Future bright for building industry

ABU DHABI — The construction industry in the capital that passed through a tenuous phase over the recent past is poised for a recovery, as it gains strides in its pace with recovery in sight, though in measured steps.

By N. Srinivasan

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Published: Sat 11 Jun 2005, 10:37 AM

Last updated: Thu 2 Apr 2015, 7:57 PM

The slowdown in the pace was part of the bleak aftermath of the terrorist attacks in the US that threw a blanket of caution and apathy for investments in the sector worldwide, the UAE being no exception, though it came without much ado, unlike many other parts of the world, said some consultants and contractors of civil engineering firms.

This was followed by certain extenuating political developments, which again caused no concern or flutter as there was smooth transition of power to the continuity of the open economic policies adopted by the country, following the demise of Shaikh Zayed bin Sultan Al Nahyan, in November last year, they averred.

This situation was aggravated by the conditions clamped on the import of manpower, particularly from some parts of the Asian subcontinent, forcing builders to employ workers from other countries, that fell much short of expectations.

The construction industry, therefore, was operating under dim lights, but the flames were flickering, with companies content with lower margins of profit and in some cases putting up with losses.

One of the reasons attributed to the low-key activity was the rising costs of building materials, steel escalating by over 55 per cent, with Turkey, one of the main suppliers of the material diverting a good part of its consignments to the US. So was the case with cement that scaled up over 40 per cent, and plywood by the same token, and some other accessories.

“These factors have led to a sluggish phase and there is now a let-up in these constraints,” said the manager of a multinational firm that employs over 700 workers.

An influencing element in the scenario comes with the absence of a clause for contractors to absorb the escalation in their contractual obligations. Despite this, suppliers took to pre-emptive action with regard to supply of materials, leading to an intense war of attrition before prices could be pegged down to saner levels, but not before many companies failed to pay their employees their wages, leading in some cases to the workforce resorting to legal remedial measures and even going on strikes, a phenomenon unheard of some years ago.

India and Pakistan have been traditionally the power houses of labour supply to the construction industry and a soft clampdown on their recruitment in what is popularly attributed to maintaining a demographic balance, left employers with no option but turn to Nepal, Sri Lanka, China and some other neighbouring countries in the region.

The future, however, augurs well for the utility sectors of the construction industry, according to Mahmood Alam Khan, senior executive of a European giant construction firm.

There are over 250 projects, ongoing or in the pipeline, for the Taweelah, Umm Al Nar, Mirfa and Baynouna stations, the Abu Dhabi Transmission and Despatch Company, the Abu Dhabi Distribution Company, the Al Ain Distribution Company and the Abu Dhabi Water and Electricity Authority and the Abu Dhabi Water and Electricity Company. The total value of these projects alone is in the region of Dh9.5 billion.

Other major projects beckoning investors include the expansion of the Abu Dhabi International Airport and the bewildering range of opportunities tossed up by the Dolphin initiative which will offer a wholesome piece of the cake to every aspirant in the market.

The scenario was vastly different in Abu Dhabi compared to Dubai, which was quick to spot the benefits accruing from opening the real estate market, and to reap the immediate harvests of a boom, even as Abu Dhabi continued to rely heavily on revenues flowing in from the oil and gas sector.

This is no cause for surprise considering that the emirate holds 94 per cent of the country’s total proven oil reserves of 98 billion barrels and 93 per cent of its natural gas reserves that is in excess of 210 trillion cubic feet, with the oil and gas industry sources acutely aware and acknowledging the fact that the hydrocarbon production has been largely curtailed by the emirate’s adherence to the OPEC quota system.

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