meed-logo

line1 line2 line3
SIGN IN / REGISTER

Bridging the infrastructure capacity gap

2 April 2024

 

The Middle East and North Africa (Mena) region faces a massive infrastructure gap, with estimates of the shortfall ranging from $75bn to $100bn annually. 

This translates to a cumulative need for $2-2.5tn in infrastructure investment alone by 2050. Bridging this funding gap will require a drastic increase in the level of investment.

In 2020, the World Bank stated that Mena countries needed to spend at least 8.2% of GDP to meet their infrastructure goals through to 2030. However, it had been averaging a spend of just 3% over the prior decade – mostly from public sector funds, alongside multilateral and bilateral debt financing. 

In the intervening years, the additional fiscal constraints imposed by the pandemic and global economic shocks, such as food price inflation, have further hindered regional public spending on infrastructure.

In 2023, the ICD-Refinitiv OIC Infrastructure Outlook valued the region’s outstanding funding gap for infrastructure development at $994bn. The gaps included a $685bn shortfall in investment in road infrastructure; a $111bn funding gap in the water sector; a $65bn gap in telecoms; $47bn in rail; $34bn in port infrastructure; $27bn in electricity network investment; and $25bn in airport infrastructure investment.

This funding gap has real, material impacts on economic prosperity and the prospects for economic growth. The shortfall in investment in road infrastructure, for example, is estimated to cost the Mena region a staggering 5.5% in GDP a year due to inefficiency and accidents, according to the World Bank.

A 2020 study in the Review of Middle East Economics and Finance found that manufacturing firms in the Mena region faced the most severe durations of power outages a month of any region, at 64 hours a month. The perceived value of the business losses due to these power outages was estimated to be around 4.8% of total sales.

Meeting the region’s annual investment needs could generate about 2 million direct jobs and 2.5 million direct, indirect and induced infrastructure-related jobs, according to the OECD. 

This is critical when half of the region’s population is under 24 years old, and 29% are not in employment, education or training, as per the OECD figures. 

Another very tangible infrastructure gap is water capacity. The current annual water shortage in the Mena region is about 42 cubic kilometres, but by 2050, this is projected to grow fivefold to 199 cubic kilometres a year under average climate scenarios and potentially up to 283 cubic kilometres a year under drier conditions. 

These examples highlight the need for substantial investments to bridge the infrastructure deficiencies, ensure the conditions for economic growth, and enhance overall sustainability in the Mena region.

To address the challenges, a comprehensive and multi-faceted approach is needed to incentivise the private sector to support regional infrastructure investments. This includes governments establishing clear policy directions and regulatory frameworks to attract private capital mobilisation.

This funding gap has real, material impacts on economic prosperity and the prospects for economic growth

Technological adaptation

In parallel with the need for governments to proactively improve the conditions for investment, the delivery of future infrastructure requirements also anticipates the adoption of emerging technology.

The goal of many countries to achieve net zero by 2050 also layers further complexity onto existing infrastructure challenges. Regional efforts such as the Middle East Green Initiative and the Circular Carbon Economy framework nevertheless demonstrate the region’s commitment to achieving its net-zero targets.

Reaching net zero will entail building infrastructure that is not just bigger and better, but smarter. At the Global Infrastructure Initiative Summit hosted by McKinsey in Dubai in February, disruptive thinking and technology were identified as vital to the industry’s evolution to meet the needs of a net-zero future. 

Industry leaders called for a nuts-and-bolts overhaul of the industry from the bottom up, with more sustainable alternatives to even centuries-old staples such as Portland cement and rebar. The digitalisation of the industry and the advent of machine-learning and AI also hold huge potential for cutting waste and designing more organic, efficient structures.

The summit highlighted that solving future infrastructure requirements will also likely necessitate overcoming technology hurdles and bringing costs down through research and development, much like the costs of solar power or reverse osmosis desalination have come down in the region. 

Alistair Green, a senior partner in McKinsey’s global infrastructure practice, pointed to the technologies that “are not at conviction, yet: the technology hasn’t even really been proven outside of the lab – like flow batteries, which are an alternative to lithium-ion batteries that can be used for grid-scale storage of long duration, energy storage. This is a technology problem that we’re actively investing in researching in order to bring the costs down.”

