PHOTO
06 August 2017
The United Arab Emirates is likely to see a 5 percent uptick in new construction contract awards by the end of this year, according to Faithful + Gould.
The latest Construction Intelligence Report produced by the firm for the first half of 2017 shows that $22 billion worth of awards were made, which means it is "in line with expectations" that the total amount due to be awarded this year will be about $45 billion - 4.6 percent higher than the $43 billion awarded last year. However, backlog - the amount of work that companies have in hand - shrunk by $17 billion as major pieces of work completed and were not replaced as quickly.
Regional development director David Clifton said that there is cause for optimism in the UAE, especially as awards are historically weighted towards the final quarter of the year .
"You can see there is a lot out there. How much of it is fully-funded is a good question, but there is a lot out there."
Potential awards that could come to market in the second half of the year include a number of major packages at Emaar Properties' Dubai Creek Harbour site, and major infrastructure packages relating to Al Maktoum International Airport and the Abu Dhabi Metro project.
Faithful + Gould also said that the industry is also looking towards Dubai Holding, which has already unveiled the $1.7 billion Marsa Al Arab tourism project in May and the $1.36 billion Emirates Towers Business Park last month.
"If their schemes move swiftly, significant growth could return in the short term," the report said.
Clifton said that export credit agencies (ECAs) such as UK Export Finance could continue to be useful sources of funding for new projects. It has already been used to fund contracts covering work at the new Dubai Trade Centre District and the Expo 2020 site. UK Export Finance has also previously pledged up to $2 billion to help build Al Maktoum International Airport.
"As we move towards Brexit, you will see other parts of the European Union really pushing as well," Clifton said.
"They [EU countries] will all be looking further afield, and ECAs are probably one of the strongest ways to attract liquidity into the region."
The other major source of project funding is likely to come from other forms of alternative financing such as public-private partnerships, but Clifton said that the UAE and other GCC countries would have to compete for this alongside markets where PPP schemes are more mature, such as Britain and the US.
"Whilst liquidity worldwide is pretty good, it's about making sure you have compelling opportunities to bring to the table," he said.
This includes a bedrock of contractors who are able to deliver PPP schemes, but, according to the report, conditions remain difficult for contractors with "continued evidence of unsustainable low tender pricing", it argued.
Already this year, Britain's Balfour Beatty has withdrawn from the UAE market selling its share in Dutco Balfour Beatty to its former joint venture partner and Carillion recently announced that it was withdrawing from three GCC markets and will only bid via its UAE joint venture Al Futtaim Carillion for work that has UK Export Finance guarantees attached to it.
Clifton said that it is important to try to keep contractors - especially those experienced in delivering PPP schemes - engaged in the market.
"Financial institutions who are putting their cash in will be looking for people who have got expertise," he said
© Zawya 2017
The United Arab Emirates is likely to see a 5 percent uptick in new construction contract awards by the end of this year, according to Faithful + Gould.
The latest Construction Intelligence Report produced by the firm for the first half of 2017 shows that $22 billion worth of awards were made, which means it is "in line with expectations" that the total amount due to be awarded this year will be about $45 billion - 4.6 percent higher than the $43 billion awarded last year. However, backlog - the amount of work that companies have in hand - shrunk by $17 billion as major pieces of work completed and were not replaced as quickly.
Regional development director David Clifton said that there is cause for optimism in the UAE, especially as awards are historically weighted towards the final quarter of the year .
"You can see there is a lot out there. How much of it is fully-funded is a good question, but there is a lot out there."
Potential awards that could come to market in the second half of the year include a number of major packages at Emaar Properties' Dubai Creek Harbour site, and major infrastructure packages relating to Al Maktoum International Airport and the Abu Dhabi Metro project.
Faithful + Gould also said that the industry is also looking towards Dubai Holding, which has already unveiled the $1.7 billion Marsa Al Arab tourism project in May and the $1.36 billion Emirates Towers Business Park last month.
"If their schemes move swiftly, significant growth could return in the short term," the report said.
Clifton said that export credit agencies (ECAs) such as UK Export Finance could continue to be useful sources of funding for new projects. It has already been used to fund contracts covering work at the new Dubai Trade Centre District and the Expo 2020 site. UK Export Finance has also previously pledged up to $2 billion to help build Al Maktoum International Airport.
"As we move towards Brexit, you will see other parts of the European Union really pushing as well," Clifton said.
"They [EU countries] will all be looking further afield, and ECAs are probably one of the strongest ways to attract liquidity into the region."
The other major source of project funding is likely to come from other forms of alternative financing such as public-private partnerships, but Clifton said that the UAE and other GCC countries would have to compete for this alongside markets where PPP schemes are more mature, such as Britain and the US.
"Whilst liquidity worldwide is pretty good, it's about making sure you have compelling opportunities to bring to the table," he said.
This includes a bedrock of contractors who are able to deliver PPP schemes, but, according to the report, conditions remain difficult for contractors with "continued evidence of unsustainable low tender pricing", it argued.
Already this year, Britain's Balfour Beatty has withdrawn from the UAE market selling its share in Dutco Balfour Beatty to its former joint venture partner and Carillion recently announced that it was withdrawing from three GCC markets and will only bid via its UAE joint venture Al Futtaim Carillion for work that has UK Export Finance guarantees attached to it.
Clifton said that it is important to try to keep contractors - especially those experienced in delivering PPP schemes - engaged in the market.
"Financial institutions who are putting their cash in will be looking for people who have got expertise," he said
© Zawya 2017
