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Dubai: Momentum building again

In the wake of the global financial crisis, Dubai's construction sector has been slow to recover, with a near freeze on new developments. However, there are signs that the industry is beginning to move forward again.

At the end of June, international food corporation Nestlé announced plans to construct a factory in Dubai, with an initial investment of $136m. The facility, to be built on a 175,000-sq-metre plot at the Dubai World Central site, will be used to manufacture food and coffee products.

Soon after the news of the Nestlé factory, Dubai-based developer Nakheel announced that it had signed a $7.5m contract for the construction of a new neighbourhood mall. The 10,600-sq-metre Jumeirah Park Community Centre, which will include retail and food outlets, will be built by Parkway International Contracting. Neither of these projects, or others like them, is on the scale of the developments of the mid-2000s, but they do indicate that construction work is starting to become available again.

Sector participants will also be looking to a revision of the Dubai Strategic Plan 2015, a blueprint launched in 2007 for the emirate's development. According to officials, a new version of the plan - currently in the final stages of drafting - will re-focus development in Dubai, giving greater emphasis to tourism while at the same time taking into account current global economic conditions.

According to a Zawya Dow Jones report, the revised strategic plan will also encourage Dubai-based companies to expand globally, a recommendation that some locals in the building trade are already taking on board. Among the opportunities that have been identified is Libya's need to rebuild its infrastructure following damage sustained during the fighting that overturned the regime of Muammar Gaddafi.

According to Atiq Juma Naseeb, the senior director of commercial services sector at the Dubai Chamber of Commerce and Industry, Dubai's firms are well positioned to assist Libya in a number of sectors, including construction, finance, tourism and telecoms.

"One major opportunity for trade is going to come from Libya's reconstruction efforts, with demand for rebar, cement, wood, iron and steel, as well as technical expertise, set to increase," he said in an interview with Gulf News in late June.

Recognising the potential for growth in the North African nation, the Chamber has accordingly planned a trade mission before the end of the year. It may take some time for the dust to settle from the recent Libyan elections and a fully functioning market economy to develop, but the new administration will likely begin to issue tenders for contracts to rebuild the country as oil production continues to pick up.

However, the Dubai construction industry is still dealing with the fallout of the 2008 economic downturn and its attendant slump in activity. One of the lingering echoes of the crisis was sounded in late June when local developer Meydan launched a legal claim against Dubai-based construction firm Arabtec and the Malaysian contractor WCT in connection with a project to build an equestrian centre and racetrack.

Meydan had commissioned the Arabtec-WCT joint venture to build the iconic racecourse and its facilities in 2007, but the developer cancelled the contract 16 months later, citing the partnership's failure to keep the project on schedule. Meydan's court case, which sees the Dubai firm seeking $952m in damages, comes as Arabtec and WCT are continuing with their own arbitration action against Meydan, asking for compensation of $762m for an alleged breach of contract.

It will likely be some time before this and the many other disputes that arose from the financial crisis are resolved. However, many of Dubai's developers have restructured and renegotiated their debt burdens, meaning that they are better placed to move beyond their past difficulties and begin building towards the future again.

© Oxford Business Group 2012

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