Construction Labour

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This week, the UAE government has been defending the investor friendly business environment that is stimulating the construction industry in the country.

Defending the government's regulations within the construction sector, Ali bin Abdullah al-Kaabi, the minister of labour, told the local press that the labour cost in the country, including accommodation costs, fees and salaries, does not exceed 14% of the total amount of money allocated for any project.

He further stressed that this percentage based fee was the maximum limit only levied against companies in category C and that those for companies in categories A and B were less. Al-Kaabi also pointed out that these labour fees were among the lowest in the world. He further defended the record of the government on granting licenses for foreign labourers to contracting companies. He asserted that the UAE had only rejected 10% of the 700,000 applications by companies to bring foreign labourers to the country. Al Kaabi also suggested that these rejections were largely because the companies had failed to provide accommodation for the labourers they sought to bring to the country.

The government is, thus, keen to illustrate that it is seeking to strike the right balance between protecting the rights of labourers and providing an attractive operational environment for contractors and the construction industry in the country. However, many contractors are concerned that legislative changes and general labour costs are having a punitive effect on their business. Changes to the labour law which provide for greater ease of movement between companies for labourers are causing anxiety for many contractors who feel that their initial investment in bringing workers to the country is not protected. Contractors importing labourers pay in the region of Dh7000 ($1906) per labourer and have no security in retaining that labourer. However, there are currently discussions between the government and the contractor's association on establishing a compensatory structure for such situations. Contractors also have concerns over the price of housing workers, an issue that is affecting all housing units, particularly in Abu Dhabi.

Nevertheless, despite such concerns the sector seems to be in a healthy state. A recent report concluded that the UAE has the largest construction industry among Gulf Cooperation Council (GCC) countries. The UAE is the biggest spender on construction in the region accounting for $294bn worth of projects, which is more than Oman, Bahrain and Qatar combined. This compares with $201bn worth of projects in Saudi Arabia and $211bn in Kuwait. The construction sector in the UAE has grown at an average rate of 11% a year over the past decade, according to some analysts.

In Abu Dhabi, the growth of the construction industry is reflected in the announcement last week that the capital will be home to a building materials city. The Dh4bn ($1.09bn) zone is being developed by the local company Manazel and is expected to be completed by the beginning of 2010. The zone, which will be located 5 minutes from Abu Dhabi International Airport and 15 minutes from the city centre, is being touted as a hub for building materials contractors and manufacturers from the region.

According to Mohamed Mehanna al-Qubaisi, the chairman of Manazel developers, over 80% of the project is already booked out and he expects the remaining space to be filled by the end of the year. Only Emiratis will be allowed to own land in the zone with foreigners being allowed to take land on a long-term lease. The city will comprise 17 commercial towers, 32 residential towers, and an impressive 100,000 square metre shopping centre, used to house building materials showrooms. The area will also include a hotel.

Elaborating on the rationale behind the development al-Qubaisi said, "The project includes the first building materials stock exchange in the Middle East to make the city a hub for attracting manufacturers, importers and suppliers."

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