A Boon for Contractors

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Like many other countries around the world, Abu Dhabi is seeking to alleviate the effects of the global financial crisis through increased public spending, manifested by an overhaul of the entire transportation system.

This year's budget is the largest in the history of the United Arab Emirates (UAE), with infrastructure spending slated to increase by 24% year-on-year, to $11.5bn in 2009. According to local media, Abu Dhabi itself will spend around $275bn in the next five years on infrastructure projects[KTH2]. This naturally comes as good news for contractors, suppliers and developers, who welcome the extra cash flow at a time when credit remains tight.

Many projects have already been launched. The Department of Transport (DOT) has drawn up a shortlist of contractors to develop a 325km-long highway that will cross the Western Region and link Mafraq with Ghweifat near the Saudi Arabian border. According to officials, the project is in the pre-qualification stage and the tendering process will be launched within a month. Construction is scheduled to begin by the end of the year at an estimated cost of around $2.5bn.

Another opportunity for contractors is the $2.5bn Khalifa Port and Industrial Zone development, currently under way. The new port will have an initial capacity of 2m TEUs (Twenty-foot Equivalent Units) that will gradually be expanded to reach 6m TEUs. Khalifa Port will eventually absorb all of Mina Zayed's operations in 2010, with the capacity to manage an expected growth in imports and exports in the longer term.

Abu Dhabi airport too is undertaking a massive expansion project. Last month, it announced a short-list of contractors considered for the $6.8bn Midfield Terminal expansion. The first phase of the project calls for a 220,000 sq metre terminal which will accommodate 20m passengers per year (up from 12m currently). Ultimately, it aims to handle 50m passengers and 2m tonnes of cargo a year.

Among many ambitious plans to overhaul the sector, the Abu Dhabi Surface Transport Master Plan, which is set to be finalised in the second quarter of 2009, studies the possibility of building two metro lines in Abu Dhabi. The first would link Saadiyat Island and Al Mina, and pass through Central Station and Airport Road to the Grand Mosque district, Capital district, and Raha Beach. The other line would cross the downtown area, connecting Al Reem and Al Suwwah to Central Station and the Marina Mall area. According to the local press, the entire system, if implemented, would be operational by 2016.

Finally, plans for a national railway are underway after members of the Federal National Council urged the Ministry of Public Works to fast-track the project. The 537km regional railway will significantly reduce traffic on the heavily congested roads connecting the emirate. It will ultimately unite with a trans-GCC network that will connect all six member-states. The first phase of the UAE's rail network would see a double track railway built from Ruwais in Abu Dhabi to Fujairah. Eventually, there would be about 900km of track running from the coast to the Saudi border. The regional mega-project is estimated at around $14bn, and the first stage of construction, is expected to be completed by 2016.

An unintended benefit of the government's commitment to massive infrastructure projects is the banking sector.

In December 2008, Abu Dhabi Commercial bank (ADCB) set up the ADCB Macquarie Infrastructure Fund (AMIF) with equity capital of $630m. In February the fund made its first investment, worth $188m, which will give it exposure to government-commissioned infrastructure projects in the United Arab Emirates (UAE). In January, a consortium of international banks closed a $500m financing deal with the Abu Dhabi Ports Company for the development of Khalifa Port, a generous gesture at a time when many banks have tightened their lending policies on all major loan categories.

Although the short-term effects of the investments will be restricted to the ailing construction sector, the emirate is forging ahead with its economic diversification programme to ensure more balanced growth in the coming years.

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