Strategy& and engineering consultancy Dar recently reported that sustainable construction technologies can potentially reduce lifecycle emissions from the Mena region’s $2tn construction pipeline through to 2035 by 50%-60% for planned projects. Simple changes can be highly effective, such as incorporating dynamic facades into building designs, which can deliver energy savings of up to 55% in hot countries.

The key is the level of innovation, not the level of technology. In the right application, a low-tech solution may be more efficient. If a low-tech solution is scalable, it is also likely to be more cost-efficient.

In the arid Ait Baamrane region of Morocco, a 2015 project by the NGO Dar Si Hmad has created the world’s largest operational fog-harvesting system, providing potable water using a system of shore-side nets that capture and condense the fog rolling in off the ocean. Launched after a decade of research, the system yields approximately 22 litres of water a day for each square metre of net. It demonstrates that infrastructure does not need to be expensive or complex to have a positive sustainability outcome.

The most pressing need for the Mena region is to improve the attractiveness of its infrastructure investment opportunities

Accessing finance

Without sufficient finance, the effectiveness of infrastructure development, including technological innovation within the sector, will be throttled. The most pressing need for the Mena region is to improve the attractiveness of its infrastructure investment opportunities.

Many governments, especially in the Gulf, have been focused on encouraging the private sector through better and wider public-private partnership (PPP) arrangements, with mixed results. Some countries have struggled to deliver PPP frameworks with sufficient commercial appeal and bankability, a problem usually linked to unattractive risk allocations on the private sector side.

Nevertheless, the mobilisation of PPPs and the creation of more transparent and efficient regulatory frameworks around them are routinely identified as vital for attracting and mobilising private capital.

The delivery of more sustainable infrastructure with a view to net-zero targets also brings the potential to tap into green finance, including green bonds and sharia-compliant sukuk. Projects targeted towards carbon neutrality open themselves up to more diverse avenues of potential finance, including international climate mitigation and adaptation funds.

Multilateral development banks, such as the Asian Infrastructure Investment Bank, support initiatives like the Catalyst Mena Climate Fund 2, which works to mobilise private capital for infrastructure projects focused on renewable energy, sustainable utility schemes and green hydrogen capacity.

Governments in the region are also taking steps to mobilise climate finance by issuing green sovereign bonds and sukuk to fund clean transportation, waste management and green building schemes.

The UAE’s infrastructure development is guided by the Green Agenda 2030 policy framework. Under this aegis, UAE banks, including Mashreq Bank and First Abu Dhabi Bank, have pledged to mobilise $270bn in green financing by 2030 for environmentally impactful projects.

Infrastructure financing schemes are an important step towards drawing more private sector liquidity into the infrastructure industry, but it is also just a start compared to what will be required to deliver the region’s infrastructure needs.

Deep regional inequality also needs to be addressed. While countries such as Saudi Arabia and the UAE may currently be meeting the World Bank’s 8.2% of GDP infrastructure spending targets, the region’s hydrocarbon importers will likely need far more outside assistance.

For the region as a whole to thrive, countries will also need to work together and synergistically to deliver holistic infrastructure roadmaps. Just as the GCC is working together to deliver the Gulf Railway, the Levant and North Africa must work together to develop their shared infrastructure.

Only through cooperation and joint initiatives will the Mena region stand to bridge its infrastructure gap.

Gulf construction holds huge emissions savings potential 

https://image.digitalinsightresearch.in/uploads/NewsArticle/11650914/main.gif
John Bambridge

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Arada completes Sokoon buildings construction

    26 March 2026

    Sharjah-based private real estate developer Arada has announced the completion of five additional buildings in the Naseej District of its Aljada development.

    Kuwaiti firm Mohammad Abdulmohsen Al-Kharafi & Sons secured the construction contract for the Sokoon buildings in 2023, replacing Airolink Building Contracting as the project’s main contractor.

    The first four Sokoon buildings were completed in December 2023.

    In April last year, Arada also announced the completion of all eight Tiraz buildings in the Naseej District. The Tiraz buildings comprise 920 homes, including studios, one-bedroom and two-bedroom apartments.

    With the completion of the five Sokoon buildings, Aljada’s total number of completed residential units has risen to more than 8,200.

