OCTOBER JANUARY 2017 2016
THE DEFINITIVE GUIDE TO THE REGION'S CONSTRUCTION PROFESSIONALS
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Editor’s note News Appointments Contracts Year in Review Cover Feature
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Construction Machinery
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Commercial Vehicles
January 2017 // Issue # 023
Construction Market Outlook 2017
Ritchie Bros celebrates 20 years in Dubai Mercedes Benz’ waste management range
construction business news me January 2017 3
GETTING CLOSER TO THE TOP...
Getting closer to the top of the tallest mountain in the UAE will soon be a lot easier, thanks to the fleet of Volvo construction equipment used in the building of the road to the Jebel Jais mountain. When it’s finished, the route will run from Ras Al-Khaimah right to the 1,910 metre summit. The road has already become a popular destination for motoring enthusiasts, who like to show off what their machines can do. But when the road runs out, that’s where the Volvo operators show off their machines. And it’s impressive to see what they VIDEO http://goo.gl/FPsU43
can do. If you want to get closer to the action, scan the code and watch the video. Building Tomorrow.
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Commercial Vehicles
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Take 10: Hotels Supplier News Save the Date Editor’s Pick
8 construction business news me January 2017
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editor’s note
Happy New Year A
nother year, another megaproject is launched in Dubai. Just before going to press HH Sheikh Mohammed Bin Rashid announced plans to build a multibillion dollar development that will bridge two of the city’s most glamourous locations: JBR and Palm Jumeirah. Meraas Holding will oversee Dubai Harbour, a project that will see a cruiseship terminal built alongside the Skydive Dubai runway; construction of the biggest yachting marina in the Middle East and North Africa; and a new road network configured to host Formula 1 races. Does it get any more ‘Dubai’ than that? Dubai Harbour will also see construction of more of all the things we associate with a ‘typical’ mixed-use megaproject. That means more residential towers, hotels, another giant mall, entertainment venues, an iconic skyscraper and an integrated transport system. No start date has been set for the project and it may be that Meraas wants to at
10 construction business news me January 2017
least complete work on Bluewaters Island before it jumps into an even bigger project on the other side of JBR. But there’s no doubt the announcement provides a confidence boost for construction companies heading into a year that many in the industry already believe will be a turning point following a lean period. For the first issue of the year, Construction Business News polled some of the biggest names in the business on their expectations for 2017, and we found many of them to be very upbeat about what the year ahead has in store. In fact time and again we heard the same message. While conditions are likely to remain tight during the first six months - and managing costs and ensuring payment will be a top priority this should gradually give way to a situation where more contracts related to Dubai Expo 2020 are released, providing a bounty of opportunity for contractors. Wishing all our readers a highly successful 2017
Jason o'Connell Editor
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NEWS
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Arabtec calls on Hamish Tyrwhitt Industry heavyweight will retain position as CEO of Depa Group
A
rabtec Holding has appointed industry veteran Hamish Tyrwhitt as its new CEO to guide the construction contractor through its ongoing restructuring efforts. Tyrwhitt will take the helm with immediate effect, replacing Saeed Al Mehairbi who has been acting CEO, and will retain his current position as CEO of interiors specialist Depa Group which he joined in April 2016. "Hamish has a distinguished career in the construction industry,” said H.E. Mohamed Al Rumaithi, chairman of Arabtec. “He has the experience necessary for Arabtec to further strengthen the company’s strategic and financial positioning and achieve its full growth potential. We are confident that Hamish’s leadership will allow Arabtec to move forward to a successful and sustainable future." Tyrwhitt spent 27 years at Leighton Holdings, one of the world’s leading international construction contractors and one of Australia’s largest listed companies. He held various positions in Australia and in Asia before being appointed as Leighton’s CEO from 2011 to 2014. He became CEO of Asia Resources Minerals, an Indonesian coal mining company listed in London, in March 2015, prior to being appointed CEO of Depa Group. "Fundamentally Arabtec is a strong company with a great track record of achievements stretching back over the past 40 years. I am looking forward to taking the company forward and capitalising on the many opportunities available to the Arabtec Group," Tyrwhitt said. 12 construction business news me January 2017
Hamish Tyrwhitt
H.E. Mohamed Al Rumaithi added: "I would like to convey the Board's thanks to Saeed Al Mehairbi who has been acting CEO and has guided Arabtec successfully through the tough environment that has affected the construction industry. Saeed will continue to serve as a Director of the Arabtec Board." Arabtec Holding, comprising nine principle subsidiary companies, is a leading construction company in the Middle East having been involved in many pres-
tigious projects throughout the region. The group is implementing a series of restructuring and cost reduction initiatives and the company generated revenues of AED 6bn ($1.63bn) in the first nine months of 2016, an increase of 17 percent over the same period last year. Arabtec also reported revenues of AED 2bn in the third quarter of 2016, a 25 percent rise on the same period last year. The company’s backlog of current and future projects stands at AED 20bn.
