Dubai: Building broad foundations

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As Dubai’s construction sector moves into recovery mode, many contractors operating in the emirate are keeping an eye on opportunities at home while stepping up efforts to fill gaps in their order books abroad.

Mohammed Al Rais, the senior vice-president and managing director at project and construction management firm Hill International, told OBG the sector is moving forward again, though the focus in Dubai has somewhat moved away from big-ticket infrastructure projects.

“Today, Dubai has benefitted since it already has the infrastructure and is now witnessing a gradual comeback in the construction sector,” Al Rais said. He added that more detailed medium-term development plans from the government would help speed up this recovery. The company, while increasing its exposure abroad, most recently through the awarding of three contracts to provide construction and project management services to several clients in Iraq, is continuing to strengthen its position in Dubai and the wider UAE.

Indeed, there are signs that opportunities could be opening up again closer to home. In mid-March, a report by real estate firm Knight Frank showed that home prices in the emirate rose by 2.3% in the last quarter of 2011, ranking Dubai among the leading-10 markets globally for the three-month term.

Though the year-end price increase came to 0.5%, the quarter’s strong performance, coupled with modest growth in the preceding quarter, could indicate that the Dubai housing slump has bottomed out, and demand for new construction could heat up in the medium term.

Mohamed Meer Abdalla Al Raeesi, the UAE’s ambassador to France, told Construction Week Online recently that the domestic industry had picked up considerably in the last year and could exceed levels seen during its last boom.

“Maybe next year, it will be even bigger than it was before the crisis,” he told the website. While a number of leading construction firms are keeping an eye on local growth, many are also expanding their activities abroad. Several domestic construction companies are taking advantage of a development surge in other countries in the region, such as Saudi Arabia and Qatar, where massive state-backed investments in infrastructure, housing and commercial developments have made construction a growth industry.

Indeed, the construction sector in the GCC as a whole is poised to see $286bn in projects set to be awarded between 2012 and 2016, local media reported in April. Saudi Arabia is expected to lead the pack, with more than $119bn to be awarded; followed by the UAE, with $75bn; Oman, $30bn; Qatar, $26bn; Kuwait, $25bn; and Bahrain, $10bn.

"There is cause for optimism in the infrastructure and construction sector,” Edmund O'Sullivan, the chairman of Meed Events, organisers of the annual Arabian World Construction Summit, told Gulf News recently. “This kind of growth cannot be seen anywhere else in the world, and is still driven by huge petrodollar reserves. However, with the construction sector picking up pace, GCC economies are likely to benefit and experience a positive increase in their GDP in the next four years.”

There are also growing opportunities for contractors in Iraq, where the government plans to spend more than $35bn on real estate and transport infrastructure development by the end of this year. International contractors based in Dubai, who have years of project experience behind them thanks to the emirate’s own construction growth in the past decade, are well positioned to branch out.

“Dubai is a brand, a seal of quality,” Khaldoun Tabari, the CEO of Dubai-based contractor Drake and Scull International, told OBG. “All UAE-based businesses benefit from its name and this is especially true for the construction industry where Dubai is synonymous with quality, creativity and professionalism.”

Drake and Scull International has recently inked a series of new contracts for work in the Middle East and beyond, including a $38m agreement signed on March 18 to provide turnkey mechanical electrical and plumbing services for a hotel and serviced apartments development in Saudi Arabia, now the firm’s biggest market.

Earlier in March, the firm announced it had also secured a contract worth $27m to install an intake water system for a power plant in Orissa, and a $230m deal to provide civil engineering services in Algeria.

Tabari said in February that it is becoming increasingly important for the company to expand beyond its home base to maintain growth in what is now a highly competitive market.

Until the home market recovery becomes more established, however, local construction firms are parlaying their home-grown experience into international success, bringing higher revenue flows back into the local economy.

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