Construction World - Gulf Edition | February 2009

KEEP it GOING…

Rumours are fuelling the emirates of doom and gloom. However, we at Construction World feel that just like the boom was far too surreal, the doomsday prophecies are exaggerated.

Let us look at some of the brighter sides of this crisis:

• Construction costs have come down substantially and therefore infrastructure building will require 25 per cent lesser investment
• Availability of building materials which had hampered progress of projects is not a problem anymore; neither is availability of labour
• The crisis is global in nature and not one that reflects the weakness of any systemic failure in the GCC
• Oil prices are stabilising at a point where the budgets just about break even
• Dollar has remained strong
• Banks have been rescued but none have failed.

With the scenario above, entrepreneurs need to bring down costs in line with the level of activity and need to adopt practices which can help them achieve more efficient execution at lesser costs. Going ahead, companies will be in a far well managed position once they are able to reschedule debts and undertake cost-cutting measures.

The government needs to take proactive measures in building back confidence. It already seems to release funding into the system after several representations have been made by industry groups.

Recently the Dubai Chamber met with the construction industry group which made following requests:
• A relaxation on visa restrictions and the rules of transfer of skilled labour would greatly help them in minimising spiraling costs. They recommend that this may be done by processing new labour cards expeditiously and canceling transfer fees. They also appealed that the Chamber broach with the Ministry of Labour the idea of allowing labourers and staff members to re-enter the Emirate after a year's time in place of the existing six months re-entry rule.
• Another major issue raised by the delegation was their deferred payment. They said that most of the projects were completed; however, they were finding it difficult to meet their commitments due to non-receipt of payments. They called upon the authorities to assist in addressing their cash flow problem.

The group has been asked to put forth a proposal both for the visas and labour rules as well as for outlining a process of staged payments to keep the cash flow coming in. Law 8 2007, also known as Escrow Law, was passed in June 2007. This law aimed to provide certain guarantees and reassurances to property investors as well as investors to make Dubai's real estate a feasible and safe investment opportunity. Furthermore, the RERA which had been formed to protect the interests of property buyers and sellers, had officially licensed over approximately 400 real estate developers, and around thirty banks were approved for operating trust accounts. This law applied to any individual or company receiving 'off plan' payments for property that was not completed. This step was very timely on hindsight although there was a huge hue and cry by developers who felt that this law would cramp their working capital. Government projects need to be stepped up in order to pull out the sentiment from the current morass.
Although the end of the crisis is still not in sight, the various bailout packages and stimuli will kick in the benefits in a few months.
The summer of 2009 will be sweltering hot literally as triple the effort will be required to earn the same income.
But if there is light at the end of the tunnel, this too will pass.
Keep it going...