Contractor chosen for Lusail Stadium
A joint venture of Qatari contractor HBK Contracting Co. (HBK) and China Railway Construction Corporation Limited (CRCC) has been awarded the main contract to build Lusail Stadium, the venue for the opening and final matches of the 2022 FIFA World Cup Qatar. British architectural firm Foster + Partners completed the schematic design earlier this year for the 80,000-seater stadium, to be located in Lusail City just 20km north of Qatar’s capital Doha. H.E. Hassan Al Thawadi, Secretary General of The Supreme Committee for Delivery & Legacy (SC), the organisation responsible for delivering the stadiums and infrastructure required for the 2022 FIFA World Cup, said: “Lusail Stadium will be the centre-piece of our tournament in 2022, and post tournament will become an integral part of the community in Lusail City in Seating the legacy phase. We look forward capacity to revealing the Qatari-inspired design and detailed legacy plans to the people in Qatar and football fans across the world next year.” The SC has also awarded Marafeq with a deal to supply district cooling to the stadium. All eight stadiums currently under construction will feature innovative cooling technology. Lusail stadium site construction began in 2014, with TIME Qatar as the project managers. Most recently early works and site office construction projects were completed by Galfar Al Misnad, with levelling and grading works and site and access roads completed by local contractor Marbu Contracting. Earlier this year, main works were awarded for Al Rayyan Stadium and Qatar Foundation Stadium, which joined Khalifa International Stadium, Al Bayt Stadium in Al Khor City and Al Wakrah Stadium in
80,000
Lane wins Al Maktoum Airport expansion project
Lane Construction Corporation bagged the contract for work on the Al Maktoum International Airport Expansion Project in Dubai. Working alongside the National Contracting Transportation Corp of Sharjah, the US subsidiary of Italian contractor Salini Impregilo Group will be responsible for 60 percent of the $125m project for a value of $75mn. The project entails new terminal facilities, concourses, runways, roads and tunnels. In preparation for the expansion, Lane will work on temporary
fences and gates, utilities and site offices, as well as site security, according to a statement. Work is scheduled to start in January 2017 and finish in 31 months. Once completed, the expanded airport is expected to accommodate more than 220 million passengers a year, making it the world’s biggest in terms of size and passenger capacity by 2050. Salini Impregilo’s projects in the UAE include the Ras Al Khor Interchange and the Parallel Roads R 881 in Dubai and the Grand Mosque in Abu Dhabi and the Deep Sewer Tunnel.
Al Habtoor Holding confirms HLG split Al Habtoor Holding LLC has completed the sale of its stake in HLG Contracting LLC - formerly known as Habtoor Leighton LLC. In a statement the chairman of Al Habtoor Group, Khalaf Ahmad Al Habtoor, said: “I took a strategic decision to depart from Habtoor Leighton LLC (HLG), and my main focus shall be on Al Habtoor Group’s core businesses such as hospitality,
real estate, automotive, education, and publishing. “I am delighted to have founded such an exceptional construction company in 1970 which to date has built many landmarks in the UAE. I wish HLG Contracting LLC, its shareholders, clients and employees great success.” Confirmation of the divestment comes several months after Khalaf Al Habtoor said he planned to offload the shares.
construction business news me January 2017 13
NEWS
Shapoorji Pallonji starts Downtown project
Shapoorji Pallonji (SP) International Property Developers has begun construction work at its Imperial Avenue project in Downtown Dubai – its first project in the Middle East as a developer. The $350mn project spanning 95,600 square feet is scheduled for completion in the fourth quarter of 2019, the Indian engineering and construction group said in a statement. Jacob Joby, Director - Development at SP International Property Developers, said: "We have started with the early works such as piling and shoring for the project, which will be completed within the next two months. Following this, work on the superstructure will commence and will be constructed by our group company SP Middle East, a division of our company with 45 years of experience as contractors in this region." The enabling work is in progress and major work on the superstructure will commence in late January 2017 and the building is due for handover in October 2019. Advanced technologies with a focus on sustainability including renewables featured within the project design are expected to help reduce the service costs by approximately 15-18 percent.
