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New Strategies To Survive Construction Slowdow

Public-private partners hips to lead the way in infrastructure projects, say organisers of CityBuild.

| | Jun 20, 2010 | 1:39 pm
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Public-private partners hips to lead the way in infrastructure projects, say organisers of CityBuild

The financing of major multi-billion dollar infrastructure projects such as roads, railways, electricity, water and universities in the Middle East are likely to be driven in future by increased use of public-private partnerships, according to industry observers. This was the observation made during CityBuild Abu Dhabi, a tradeshow for the region’s building and construction industry, held from 18-21 April at the Abu Dhabi National Exhibition Centre. The event brought together industry suppliers, manufacturers, distributors, architects, engineers, importers and procurement decision-makers, and was staged alongside Cityscape Abu Dhabi. As part of the construction summit, speakers addressed the challenge of developing strategies for surviving the construction downturn, as well as for maximising competitiveness and utilising alternative funding models.

“The fact is that international investors are finding it tough to secure traditional infrastructure project funding in today’s new world economic climate,” said Graham Wood, Group Director, CityBuild Abu Dhabi. “The construction boom may have slowed down within the Arabian Gulf, now, with a more considered approach to development, but there are still about $114-billion worth of construction and infrastructure projects due to be awarded over the next 12 months.”

Wood observed that the market was being driven by projects in Abu Dhabi. Presently, the UAE capital accounts for more than half of the top 10 infrastructure projects by value, in the Gulf.

“Abu Dhabi is already leading the way in private financing to pay for infrastructure. It is using public-private partnership (PPP) funding methods with the new campus at Al-Ain University and the new Paris-Sorbonne and Zayed Universities in the capital,” he elaborated.

“The PPP approach is also being used on a highway through Abu Dhabi to the UAE’s border with Saudi Arabia, and other Gulf countries, such as, Qatar and Bahrain are looking at using the system,” he added.

Saying that a whole range of new trends were emerging in the region’s construction sectors, as businesses assessed the impact reduced client finances are having on budgets, tenders and supplier criteria, he concluded that margins are under pressure with contractors and consultants being squeezed, to achieve better value, and that there was tighter due diligence than before, as organisations attempted to reduce risk.

Industry advisers also urged a back-to-basics riskmanagement approach. when it came to project financing. “The inherent risks faced by construction firms in the Gulf region over the past three to four years demonstrate how important a risk-management plan is to a contractor,” said Cynthia Corby, Audit Partner for Deloitte in the UAE, in a recent report.

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