Discussing the downturn

Last week, Construction Week sat down with a select group of key decision-makers in its first roundtable event, where current issues in the industry were tackled.

What is your liquidity situation?
Philippe Dessoy: We’re coping with it. The situation differs slightly in different markets of course, but in Dubai there isn’t much liquidity. Many developers are not paying for projects. Abu Dhabi and RTA are paying.
Jonathan Eveleigh: There are payment issues but fortunately, whether it’s purely by luck or good management, we were reasonably unexposed when the downturn happened last year. We had no live projects with Nakheel; we’d finished our major projects with Emaar and so we didn’t suffer, particularly like some other major contractors. We’ve had some late payments, but things are picking up again.

Story continues below

Advertisement

FEATURED COMMENT Please click here to comment on this article

How about Abu Dhabi?
Eveleigh: For us Abu Dhabi consists of Al Raha Beach, and obviously being in joint venture with Aldar, it probably puts us in a slightly different position than perhaps most client-contractor relationships. I mean Al Raha Beach has slowed down, there’s no secret there – we’re not doing as much work as we thought we would be doing, but payment wise it’s not a problem.

And Saudi Arabia..
Eveleigh: We’re only just looking at Saudi. In fact we’ve got people over this week, funnily enough. We don’t have any live projects from our office here but our rail business in Australia is doing a project on the North South Railway and I think that’s going well.

Is Qatar on your radar at all?
Eveleigh: Not really.
Dessoy: It has slowed down. We have one big project with Qatari Diar, which we started this year. They reduced the project size by about 60%, but we’ve been there continuously for the last eight years.

Is it tough to start up business there?
Dessoy: It’s not as easy as it is in Dubai. Firstly, it’s not easy to get visas for, let’s say, 500 people or 1,000 people. Then they want you to hire lots of different nationalities within that; it’s difficult to get a plot of land; Dubai is so easy that way.

Would the GCC currency affect you?
Ani Ray: The UAE is not participating. And anyway I don’t think it would affect the construction business much.
Dessoy: Well for a European company that has to send back money to a head office in Europe, having a common currency linked to the euro and dollar would help, especially since we have offices in many GCC countries. Right now we are completely exposed to the dollar which has proved to be quite risky.

So you’d rather have the UAE join in?
Dessoy: Yes, I mean if the UAE joins in, we have no problem with it.
Ray: The link to the US dollar affects steel the most.
Dessoy: It’s the same with oil.
Ray: Steel affects the entire construction industry. Most of the steel comes from non-dollar dominated countries such as Turkey, so when the dollar falls prices go up immediately.

Will the midday break be hard this year?
Dessoy: We’ve been following it for the past four years, so I don’t see why this year should be any different.
Ray: Work during midday is pretty unproductive anyway, so it doesn’t take much to convince contractors to stop work during that time. Most companies just change the shifts around. In fact, we started our new shifts in the beginning of
this month.
Eveleigh: With these things, if you’re prepared in advance, you work around it. You programme your jobs accordingly. Of course production is affected, but that can be brought down to a minimum if you know in advance. Also, the problem is some people conform and some don’t.
Ray: I think the bigger problem will come this August when the timing for the work ban and Ramadan coincide. It will be 12.30pm to 3pm and after that Ramadan starts so I don’t understand how it’s going to work.
Dessoy: We’re starting early in the morning and finishing by 12.30pm.

Where do you see the next opportunities?
Dessoy: Maybe Abu Dhabi.
Eveleigh: Saudi Arabia.
Ray: Everyone’s now flocking to Libya.
Dessoy: We used to work in Libya but we closed the office there. Everything takes a lot of time. You never know when they will start – we had to wait for one or two years to get a contract. We were there from the end of 1990 to 2004. I don’t see anything changing.
Ray: From what I hear, anyone who’s been to Libya will not go back but those who haven’t been there are quite enthusiastic.

So you’re not too keen on Libya then...
Eveleigh: We’re not particularly aggressive on Libya at all. We keep being presented with opportunities but I think there are some risks in Libya, especially the way they structure deals, not financially, but just in the way they structure things. I don’t think there are any common contractual arrangements.
Ray: What I understand is that they have a rate contract – it is government controlled. So if they like you, they’ll tell you to go by their rates. If the parties agree, they’ll give you the contract but even that is very loose.
Dessoy: Yes, but we weren’t working for the government. We were working for a private company.