This time a year ago, the party that the global construction industry had enjoyed in the Middle East looked to be well and truly over.

“We were being offered ludicrous sums of money to bulldoze the desert and knock up a race track for camels in double-quick time,” says Adrian Ringrose, chief executive of Interserve, a UK construction company with half its business in the region.

“Even though the inventory value of those beasts is huge, you know that kind of market is never going to provide serious long-term prospects.”

Mr Ringrose describes his company’s multimillion-dollar contract to build three miles of graded sand for the dromedaries as Dubai at its most exuberant. When that exuberance ran out late last year, there were many in the construction industry who wrote off the Middle East as a basket-case market that could not be expected to provide long-term income.

Now there are signs that the construction industry in the region might be far from past its peak.

In the neighbouring emirate of Abu Dhabi, in Saudi Arabia to the east and Qatar to the north, publicly funded infrastructure projects have replaced the elaborate projects in Dubai.

During the past five years, the oil-exporting countries have built an estimated $1,300bn in oil earnings, much of which they are now keen to plough into improving transport, schools, hospitals and housing.

Abu Dhabi is well on the way to usurping Dubai as the cash-rich heart of the Middle East’s construction industry, with $105bn worth of state-funded projects being planned and already in progress in the United Arab Emirates capital.

Qatar is also going through a purple patch and the industry in the country is set to grow by 17 per cent in 2009, almost entirely fuelled by investment on large-scale infrastructure.

However, perhaps the richest spread of opportunities is in Saudi Arabia, where a growing population, demand for affordable housing and a government initiative to shift economic dependence away from oil have created huge potential for construction.

Another factor attracting companies to the country, which accounts for half of all construction spending in the region, is the mountain range bisecting it.

The rocky partition offers the opportunity of a complicated but lucrative project to develop a road and rail network able to link industry in the east with the pilgrimage sites in the west.

As well as the welcome return of investment in the Middle East, many of the companies in the region are happy to accept the loss of the double-digit profit margins enjoyed in Dubai in exchange for stability.

“Everyone froze when it became clear the credit crunch would affect what was going on in Dubai,” says Cynthia Corby, head of Gulf Co-operation Council construction at Deloitte and the author of a recent report into the industry’s prospects in the region.

“For a while the industry and the markets seemed to be in shock and everything just seemed to grind to a halt, but now that everybody has had a chance to sit back and assess there is plenty of positivity creeping back,” Ms Corby says.

Mr Ringrose agrees, and says the frenetic pace of work in Dubai and the demand-inflated margins created a market where it was inevitable that “people were going to get hurt”.

“A correction was needed after Dubai, and the current focus on infrastructure work is a long way from the bubble the industry out here was in two years ago.”

This view is widely held by construction groups active in the region, which say that in terms of both immediate stability and long-term visibility the market is improving.

However, construction in the Middle East is still feeling the aftershocks of its experience in Dubai.

Many companies remain wary of the emirate, owing to severe haircuts given to some, which are still owed hundreds of millions of dollars in unpaid fees.

In the near future, Dubai hopes to raise $10bn in bonds after the Abu Dhabi-based UAE central bank subscribed to its initial tranche of $10bn in February, damping fears that the emirate would default on its $80bn-plus in debts.

Across the region, demand for steel and cement is expected to fall 20 per cent during 2009.

Foreign companies also have trouble generating interest from investors, many of whom think of the region as a byword for risky investment.

“One of the biggest challenges for companies is trying to overcome the pessimistic investors who tend to focus on the horror story in Dubai,” says Ms Corby.