Dubai’s construction sector shifting gear

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The construction sector in Dubai has almost stopped new projects while slowly recovering from the global financial crisis.

However, by the end of June international food corporation Nestle announced their plans to build a factory in Dubai. The company plans to invest the initial capital of $136m to build a manufacturing unit for food and beverage products, situated on a 175,000-sq-metre plot at the Dubai World central site.

Meanwhile, the Dubai-based developer Nakheel has signed a $7.5m contract with Parkway international Constructing for building up a new neighbourhood mall. The new 10,600-sq-metre Jumeirah Park Community Centre will include retail and food outlets.

Both projects are not on the scale of the developments of the mid-2000s, but they do indicate that construction work is starting to recover.

In addition, developers are looking forward to a revision of Dubai strategic plan 2015, a blueprint launched in 2007 for the emirate’s development. Officials announced that a new version of the plan is in its final stages of drafting. It will re-focus the development in Dubai giving greater emphasis on tourism and considering the current global economic conditions.

Zawya Dow Jones reported that the revised strategy plan will encourage the Dubai-based companies to expand globally – a recommendation, which some local developers are already taking on board. Among these opportunities is Libya’s need to rebuild its infrastructure after the damages caused by the overturning of Muammar Gaddafi’s regime.

In an interview with Gulf News, in late June, Atiq Juma Naseeb, the senior director of commercial services sector at the Dubai Chamber of Commerce and Industry said that Dubai’s companies are well positioned to assist Libya in construction, finance, tourism and telecoms. Emirates airline announced it will resume flights to Tripoli in October.

Recognizing the potential for growth in the North African nation, the Dubai Chamber has accordingly planned a trade mission before the end of the year. It may take some time after the last Libyan elections’ euphoria calms down, but the new administration will likely begin to issue tenders for contracts to rebuild the country as oil production continues to pick up.

However, the Dubai construction industry is still dealing with the fallout of the 2008 economic downturn and its attendant slump in activity. One of the lingering echoes of the crisis is the contract between the local developer Meydan, Dubai-based construction firm Arabtec and the Malaysian contractor WCT.

Meydan had commissioned the Arabtec-WCT joint venture to build the iconic racecourse and its facilities in 2007, but the developer cancelled the contract 16 months later, citing the partnership’s failure to keep the project on schedule. Meydan’s court case, which sees the Dubai firm seeking $952m in damages, comes as Arabtec and WCT are continuing with their own arbitration action against Meydan, asking for compensation of $762m for an alleged breach of contract.

It will likely be some time before this and the many other disputes that arose from the financial crisis are resolved. However, many of Dubai’s developers have restructured and renegotiated their debt burdens, meaning that they are better placed to move beyond their past difficulties and begin building towards the future again.

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