Projects worth $42.5bn (AED156bn) are being constructed across various UAE sectors for Expo 2020 Dubai, it has been revealed.
This headline alone, can turn many heads towards the importance of Expo 2020 and its impact on the construction sector. There have been many talks around Expo 2020 in recent years and there is barely anyone in the region who hasn’t heard about it.
In this article, we are discussing the value Expo 2020 in bringing to the region and more specifically to the construction industry. Before we get into any details, it is important to understand what Expo 2020 is and the impact other previous Expos have had on the economy of hosting countries.
What is Expo 2020?
According to Expo 2020 website, “Expo 2020 is a Universal Exposition to be hosted by Dubai in the United Arab Emirates, opening on October 20, 2020. The Bureau International des Expositions general assembly in Paris awarded Dubai as the host on November 27, 2013.”
Expos have been taking place since 1851 and according to Bureau International des Expositions “An Expo is a global event that aims at educating the public, sharing innovation, promoting progress and fostering cooperation. It is organized by a host country that invites other countries, companies, international organisations, the private sector, the civil society and the general public to participate. Due to the diversity of its participants, from top decision makers to children, Expos offer a multifaceted event where extraordinary exhibitions, diplomatic encounters, business meetings, public debates and live shows take place at the same time.” And based on their same publications, Expos are a unique event for the following reasons:
- For the international community: Expo is a dialogue platform for progress and cooperation
- For the general public: Expo is an educational and entertaining experience
- For the host country: Expo is a tool for nation branding and development
- For participants: Expo allows international outreach and economic opportunities
Based on the pints above and given Dubai’s current economic standpoint and its diverse business ecosystem, naturally it has become the home for Expo 2020.
Previous Expos and their impact on the economy of the host country
In order to understand the value of Expo for Dubai and to forecast its impact on the construction sector, it is best to benchmark and look into previous Expos. The last Expo was held in Milan in 2015.
According to a report by Euler Hermes, ““In the short term, the positive momentum from Expo is expected to produce a value equal to +0.1% of the Italian GDP in 2015, concentrated in the third quarter,” said Ana Boata, European economist at Euler Hermes. “The expectation is a total GDP increase amounting to 0.7% in 2015 and to 1.1% in 2016, with the economic recovery speed remaining moderate”.
Apart from the positive effect on demand from abroad, the boost in domestic demand – after years of decline – is a positive sign. Consumer confidence levels are rising and durable goods purchases are again increasing. The labor market is on the rise – with 295,000 new jobs- following an all-time-low in November 2014; the unemployment rate is expected to drop from 12.7% in 2014 to 12% in 2015, and further to 11% in 2016.
Many industries are benefiting from a positive Expo impact. Specifically, revenues from tourism-related sectors have increased, especially in Milan and the Lakes region. These higher revenues helped increase the turnover of companies in the service industry, with the highest peaks being registered by the wholesale and distribution sector (+4.2% YoY in the second quarter of 2015), hotels and catering (+2.9% YoY), transport-related sectors (+2.1% YoY) and commercial services (+1.3% YoY). Moreover, Expo encouraged the inflow of foreign direct investment (FDI) to a level of 6 billion euro between February and April, the highest quarterly figure achieved since the end of 2013”
Before Milan, the previous Expo was held at Shanghai in 2010, according to Gulf Business, “The Chinese city received around 73 million visitors in total, with numbers reaching 1.03 million in just one day (16 October, 2010), according to the BIE report, ‘Making an impact: The power of the World Expo’.
Six new subway lines were opened between 2008 and 2010 along with 4000 new taxis in the city. The revenue from the tourism sector rose 13 per cent year on year during the Spring festival to reach $332.7 million.
According to a Bloomberg report, the event may have generated tourism spending of more than 80 billion yuan ($13 billion) for Shanghai, and neighbouring cities along the Yangtze River.”
Just by looking at the previous 2 expos, it is quite evident that they have a positive impact on the construction sector and since Dubai’s economy is quite welcoming to the tourism industry, Expo 2020 is expected to attract a significant number of tourists and just during the Expo, it is expected to receive over 25 million people from all around the world.
Current construction work at Expo 2020
According to AMEinfo, “It’s the grandest of all shows and Dubai, host of the event, has not taken this responsibility lightly.
