Even though he turned 65 last week, Riad Kamal, the founder and chairman of Arabtec Holding, has no plans to retire just yet. "I get up every morning feeling as energetic as I did 30 years ago, probably even more so today," he says. "And as long as that feeling is with me and I am capable, I will stick with it. I have no plans to abandon what I do, because I enjoy it." That energy has helped Mr Kamal, born in Palestine and raised in Jordan, to create what is now the largest construction company in the UAE, employing 72,000 staff on a backlog of projects worth Dh50 billion (US$13.61bn). The firm has helped shape Dubai into a modern city. And as the Emirate prospered and gained global economic clout, so did Arabtec. As a fledging company in 1976, Arabtec won a contract to build The Pearl, which at 17 storeys was then the tallest tower in Dubai. The deal was worth a mere Dh24.9 million, a far cry from the Dh3.2bn awarded in 2004 to build Burj Dubai, now the world's tallest building. Mr Kamal started Arabtec after a stint working in the northern town of Scunthorpe in the UK. It was while working on a steel factory project there for the construction company, Sir Robert McAlpine, that he met three men who would help him mould Arabtec. One of them, Tom Barry, is now an executive director and general manager of Arabtec Construction. The other two, Colin Weekly and Peter Bruce, spent 10 and 25 years at the firm, respectively. "All three impressed me when I worked with them in Scunthorpe and were instrumental in helping the company get started," Mr Kamal says. From humble beginnings, Arabtec went on to win a range of contracts in Dubai and Abu Dhabi, building everything from villas, skyscrapers and hotels to exhibition centres, hospitals and airport terminals. The firm went public in 2004, after winning the Burj Dubai deal and as the GCC economies exploded. Its share price increased with each new contract, surging to about Dh17 earlier this year when it won a Dh10bn deal to build a new headquarters for Gazprom Neft, the Russian oil producer, in St Petersburg. But now the global financial crisis has hit Dubai stocks and Arabtec's share price has fallen to about Dh4.78. It slumped to Dh3.01 last month, its lowest price in more than two years, but has since been boosted by a contract to build the Cleveland Clinic in Abu Dhabi in partnership with Aktor Technical Company of Greece. Arabtec has also faced other challenges in recent years. In November last year, the company made headlines when thousands of its workers on the Burj Dubai and other Dubai projects went on strike over pay. The walkout lasted almost a week and sent Arabtec shares plunging 7.3 per cent. The strike ended only when the company agreed to a pay rise. In an industry blighted by labour unrest, Arabtec's move represented a turning point. Even the Ministry of Labour called for construction companies to increase their workers' salaries. Mr Kamal says challenges such as the strike make doing business interesting. "We have financial, technical, management and project challenges. And I enjoy the process, especially when you see results are right and you're able to help the people around you to grow themselves and their standard of living." Now, Arabtec is facing its biggest challenge, brought on by the global financial crisis. Developers grappling with liquidity problems and a slowdown in sales have postponed or cancelled projects. Mr Kamal declines to elaborate but says those projects have not yet been sold to buyers. He says the construction industry should not be surprised at the cancellations, because capital has become scarce. "There's nothing wrong with delaying or cancelling projects. These are decisions that should not be taken in an egoistic manner, where people isolate themselves and pretend they're capable of something they're not." As many of the world's largest economies grapple with recession, Arabtec is seeing more business dry up. It could lose about one third of the value of its largest contract, the Gazprom Neft project. The Russian oil producer is reviewing the deal because of the tightening economic conditions. "We're in final negotiations with the client on finalising all the outstanding issues so that the project can hopefully proceed early in the first quarter of next year," says Mr Kamal. So far, Arabtec has reworked aspects of the design process and is negotiating on the engineering aspect. The company wants to work with Gazprom Neft to stay faithful to the original scope of the project while reducing the initial budget. In the meantime, Arabtec has also frozen its drive to acquire construction supply companies. In the past year, the company has acquired a 60 per cent stake in Target Engineering, an Abu Dhabi company that specialises in civil, electrical and marine contracting, as well as a 33 per cent stake in House of Equipment, a rental firm for construction equipment. Arabtec also acquired a 55 per cent stake in Gulf Steel Industries. "We're going to use any cash in the company as a reserve, maybe for possible hard times ahead or a drop in the volume of work," Mr Kamal says. "It's essential that a company of our size maintains some cash in its coffers for the unknown." Still, with Dh50bn of work to tide the company over for at least three years, Arabtec is in the fortunate position of being able to ride out the storm better than others. The company expects turnover to total Dh6bn this year, compared with Dh2.87bn last year. Mr Kamal says that even if two thirds of its order book is suspended or cancelled, the firm will still have a backlog of Dh17bn. "We're going to be busy, at the same current turnover, with the same volume and with the same number of people that we have now." He adds that while the UAE is not immune to worldwide financial issues, the country is in a stronger position to deal with them. "We're probably slightly better in being able to cope with the situation because cash resources can probably still be made available here. "However, we need to be very careful how we spend it, and in deciding which projects are a priority and which ones aren't." He also believes that putting the brakes on the pace of construction is good for the country. Until now, deadlines were tight, forcing contractors to build at breakneck speed, and in some cases to the detriment of quality, he says. A slower building pace will be better for the industry. "I'm not pessimistic at all about this situation. Some people are going to be hurt in the process, but I think that, on the whole, it's a healthy turnaround of events." Mr Kamal also sees the turmoil as an opportunity to pursue other opportunities in the GCC. High on the list is Saudi Arabia. With the total value of investment in property estimated at more than Dh900bn, the kingdom is the region's largest, yet least explored, market for construction. Still, simply gaining a foothold in the kingdom is a challenge in itself. In the past, Arabtec has tendered unsuccessfully for work there. This time, Arabtec will set up operations in Saudi Arabia, possibly early next year. The company is in talks with potential local partners to help manage the formalities such as registration and recruitment of labour. Arabtec has been invited to bid for at least three projects in Saudi Arabia. Qatar is also an important market. The company is working on a Dh4.5bn contract to build Al Waab City, a massive residential and commercial centre in the outskirts of the capital, Doha, and may be on the verge of winning another major deal. A key element to Arabtec's success, according to Mr Kamal, is making sure that employees feel part of the business. "You must delegate, otherwise you'll stagnate. People like to feel as if they're part of an organisation and that they're carrying a role helping to build it up." agiuffrida@thenational.ae
