Abu Dhabi restructures construction sector

Abu Dhabi said on Wednesday it had enacted new rules governing construction activities as part of an overall restructuring process aimed at supporting the domestic economy within its 2030 development strategy.

The new rules will be enforced at the end of this month but they give contractors and other construction establishments up to four years to bring themselves in line with such rules, the Abu Dhabi Department of Economic Development said.

The new laws, termed by the department as “the executive regulations and instructions for the classification of contractors and engineering consultancy offices”, are aimed at organising and restructuring the construction sector.

“They are designed at streamlining and restructuring the activities of contracts and consultants to match the developments which the emirate is witnessing, mainly in the construction sector, one of the most important sectors and a key contributor to economic growth in the emirate,” the Department’s Undersecretary, Mohammed Omar Abdullah, told reporters in the capital.

“These rules are considered as an integrated and comprehensive system that will serve the economy of Abu Dhabi and the whole UAE… it has been prepared by a highly qualified team of experts in collaboration with the private sector.”

Abdullah gave no details of the new rules but said they would be published in the official gazette before they are enforced at the end of October.

He said the new system governing contractors’ activities would also support Abu Dhabi’s Vision 2030, a long-term ambitious development strategy approved by the emirate a few years ago. The strategy involves development of all sectors in the emirate, including the infrastructure, to match a projected surge in its population, which could triple by 2030.

“These rules are basically intended to upgrade performance and define goals and requirements for the coming stage, which is expected to see an upsurge in construction activity in all parts of the emirate,” Abdullah said.

His figures showed more than 2,500 classified contracting companies and their branches operate in Abu Dhabi while there are nearly 4,500 unclassified firms.

Speaking at the press conference, another department official said details of the new classification rules would be published in the official gazette before the end of this month, when these regulations would take effect. But he noted that companies would be given a grace period of up to four years.

“These new rules take into consideration the successful experiences in the classification of contractors in other countries… the department has also conducted in-depth studies about the local market before preparing such regulations,” said Khaled Housani, acting head of the Classification Section.

“We also took into account in our classification the experiences and financial and technical capabilities of contracting companies in line with defined criteria.”

Housani said the rules could allow expatriate investors, under specific terms, to own a consultancy office while other investors could be permitted to practice contracting and consulting activity at the same time.

“We have set a deadline of four years for classified contractors and two years for unclassified contractors and consulting firms to redress their position,” he said.

Abu Dhabi and other UAE emirates recorded a sharp expansion in construction activity during the 2003-2008 oil boom, with the costs of projects exceeding $1 trillion during 2007-2008 alone. Activity plunged in the aftermath of the 2008 global fiscal crisis but the UAE has remained the region’s main business hub.

Official data showed construction activity in the UAE leaped by nearly 21 per cent in 2008 to allow the country to have the largest Arab construction sector.

Saudi Arabia, the world’s oil superpower with the largest Arab economy, had dominated construction activity in the region in the previous years before it was outpaced by the UAE in 2008, showed the 2009 Arab economic report.

From $15.87 billion in current prices in 2007, the UAE construction sector’s contribution to the gross domestic product jumped to $19.06bn in 2008, an increase of about 20.1 per cent.

The report showed the UAE construction sector accounted for around a fifth of the total Arab construction sector’s value of $94.1bn in 2008.

Saudi Arabia had the second largest construction sector last year, with a value of $18.9bn, followed by Algeria with nearly $12.5bn and Egypt with around $6.6bn.

Despite the decline, analysts believe the UAE still maintains its position as one of the largest construction hubs in the Middle East.

In a recent report, the International Monetary Fund estimated the total value of projects planned in the UAE at a staggering $918bn in construction, oil and gas, petrochemicals, real estate, industry and other sectors.

The value accounts for nearly 42 per cent of the total major ventures to be implemented by the six-nation Gulf Cooperation Council in the medium term as part of a strategy to diversify their oil-reliant economy and upgrade their infrastructure, the Washington-based IMF said.

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