When Dubai adopted its 2018 budget, spending $15.5 billion or some 20% more than 2017, it worried more about securing funds to host Expo 2020, than adding on a deficit of $1.7 billion.
The investment value of the Expo is estimated at 25 billion dirhams (Nearly $7bn).
Dubai’s budget sees more than 20% of it allocated to infrastructure spending, an increase of more than 40% from 2017.” Of course, the site of the Expo 2020 has been given significance budget by the government and over 100 countries are participating in constructing eye-catching and impressive pavilions for their countries to
attract investment. According to Arabian Business, New Zealand has committed $53 million to design, construct, operate and promote its presence at the six-month event.
According to Construction Global, “US$42.5bn of construct projects are currently underway in Dubai, UAE – designed for the nation’s Expo 2020.
The top 10 of the project amount to $32.7bn, accounting for almost 77% of the total, according to a BNC Network report.
The infrastructure and energy industries are constructing $17.4bn worth of projects, whilst housing construction comprises of $13.2bn of the total.
The BNC Construction Intelligence report claims that hospitality projects – such as hotels and theme parks – are costing $11bn.
The renovations being made on Phase One of the Al Maktoum International Airport are worth $8bn.”
Expo2020’s impact on the construction industry
According to Khaleej Times, “Preparations in the run-up to Expo 2020 are proving to be a catalyst for the UAE construction industry. The rise in oil prices is also beneficial for contractors since regional governments are beginning to restart old projects or invest in new infrastructure development.
However, contractors are not insulated from challenges – they face smaller margins, more competition in project bids, delayed payments and rise in the cost of doing business. There is also concern about the extent of project awards after all the Expo contracts have been let.
“There is a large amount of current activity but concerns remain about the volume of works after 2020. Meed Projects estimate that around 30 per cent of the $3.8 billion in construction contracts for the Expo have already been let, with another 60 per cent in the final procurement stage and expected to be let during 2018. The volume of new projects awarded across the UAE is expected to decline in 2019 and 2020,” says Alan Baker, JLL national director, project and development services – Mena.Sentiment in the UAE’s construction sector is optimistic as the region prepares for Expo 2020. According to Avin Gidwani, CEO of BNC Network: “As the demand for hotel rooms, housing and the need to expand infrastructure increases, one can see activity in a number of construction sites across Dubai. Crude price that is currently hovering over $60 per barrel, up from $40 to $50 a few months ago, is going to lift investor sentiment and will encourage the government and the private sector to invest in new projects or start held-over projects.”
According to a major law firm, Al Tamimi & Co.” If Dubai and the UAE can learn from the experience of previous Expo’s, it could move the country into a different level internationally and allow it to serve a wider community than what it is currently catering for. Potential areas of expansion include the areas of trade, manufacturing and service industries, including tourism.”
And According to The National, “The value of the UAE’s construction industry is set to increase to Dh181 billion next year from about Dh162bn this year, the company said. BMI Research also predicts growth of more than 6 per cent for the following three years as Dubai ramps up spending ahead of Expo 2020, but a fall-off of 2 to 3 per cent a year after 2020.
It said that Dubai’s planned projects in real estate and energy are “progressing well”, but said that Abu Dhabi had been more exposed to the downturn in commodities as government and private sector spending were more reliant on the oil and gas market.”
So what happens after Expo 2020?
According to a report by CNN, “Dubbed “District 2020,” the area which the expo occupies in Dubai South will undergo extensive redevelopments before reopening in October 2021 — not long after the expo closes in April that year.”
Some buildings will remain unchanged, including the Santiago Calatrava-designed UAE National Pavilion, modeled on the wings of a falcon. Others will be transformed on the inside: The Sustainability Pavilion, for instance, will live on as a center for child and scientific education. The Dubai World Trade Center Conference and Exhibition Center will also remain once the expo closes.
Over 80% of the 200 hectare site will be retained according to documents released as part of the announcement, and planners hope District 2020 will more than double in size to become a city in its own right.
“District 2020 will continue to carry forward Expo 2020’s mission of connecting people,” says Marjan Faraidooni, an official specializing in Expo 2020 legacy.
Undoubtedly, expos have significant impact on the overall economy of a country across different sectors, given that expos are quite reliant on construction, it will have a direct positive impact on the construction industry.