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INTERVIEW- Business is booming, says UAE contractor
By Megha Merani
24 May 2017
The year 2017 is already looking three times more positive than the past year, according to one contractor that has already seen a surge in the number of contracts it has won in the United Arab Emirates (UAE).
While the economic climate remains challenging in the aftermath of the lower oil price, Walid Salman, Consolidated Contractors International Company S.A.L’s (CCC) regional managing director of operations for the UAE and Palestine, predicts 2017 will be a positive year as construction activity picks up pace in the emirates.
“If I compare last year (2016) with this year, this year the projects awarded to CCC is more than 5 billion dirhams in the UAE. Last year it was 1.5 billion dirhams,” he told Thomson Reuters Projects in an interview this month.
The firm’s latest win is a contract to build the 2.6 billion dirham ($707.8 million) City Centre Al Zahia mall in the emirate of Sharjah. Salman believes the project will stimulate new investment in the city. “I believe the location of this mall is strategic - it will cause big development around the project,” he said.
Several construction projects in the UAE and across oil-producing Gulf Arab states have suffered delays following the plunge in crude prices in 2014, slower economic growth and tighter bank liquidity.
In its Construction Intelligence report in April, Faithful+Gould called the first quarter of 2017 “poor” in terms of contracting awards in the UAE and the wider GCC, with some of the lowest volumes on record.
However, it said the pipeline and sentiment was more positive with Q2 expected to improve in view of Dubai’s commitment to 11 billion dirhams of awards for the Expo 2020 site, likely leading the private sector to take a positive view.
Business is ‘booming’
“It is booming - you know there is a big development in Dubai related to Expo,” Salman said.
“Things are moving now and I believe the economy has started picking up. We have started participating in many projects in Abu Dhabi, Dubai and in Sharjah.”
In April, the Emirates NBD Dubai Economy Tracker Index climbed to the highest in 26 months. The strong rise in business activity was led by wholesale, retail and construction. Construction firms reported the strongest upturn in new business, which the bank said supported the view that investment in infrastructure ahead of Expo 2020 will be a key driver of Dubai's growth over the next 2-3 years.
In addition to the pipeline leading up to the Expo, the launch of new master developments by major developers has also created a bright spot in the market.
“We are participating in most of Emaar and Nakheel projects, and also in the infrastructure in the UAE and all around,” Salman said.
Emaar Properties PJSC is currently developing the 6 square kilometre Dubai Creek Harbour master development, the 11 million square metre Dubai Hills Estate and the Emaar South master community in Dubai South.
Nakheel is set to award 4 billion dirhams worth of contracts in Q2 2017, the company said in a statement in April.
Salman said CCC is also planning to bid on major infrastructure projects, including the UAE’s federal railway project, the Jeddah Metro and renewable energy projects.
“We are planning to bid on Etihad Railway. Now we are expecting the second phase to be released,” he said.
The company is currently working on infrastructure projects in Saudi Arabia. “We are handling Riyadh Metro now and also we are investing in renewable energy, mainly in the solar power stations,” Salman said.
He added that work on the Riyadh Metro project is progressing well and payments are “on schedule”.
The company had previously bid on Dubai’s Route 2020 project extending the Dubai Metro line to the Expo 2020 site, but did not win the project. The bid involved submitting both technical and financial proposals.
Salman said CCC is evaluating a list of projects that would include a financing proposal through its investment division.
“As CCC we have a division for investment and development... we are studying opportunities,” he said.
Historically, Gulf governments have funded most of their infrastructure spending without private sector involvement, but lower energy revenues have spurred them to seek alternative means to fund infrastructure projects.
“As a contractor our field is construction, but where we have a kind of a good opportunity we participate in up to 10 to 15 percent in finance or in development cost. We are ready to participate in the development and investment if the construction under our company.”
A CCC-led consortium has also been appointed to develop and operate Saudi’s Taif Airport.
Cash flow starting to seep in
Tight liquidity conditions continue to reign as clients push to tighten belts, the contractor said.
“Frankly still we are suffering from the cash flow issue because most of the clients have become very conservative on the cash,” Salman said.
“But all in all, I can say the last three to four months it (has) started picking up and we started receiving good cash from all the projects we are executing.”
He said clients have become more conservative and conscious about spending, driving a more well-researched approach.
“The clients become more experienced in how to be more economic in executing their projects,” he said. “They do a lot of studies on how to value engineer, (and) reduce the cost.”
Earlier this month, Thomson Reuters Projects reported that CCC, which previously worked on The Dubai Mall, plans to assign 4,000 to 5,000 workers to build its recently won City Centre Al Zahia project to meet the project’s tight 32-month deadline.
© Zawya Projects News 2017