Local construction companies vs foreign contractors


Rapid activity in Dubai’s domestic construction sector continues with signs that the industry is gradually regaining strength after the global financial crisis challenged property markets worldwide.

While local trade is starting to pick up, many firms have excess capacity to utilise and empty pages on their order books to fill, prompting some to look further afield for projects.

A number of leading local companies are competing for lucrative construction contracts in neighboring Gulf states and in other parts of the world, inventing brand new opportunities for the construction sector. In particular, new projects are increasingly launched in Qatar and Saudi Arabia.

However, the Dubai firms face stiff competition from foreign companies, especially those from Europe where, the domestic construction industry has been hardly hit by three years of weak economic growth and recently the threat of a return to recession.

While there is a rush by big American and European companies to cut out a slice of the market in the Middle East, Dubai-based enterprises have a number of advantages to offer, among them the fact that they are  already established regionally, a definite priority over foreign contractors who would have to set up base in the Gulf ahead of commencing project work.

Among the Dubai-based firms to push into the regional market is Drake and Scull International (DSI), which won a series of major contracts in Saudi Arabia last year. On December11, the company announced it had been commissioned to carry out mechanical, electrical and plumbing work for a hospital in Damman, a contract worth $35m. DSI recently annonced it had been awarded a $94m commercial development project in Riyadh, with work scheduled to be completed in 2013.

Arabtec has few large Saudi projects in the pipeline, one being the construction of 46 buildings associated with the Princess Noura University in Riyadh and the other the delivery of 5000 villas in the Eastern Province. The company has also said it will be looking to break into the Qatari market, where more than $250bn worth of building and infrastructure projects will be coming up for grabs in the coming decade,  according to media reports.

It is not just in fellow GCC states, where Dubai builders are laying foundations, with the Giga Group announcing on December 8 that it had landed a $1bn contract to construct 12,000 houses in the Iraqi city of Basra for the provincial administration. Following years of underinvestment and war damage, the need for infrastructure, housing, retail and commercial developments in Iraq is significant, and with increased revenues from the oil industry beginning to flow, there will be opportunities for Dubai builders to tap into a growing market.

Emaar, Al Futtaim Group and DAMAC are continuously building in Egypt, despite ongoing diputes about cost of land purchases.

While opportunities are expanding in regional markets for Dubai-based builders, pitfalls remain, one of which is the effect of regional political instability on economic growth. Dubai firms involved in large-scale projects in Syria, for example, have seen them temporarily put on the back-burner due to unrest and economic sanctions.

Local developers will likely maintain a low profile, continuing with planning and design aspects of their projects, but not the actual on-the-ground construction work until the situation is resolved. However, any halting of work locally does not mean that the investments are a lost cause.

Though Dubai builders may have to fight hard to win contracts against rivals from Europe and elsewhere, the recent flow of successful tender bids has shown that the emirate’s construction firms are able to compete with the best international developers have to offer. While Dubai’s own building activity may be muted for the time being, the lessons learned from it are continuing to serve the construction trade well.


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