    Spanning 2.2 square kilometres, Aljada features residential districts, retail spaces, educational institutions, healthcare services and other facilities.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16141382/main.png
    Yasir Iqbal
  • Local contractor wins Medina substation contract

    26 March 2026

    Danway Saudi Arabia has won a contract with National Grid SA to construct a new 110/13.8kV substation in Medina.

    The contract is valued at more than SR100m ($26.7m) and covers the construction of the King Abdulaziz Road substation, including design, engineering, supply, installation, testing and commissioning.

    The project is expected to take approximately 23 months to complete.

    Key components include 110kV gas-insulated switchgear (GIS), 50/67MVA 110/13.8kV power transformers and 13.8kV switchgear.

    National Grid SA is a wholly owned subsidiary of Saudi Energy, formerly Saudi Electricity Company. It owns and operates the kingdom’s high-voltage transmission network and is responsible for grid planning, interconnection and system reliability.

    The operator recently appointed another local firm, Nesma Infrastructure & Technology, as the contractor for the construction of two 380kV double-circuit overhead transmission lines in Riyadh, connecting an existing substation to a wind power substation, referred to as Samha Wind BSP.

    As MEED understands, National Grid SA is also due to begin construction on the replacement of 132kV oil-filled underground cable circuits between several substations in the Central Operation Area in Murabba in Riyadh.

    Riyadh-based Keir International is the engineering, procurement and construction contractor for the project.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16139578/main.jpg
    Mark Dowdall
  • Neom terminates $5bn Trojena dams contract with WeBuild

    26 March 2026

    Register for MEED’s 14-day trial access 

    Neom has terminated its contract with Italian contractor Webuild for the construction of three dams feeding a freshwater lake, as well as ‘The Bow’ architectural structure at Trojena in northwest Saudi Arabia.

    In a statement posted on its website, Webuild said: “The termination will become effective on 29 March. As of that date, the works are approximately 30% complete, with a remaining project backlog for Webuild of approximately €2.8bn ($3.2bn).”

    Neom awarded Webuild a SR20bn ($5bn) contract to build the dams in late 2023, which MEED exclusively reported at the time.

    The termination is the latest in a series of high-profile contract cancellations by Neom in recent weeks. Earlier this week, Neom terminated its contract with Malaysian contractor Eversendai Corporation for the steel structural works on the Ski Village project in Trojena.

    In a statement published on its website, Eversendai said it had received an official notice that the termination would take effect from 26 March.

    In January this year, Saudi Arabia confirmed the postponement of the 2029 Asian Winter Games, which were scheduled to be held at Trojena. Trojena was chosen to host the event in October 2022.

    Neom has also cancelled contracts for the construction of the tunnel sections of The Line in northwest Saudi Arabia.

    In a stock exchange filing dated 13 March, South Korean contractor Hyundai E&C said Neom cancelled its contract on 29 December last year.

    Hyundai E&C was executing the drill-and-blast section of The Line’s tunnels in a joint venture with Greece’s Archirodon and South Korean counterpart Samsung C&T.

    These developments follow a wider strategic review of Neom last year, as Saudi Arabia reassesses priorities under its Vision 2030 programme.

    With tighter liquidity at the sovereign wealth fund level, resources are being redirected towards projects linked to the Fifa World Cup 2034, Expo 2030, and essential housing, healthcare and education initiatives.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16140200/main.jpg
    Yasir Iqbal
  • Iraq gas field project disrupted by regional conflict

    26 March 2026

     

    Register for MEED’s 14-day trial access 

    Progress on Iraq’s project to develop the strategically important Akkas gas field has been disrupted by security issues related to the US and Israel’s ongoing war with Iran, according to industry sources.

    Work activity at the project site has been significantly reduced due to security concerns, and the project is now expected to take longer to complete.

    Iraq held a ceremony in January this year to mark the restart of drilling operations at the site as part of the field development project.

    In July last year, Iraq’s Oil Ministry announced signing a contract with the US-based oil field services provider SLB to develop production at Iraq’s Akkas gas field.

    Under the terms of the deal, SLB will drill wells at the Akkas field, aiming to initially raise production to 100 million cubic feet a day (cf/d).

