Scaling new heights

With many innovative projects under way, UAE's construction sector remains upbeat.

The design of good houses requires anunderstanding of both the construction materials and the behavior of real humans.
- Peter Morville

When it comes to construction, the UAE leads the way. The UAE's construction industry is valued at $221 billion (about Dh811.73 billion) - the highest in the region. This highlights the fact that planned construction is the focus of the Emirates, particularly Dubai.

Large property developers such as Nakheel, Emaar, Dubai Properties and Dubai International Properties have announced projects worth $26 billion (about Dh95.49 billion), while Dubai Municipality, Dewa and the Department of Civil Aviation are planning projects costing another $20 billion (about Dh73.46 billion).

Bernard Walsh, Managing Director, DMG World Media Dubai Limited, says, "The UAE has a young, ever-growing population, leading to massive housing requirements while the oil revenues continue to drive a construction boom in both the public and private sectors.

"The ongoing construction boom throughout the Gulf is the result of an extremely active public sector and the commitment of governments to develop and enhance its infrastructure, leading to the commissioning of hospitals, fire stations, tourism and educational facilities.

Annual requirement

"With desalination providing 80 per cent of the annual requirement, the UAE alone will spend in excess of $7 billion (about Dh25.7 billion) over the next 25 years to develop its water resources, with a series of new plants developed throughout the Emirates.

"Private sector development is even more ambitious, with the focus throughout the region firmly on hotels, leisure and commercial developments, shopping malls, apartment blocks, residential developments and office towers, as the growth and significance of the tourism trade continues at a rapid pace," says Walsh.

"These projects are, in turn, boosting the business of the entire spectrum of supply industries - a typical example is cement, with Dubai Holdings establishing the Emirates Cement Company (ECC), which aims to profit from the current boom in the region's construction sector. To be located in Fujairah and be operational within two years, it will feature a three-million- tonne-capacity plant and raw material quarries."

According to a recent UN conference on Trade and Development, the GCC states attracted $1.8 billion (about Dh6.61 billion) of foreign development investment in 2003; $480 million (about Dh1.7 billion) of this flowed into the UAE. This was believed to increase significantly in 2004 and 2005 due to the opportunities in the region, the relaxation of trade barriers and the improved governance being implemented by the Dubai International Financial Centre (DIFC).

Riad Bsaibes, Chief Operating Officer, Amana Contracting and Steel Buildings, attributes the boom in UAE's construction industry to several factors. "Looking at the macro-economic level, the increase in oil creates an increase in government wealth and expenditure. Besides this, the choice of investments made after 9/11 has been favourable for the UAE, which is considered a safer environment for investments.

"The introduction of freehold property ownership by non-UAE and non-GCC residents has helped the industry grow. The UAE's geographic location makes it a prime candidate for investment. Worthwhile investments in infrastructure in globally recognised products such as Emirates airline brings in more companies to the UAE which in turn increases the demand on the real estate market," says Bsaibes.

He believes the UAE is fertile environment for construction because it is a growing economy. "Since the UAE has a developing economy it is still growing, unlike developed economies which now have to rebuild themselves. In a developing economy where the service and financial industry aren't developed and industry is not very mature, investors look toward real estate as investment vehicles as opposed to other investment opportunities.

"Real estate investment has what economists call a mutiplier effect. Every dollar invested produces more returns. Since construction depends on manpower it feeds its own cycle," says Bsaibes.

"The philosophy from the film Field of Dreams says its best: ?Build it and they will come'. It's the same with the UAE," says Avin Gidwani, CEO, Industry Networks, a high-tech information exchange service for the building and construction industry. The company's BNC network (building and construction network) is the UAE's largest and most powerful information service - offering information on more than 10,000 projects and 15,000 companies in the building and construction industry.

"There are two things that set buildings in the UAE apart from construction in most parts of the world. There are no constraints on architectural vision - the artist is encouraged to dream the impossible dream and is thus free to create. Secondly, there is no place in the world where construction moves as fast as the UAE. The exponential timescale is the most impressive feature of the phenomenal development here.

"The UAE construction industry desperately needs to ensure that the buildings it builds last by following predefined building standards. The industry still sits on the fence, shuffling between the US and European standards, depending upon the consultants, and this needs to change," cautions Gidwani.

With some of the most innovative projects under way, analysts and top executives associated with mega development projects in the UAE expect the construction and real estate sectors to remain upbeat.