Contractors get paid as developers use bond issue
Dubai construction companies are starting to get paid as Government-backed property developers tap into the first half of the US$10 billion (Dh36.7bn) bond issue. Contractors have struggled to get their dues in the past six months as developers grapple with cash flow issues, but some are beginning to see payments trickling through.
Nasser al Shaikh, the director general of the Dubai Department of Finance, said this week that firms had drawn Dh18.3bn from the bond, with the main recipients being property companies. Contractors say some firms that come under the umbrella of Dubai World and Dubai Holding have started to pay, while others have not. "It's a mixed-bag," said David Savage, the managing director of Al Habtoor Leighton Group.
"We've been slowly receiving payments from some, but from others we still haven't received much at all." Al Habtoor is still trying to recover costs on some projects that have been cancelled, in particular its Dh2.2bn deal with Nakheel for the Trump International Hotel and Tower, which was suspended in December. "We're still finalising the closing-off of the job and working through an amicable solution with Nakheel," Mr Savage said.
Riad Kamal, chief executive of Arabtec Holding, said in March that the company was beginning to get the receivables owed since October. The comment was made about a month after the bond was issued. Kez Taylor, managing director of Al Jaber Engineering and Contracting (Alec), a firm owned by Abu Dhabi's Al Jaber Group but with a number of projects in Dubai, said: "There are clients who are paying, but it's a trickle, while others are late".
He said the payments were being made by Government-related clients but declined to say which ones. But for other major contractors, getting paid is still a struggle. "We're not receiving payments yet but we're being promised we will very soon," said Bishoy Azmy, the chief executive of ASGC, which laid off hundreds of staff in December. Mr Azmy added that the firm had slowed work on some projects to allow clients more time to raise finance, but that the company "was still not getting paid".
A senior member of staff at another contracting firm, who asked not to be named, said the company was owed a "significant sum" from both Government-related and private developers. "We haven't seen anything of any substance from the Dubai money," he said, adding: "And we're not trying to slow down work as we're just trying to finish and get out." He said the firm had been less impacted because most of its projects are in Abu Dhabi, but that he was confident Dubai would find a solution.
"Not getting paid is very problematic, but taking the issue to court doesn't get you paid either," he said. "It's not something that fits well and we don't like to do it. We believe strongly in the country and in Dubai; it's been the cornerstone of our success. "The solution might not come soon," he said, "but it will come." Meanwhile, a report released on Thursday by Standard Chartered Bank said the bond would "start to have a positive trickle down effect on the rest of the economy by the second half of 2009".
It said Dubai's massive expenditure allocation for infrastructure projects this year, which totals 45 per cent of the emirate's budget, would help in supporting growth. The continued investment in infrastructure has encouraged contractors to shift their focus to other sectors of construction as work in the private sector dries up. Mr Savage of Al Habtoor said: "Social infrastructure work is our biggest target at the moment".
Several contractors are also looking towards other growth spots in the region, including Qatar, Saudi Arabia, Libya and Egypt. ASGC is eyeing work in these countries, while Arabtec is bidding for work in Egypt and looking at Libya. firstname.lastname@example.org
Updated: April 25, 2009 04:00 AM