    Many of SLB’s non-Iraqi employees have now been evacuated from the country.

    Over the long term, Iraq is targeting gas production of 400 million cf/d from the field.

    The contract with SLB replaces a previous deal with Ukraine-based Ukrzemresurs, which has been terminated.

    It also covers the construction of surface infrastructure and pipelines to connect Akkas to central processing units.

    The gas produced at Akkas will be used to fuel the Anbar combined-cycle power plant, which is under construction by the Electricity Ministry.

    Akkas gas field development

    The Akkas gas field, located in Anbar province in western Iraq, has 5.6 trillion cubic feet of proven reserves. The field was discovered in 1992 and began production in 1993.

    Since then, Iraq’s plans to develop the Akkas gas field to its full potential have experienced several setbacks.

    In April last year, the Iraqi Oil Ministry signed an agreement with Ukrzemresurs to develop the field.

    At the time, the Oil Ministry said that the partners were aiming to produce 100 million cf/d in the first two years, as per the agreement, with output targeted to increase to 400 million cf/d within four years.

    Prior to Ukrzemresurs, South Korean company Kogas was responsible for developing the field.

    Rights to the field were originally awarded to a consortium of Kogas and Kazakhstan’s state-owned oil company KazMunaiGas (KMG) in the third licensing round, which was launched in October 2011.

    KMG pulled out, leaving Kogas as the sole investor and operator on new contract terms.

    When the deal with Ukrzemresurs was originally announced last year, it was negatively received by some Iraqi politicians, with the Oil and Gas Committee in Iraq’s parliament rejecting the contract signing.

    At the time, Ali Al-Mashkour, a member of the Oil and Gas Committee, told Iraq’s Shafaq News Agency: “This contract involves a great waste of Iraq’s wealth, and there will be a waste of Iraq’s oil, and this confirms that Iraq is once again failing to choose reputable companies to work with in the most important economic field in the country.”

    He added: “We will work to uncover and expose the suspicions in this contract during the next stage, especially since this contract was made by some representatives for specific interests, which we will reveal soon with evidence.”

    Plans to sign the contract to develop the Akkas gas field with a Ukrainian company were first announced by the Oil Ministry in September 2023, but Ukrzemresurs was not named at the time.

    Iraq’s government is trying to transform the country into a gas-exporting nation. Currently, Iraq is reliant on Iran for gas imports.

    Both Saudi Arabia and the US, which are looking to contain Iranian influence in the region, have been supporting Iraq in developing its non-associated gas fields as this will reduce Iraq’s economic reliance on Iran.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16138892/main.png
    Wil Crisp
  • Dubai seeks contractors for Nadd Hessa stormwater project

    26 March 2026

    Dubai Municipality has invited contractors to prequalify for a contract to build a sewerage and stormwater system in the Nadd Hessa area.

    The project is being procured through the Sewerage and Recycled Water Projects Department.

    The submission deadline is 2 April.

    Nadd Hessa is an emerging development area, located between Dubai Silicon Oasis and Academic City along the E311 corridor.

    It has been earmarked for future residential expansion, with enabling infrastructure now being tendered to support planned housing and community developments in the area.

    The scheme, known as DS 328/1–C1, covers the construction of sewerage and stormwater infrastructure, including approximately 12.4 kilometres of sewerage lines with diameters of up to 400 millimetres.

    The scope also includes about 14km of stormwater lines with diameters of up to 1,000 millimetres.

    In addition, the project involves around 500 metres of microtunnelling works for both sewerage and stormwater networks.

    The municipality is currently prequalifying contractors for several upcoming water projects, including the expansion of the Jebel Ali sewage treatment plant (STP) phases one and two.

    The upgraded facility will be capable of treating an additional sewage flow of 100,000 cubic metres a day (cm/d).

    Bid submissions for this project are also due by 2 April.

    In addition, the authority is planning a broader review of Dubai’s water and wastewater infrastructure to support future population growth, including identifying locations for future infrastructure. 

    Two separate consultancy tenders were issued in March.

    One involves a study to develop a sustainable urban drainage systems strategy across the emirate. The other covers a review of the emirate’s sewage treatment and recycled water distribution strategy. 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16138660/main.jpg
    Mark Dowdall