Dubai’s boom means stiffer competition for local firms

With an MEP buisness, joinery, ceiling and steel divisions, Khansaheb knows it must still work to compete in Dubai.

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By  Rhys Jones Published  August 7, 2004

Dubai and the boom|~|foyerrgbmain.jpg|~|Khansaheb is a well established company in the UAE market.|~|The expertise of major local contractors and existing joint ventures between local contractors and overseas majors have created a situation where it is difficult for new overseas firms to enter the market, according to Keith Ridgway, executive director, Khansaheb and managing director of Interserve’s international business. Interserve is a partner in joint venture with Dubai-based Khansaheb Group, a relationship that now extends over 20 years. “Dubai is booming and does attract a lot of attention from the competition outside. Operationally, contractors based here have the advantage, as they know how to deliver to the quality required. They have the labour and the infrastructure to be competitive. It is more difficult for new ones to set up,” says Ridgway. Recently, a major delegation comprising leading Chinese contractors was in town to assess their chances of breaking in into what is claimed to be the most busy construction site per km2, in the world. Several other new-to-market contracting joint ventures are reportedly bidding for major projects on Emaar’s Burj Dubai development, which is set to become the tallest building in the world when it is completed. Ridgway believes the best way for new internationals to get a slice of the burgeoning market is to offer a type of significant expertise that may not necessarily exist in the UAE. Extreme high rise projects would be an example of an area where most established companies would not be able to complete it on their own because of a lack of experience and the relevant skills. Local contractors would thus need to bring in a partner, rely on the partner’s technical expertise and more than likely use up all their resources on that one project. “For us, that is not the way as we would not be able to service our other long standing clients. It is not a good strategy to put all your eggs in one basket,” says Ridgway. Those internationals, which do not have adequate resources on the ground in Dubai, generally do the management but subcontract the different packages out. “We prefer to have delivery of our projects more under our own control and there is a lot of competition in the marketplace in Dubai. An enormous amount of work is currently going on and enormous amount is planned. This is putting pressure on the marketplace,” explains Ridgway. The Khansaheb executive director says contractors do need to look at what they can service. “There is a range of contractors with differing abilities and quality. We want to position ourselves at the top level, to deliver the more demanding and technically difficult projects safely and securely. The majority of our clients rightly expect the highest standard of delivery,” he points out. Khansaheb has built up a range of extensive in-house capabilities. “We have a small building services (MEP) business, a substantial joinery and fit-out division, a ceiling and partition division and an architectural and stainless steel division. We can combine and provide a complete fit-out one-stop-shop. Clients enjoy the one-point of responsibility facility that we offer,” adds Ridgway. And, how does the local major face the payments disputes that are the bane of the market? “We are fairly cautious about who we work with. Obviously, there are good clients and less good clients. We largely work with clients who have a positive culture, who expect high standards and whose corporate management is good. All contractors want to work with clients who have the money to pay on time. "Referring to the recent raw material price crisis, he pointed out that Khansaheb came out of it relatively unscathed. “There was severe pressure on prices but we are blessed that we have shareholders who are financially strong. We manage our business well in terms of cash flow and we have all the facilities required to manage a business without such problems impacting our ability to deliver,” says Ridgway. Major projects that the group is involved with include the Mall of the Emirates and a hotel in the Endurance Village, which is going to be used to host the horse racing world championships in Dubai and subsequently be used as a desert retreat that will be managed by the Jumeirah International Group.||**||Projects and the UAE|~|khanmain.jpg|~|Khansaheb's relationship with Interserve extends over 20-years.|~|Asked what did he think of the mega projects that are planned for Dubai, such as the 200 million m2 entertainment, tourism, leisure and lifestyle Dubailand, Ridgway said that the “concept is fabulous it is a huge project” and will give birth to a large number of tenders. Referring to labour practices and issues, Ridgway is forceful. “If companies cannot afford to pay the labour, what has happened, for example, to the gratuity fund? It must have been absorbed into the working capital,” he says, claiming that his group has never paid any employee late, unlike many other construction firms in Dubai and Abu Dhabi and there have been many protests of late. Ridgway also applauds the government’s efforts to regulate matters with initiatives such as the labour payment audits and recent immigration regulations. “It is a good step forward, in my view,” Ridgway says. “How can the government manage companies that don’t manage themselves properly? Some are simply greedy. They take on too much work that requires additional working capital without adequate financial resources. It would appear it is then that it is the labour that inevitably starts to suffer.” Speaking about his own professional background, the executive director of Khansaheb and the managing director of international business for global major Interserve, points out he has been with the international business side of Interserve since the year 1983. He served for three years in neighboring Muscat and was based in Malaysia for a further three years. For two years, Ridgway was in UK overseeing the construction of the Honda Motor’s car plant in Swindon. “I was supposed to be there for one year, but it was a challenging job, and the client wouldn’t release me,” Ridgway recalls. He started to develop Interserve’s international busines from 1992 onwards and in 1995 was rewarded by being named the managing director of international business for the British major. “Here Interserve holds equity. There is no sponsorship arrangement at all. The same is the case in Oman and Qatar, but of course, with different shareholders. We, at Interserve, believe that if we find partners of good standing, we are willing to put money into the business and build a long term relationship,” Ridgway points out.||**||

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