The UAE government has been defending the investor friendly business environment that is stimulating the construction industry in the country.
Addressing the government’s regulations within the construction sector, Ali bin Abdullah al-Kaabi, the minister of labor, said that that the labor cost in the country, including accommodation costs, fees and salaries, does not exceed 14% of the total amount of money allocated for any project.
He also pointed out that these labor fees were among the lowest in the world and defended the record of the government on granting licenses for foreign laborers to contracting companies. He asserted that the UAE had only rejected 10% of the 700,000 applications by companies to bring foreign laborers to the country. Al Kaabi also suggested that these rejections were largely because the companies had failed to provide accommodation for the laborers they sought to bring to the country.
A balanced approach
The government is, thus, keen to illustrate that it is seeking to strike the right balance between protecting the rights of laborers and providing an attractive operational environment for contractors and the construction industry in the country. However, many contractors are concerned that legislative changes and general labor costs are having a punitive effect on their business. Changes to the labor law that provide for greater ease of movement between companies for laborers are causing anxiety for many contractors who feel that their initial investment in bringing workers to the country is not protected. Contractors importing laborers pay in the region of $1,906 per laborer and have no security in retaining that laborer. However, there are currently discussions between the government and the contractor’s association on establishing a compensatory structure for such situations.
Contractors also have concerns over the price of housing workers, an issue that is affecting all housing units, particularly in Abu Dhabi.
Nevertheless, despite such concerns the sector seems to be in a healthy state. A recent report concluded that the UAE has the largest construction industry among Gulf Cooperation Council (GCC) countries. The UAE is the biggest spender on construction in the region accounting for $294 billion worth of projects, which is more than Oman, Bahrain and Qatar combined. This compares with $201 billion worth of projects in Saudi Arabia and $211 billion in Kuwait. The construction sector in the UAE has grown at an average rate of 11% a year over the past decade, according to some analysts.
Promising growth
In Abu Dhabi, the growth of the construction industry is reflected in the announcement last week that the capital will be home to a building materials city. The $1.09 billion zone is being developed by the local company, Manazel, and is expected to be completed by the beginning of 2010. The zone, which will be located five minutes from Abu Dhabi International Airport and 15 minutes from the city centre, is being touted as a hub for building materials contractors and manufacturers from the region.
According to Mohamed Mehanna al-Qubaisi, the chairman of Manazel developers, over 80% of the project is already booked out and he expects the remaining space to be filled by the end of the year. Only Emiratis will be allowed to own land in the zone with foreigners being allowed to take land on a long-term lease. The city will comprise 17 commercial towers, 32 residential towers, and an impressive 100,000 square metre shopping centre, used to house building materials showrooms. The area will also include a hotel.
Elaborating on the rationale behind the development al-Qubaisi said that the project includes the first building materials stock exchange in the Middle East to make the city a hub for attracting manufacturers, importers and suppliers.
