +1 212 610 2950 India Voice: +91 22 22881123 Fax: +91 22 22881137

Disclaimer: The material is based on sources which we believe are reliable, but no warranty, either expressed or implied, is provided in relation to the accuracy or completeness of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional Investor PLC take no responsibility for decisions made on the basis of these opinions. Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. A Euromoney Institutional Investor company.

About EMIS Insight EMIS Insight is a unit of EMIS that produces proprietary strategic research and analysis. The service features market overviews, industry trend analysis, legislation and profiles of the leading sector companies provided by locally-based analysts.

About EMIS Founded in 1994, EMIS (formerly known as ISI Emerging Markets) was acquired by Euromoney Institutional Investor PLC in 1999. EMIS works from over 15 offices around the world to deliver electronic information products, by subscription, to institutional customers globally. EMIS provides hard-to-get information covering more than 100 emerging markets. Its flagship products are EMIS Intelligence and EMIS Professional. EMIS clients include top investment banks, corporations, law firms, consultants, investment and insurance companies, universities and libraries, multilateral organisations, and others.