A new wave of international contractors targets the UAE

The regional construction boom has created a contractor drought throughout the region, and some public tenders are failing to attract even a single bidder. But news travels fast in the international construction industry, and an increasing number of overseas firms are seeing an opportunity in the barren bid lists of the Middle East. Angela Giuffrida reports on the return of some old faces on the local contracting scene, and the arrival of some new ones.

  • E-Mail
By  Angela Giuffrida Published  February 18, 2006

‘Too many tenders and not enough tenderers’ sums up the situation in an increasing number of GCC construction markets. The vast amount of development taking place across the region has made for rich pickings for many established contractors. But for public sector clients, the situation is reaching crisis point, as it is becoming harder to attract qualified contractors to bid for projects. Some tender announcements have failed to attract even a single bidder. Ibrahim Yaqob Ali, director of the contracts and purchasing department at Dubai Municipality, told Construction Week: “We recently tendered a project which we estimated would cost AED60 million, but we received just one bid for AED140 million.” For many contractors, the reason for this is simple: There is a lot of work in the market but not enough time available to do it. They are also reluctant to stretch themselves too thinly through fear of gaining a bad reputation among clients for being unable to deliver projects on time — a major factor in local markets such as Dubai and Doha. In a bid to tackle the problem, Dubai Municipality is relaxing bidding rules to attract more foreign participation in tender calls. International contractors are already allowed to bid for major projects before they have established a local company. The move has prompted interest from a wave of international players, including Austria’s Bau Holding Strabag AG. The company recently passed the pre-selection stage for the construction of a US $299.3 million (AED1.1 billion) 88-storey residential tower in Dubai Marina. The same project also attracted other international contractors, including Al-Rostamani Pegel, and South Korea’s Ssangyong Engineering and Construction. Strabag is also chasing a $268 million deal for the construction of a 4.1 km runway at Abu Dhabi International Airport, and is bidding for Qatar Foundation’s $463 million Convention Centre. But this is not the first time the company has done business in the Middle East. It was tempted back to the region three years after leaving it in 1999, after witnessing the scale at which construction was growing. But convincing project developers that its return was a serious move has been a challenge. The company made inroads, with a car park project at Dubai International Airport and a villa development behind the Mall of the Emirates in 2002, but has since found it difficult to get beyond the pre-qualification stage for bigger projects. It has now whittled down its target projects to those that have secure financing in place. “Getting pre-qualified for other projects hasn’t been easy, as everyone knew that we left the market before,” said Frank Purgstaller, commercial director for Strabag’s export department. “But at the same time, there is some hesitation when bidding for projects. Projects here are expensive, so you have to ensure that you have a very good team in place, which is costly.” Purgstaller added that, compared to Europe, there are lots of obstacles to getting involved in construction in the Middle East. “On the one hand, there are so many projects happening. All of the local companies have full books, so that’s why the government is looking for more international companies. But on the other hand, starting a construction business in the Middle East is very tough, especially if you have had no experience in the region. “It’s partly because of the time the bidding process takes — there are so many negotiations involved, and every decision seems to take longer than needed. For example, we submitted a bid for the Convention Centre project in Qatar in mid-2005, and don’t expect to hear an answer until the end of March this year.” Contractors from China and India have also been noticeably quiet in the region, said Sachin Kerur, senior associate at Masons Galadari in Dubai. He puts this down to a buoyant domestic and regional market. But he also says that moves from the Chinese government to nurture relations in the region will spur further participation. “Over the last few years, Chinese companies have been able to improve their reputation and move into more high-end design and construction. It’s also easier to get loans from Chinese banks. “For India, it’s a different issue. A lot of companies already have management-level access to people in the region, but they don’t have as much government support as the Chinese. But I suspect they will in the future.”

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code