Companies in the construction sector that can bring finance sources such as export credits to tender bids could enjoy a brighter year in 2017, but those heavily exposed to Saudi Arabia and Qatar are likely to face continued constraints, according to a panel of experts.
Speaking at a British Business Group event in Dubai last week, Thomas Riordan, Arabtec professor of civil engineering at Higher Colleges of Technology in Dubai, who has spent a year advising the UK’s department for international trade, said: “The key trend at the moment is alternative revenue sources.
“A lot of developers, a lot of government entities are told: ‘we don’t have money from oil – please go out and get alternative revenue sources for these projects … We want your contractors and developers to be more proactive.’”
He said that the UK Export Finance initiative, which provides funding for projects in which there is a significant British involvement, is a powerful tool in helping them to secure projects.
“That is a game changer,” said Mr Riordan. “UK Export Finance has something like US$2 billion on the table at the airport and $1bn at the Expo 2020. That will be an opportunity for a lot of people to win key contracts on those projects.”
He also said that Britain was not the only country whose government was offering export credits to enable its contractors to secure work.
“You’ve got the Chinese getting more involved in that, you’ve got the Italians and the French coming here and talking about financing projects.”
Public Private Partnerships (PPPs) were discussed as another potential way of contractors securing work – especially in Dubai, which passed its PPP law in November last year. Ben Hughes, a director of Deloitte’s Capital Projects team in Dubai, said that although “there hasn’t been the avalanche of PPPs that one might naively have expected”, this is likely to change next year with Expo 2020 presenting a pressing deadline.
“I think 2017 is probably the time when PPP really kick-starts in Dubai and really takes off.”
Outside the UAE, contractors are still facing acute cash flow pressures in Qatar and Saudi Arabia, where capital spending programmes have been scaled back and, in the latter, payments from government clients have been on hold.
“In Saudi Arabia, we’ve advised clients where they are simply not being paid by the government,” said Mr Hughes. “If the government is unable to pay and the contractor is still obligated to maintain the supply chain they’ve got, then they are in a fairly invidious position where no money is coming in and it’s all flowing out.”
Jed Savager, a partner at law firm Pinsent Masons, said that relationships between main contractors and their suppliers are becoming more adversarial as the amount of money in the supply chain dries up.
“If you look at the last 12 to 18 months, there has undoubtedly been a huge upswing in disputes, many of which are entrenched. The supply chain is distressed.”
A report published last week by BMI Research, part of the Fitch group, said that the downturn in Saudi Arabia’s construction market is likely to continue throughout next year.
The report said that Saudi Arabia’s construction sector had shrunk in size by 1.9 per cent in the first quarter of this year, then by 3.1 per cent in the second quarter.
“While we believe the industry will have improved marginally over the second half of the year, the issues which have dogged 2016 will roll over into 2017,” it said.
Although the government recently pledged to repay outstanding bills to contractors by the end of next month, the fact that it has withheld payments for more than a year has had a dramatic effect on staffing, the solvency of subcontractors and the backlogs of existing projects.
It has downgraded its growth forecast for Saudi Arabia’s construction sector to 0.5 per cent this year and 1.9 per cent next year, and predicted that growth above 5 per cent – commonplace in recent years – is not likely until 2019.
mfahy@thenational.ae
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BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
Company%20Profile
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Blackpink World Tour [Born Pink] In Cinemas
Starring: Rose, Jisoo, Jennie, Lisa
Directors: Min Geun, Oh Yoon-Dong
Rating: 3/5
The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
Company%20Profile
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
COMPANY%20PROFILE
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Company profile
Name: Tratok Portal
Founded: 2017
Based: UAE
Sector: Travel & tourism
Size: 36 employees
Funding: Privately funded
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
Scoreline
Abu Dhabi Harlequins 17
Jebel Ali Dragons 20
Harlequins Tries: Kinivilliame, Stevenson; Cons: Stevenson 2; Pen: Stevenson
Dragons Tries: Naisau, Fourie; Cons: Love 2; Pens: Love 2
The%20specs
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So what is Spicy Chickenjoy?
Just as McDonald’s has the Big Mac, Jollibee has Spicy Chickenjoy – a piece of fried chicken that’s crispy and spicy on the outside and comes with a side of spaghetti, all covered in tomato sauce and topped with sausage slices and ground beef. It sounds like a recipe that a child would come up with, but perhaps that’s the point – a flavourbomb combination of cheap comfort foods. Chickenjoy is Jollibee’s best-selling product in every country in which it has a presence.
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BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million