14 construction business news me January 2017
Drake & Scull appoints PwC as advisor
Drake & Scull (DSI) has appointed PricewaterhouseCoopers (PwC) as a strategic and financial advisor. The consultancy will assist with "examining the company's capital structure and financial liabilities", the firm said in a statement to the Dubai Financial Market. Drake & Scull reported a significant decline in first half profit and revenue due to the regional construction downturn. It attributed the loss to project cancellations and “additional one-off provisions taken in light of the challenges in the sector”. It said a majority of the provisions emanate from Saudi Arabia, with the total impact on the bottom line amounting to AED 192mn. Drake & Scull appointed Wael Allan, previously Chief Operating Officer (COO), as the company’s new Group Chief Executive Officer (CEO) in October.
Schon launches $870m hospitality project
Schon Properties has launched a AED 3.2bn ($870mn) development that will see 2,550 hotel apartments built at a single site within Dubai Investment Park – close to the World Expo 2020 site. The iSuites complex will comprise of 21 mid-rise buildings – each having nine floors including two basement floors – which will be delivered by ahead of Expo 2020. Schon Properties will retain a third of the units in iSuites, which will be managed by international hotel operators, and will offer a limited number of units to the public to purchase. The development features over 52 restaurants and cafes boasting outdoor areas overlooking the Crystal Lagoon as part of a master-planned development, which marks the beginning of Schon’s restructuring plan and change of development direction, fully focusing on hospitality ventures going forward. "We will offer everything from ski slopes, to the desert, to culture, to arts, to beaches, to year-round sunshine, all with 100 per cent security, hence, we believe tourism is the best investment in Dubai,” said Noorul Asif, the chief operating officer of Schon Properties.
Qatar’s first World Cup venue almost complete Qatar is putting the finishing touches to the first in a series of venues that will host matches at the 2022 FIFA World Cup. Khalifa International Stadium is undergoing a comprehensive revamp, which includes building a single roof to cover the whole seating area, adding a new building to the east wing, and construction of an Olympic sports museum. The ‘big lift’ operation of the roof is complete and installation of an innovative roof membrane will continue until early January, with completion of the renovation planned for the first quarter of 2017, the Supreme Committee for Delivery & Legacy said in a statement. A 44,000 m2 membrane made of two materials is being used to achieve FIFA requirements regarding sunlight over the pitch. An intricate net of German and Italian-made steel tension cables weighing 4,000 tonnes has been installed to hold the 92 panels that will make up the roof. The stadium will seat more than 40,000 spectators and will be completely cooled throughout, including the field of play and spectator seating areas. The venue will host matches through to the quarter-finals of the competition which will kick off on November 21, 2022 and end on December 18.
HLG bags $160mn twin towers contract Habtoor Leighton Group (HLG) has been awarded a QAR 580mn ($160mn) contract for the construction of Al Mutahidah Towers by United Development Company (UDC). The project is located on the beach front precinct of Viva Bahriya at the Pearl-Qatar, UDC’s flagship project and one of the largest urban developments in Qatar. HLG will construct twin 25 storey residential towers consisting of 480 apartments, two parking levels, ground floor entrance lobby and amenities/entertainment areas with a gross floor area of 160,500 square meters. News of the contract was revealed in a statement by Austalia’s CIMIC Group which holds a 45 percent stake in HLG. The scope of works includes the structural, architectural finishes and MEP works and landscaping. Construction will start in February 2017 and is scheduled for completion in the third quarter of 2019.
Qatar to ink $13bn worth of contracts in 2017 More than QAR 46bn ($12.6bn) worth of new contracts will be signed in Qatar in 2017 as the country cranks up preparations ahead of the FIFA World Cup in 2020, the country’s finance minister has said. Despite the huge fall in energy prices Qatar has managed to keep economic growth rates at adequate levels, HE Ali Shareef Al Emadi told the Euromoney Qatar 2016 conference. Total investment in commissioned projects stands at nearly QAR 374bn ($103bn), the minister added. Growth is predicted to rise to 3.4 percent in 2017, in line with an International Monetary Fund estimates and up from a projected 3.2 percent this year.
construction business news me January 2017 15
NEWS
Kuwait launches $775mn Cultural Centre Kuwait has inaugurated the $775mn Sheikh Jaber Al Ahmad Cultural Centre (SJAAC) - the stunning centrepiece of a new cultural district in central Kuwait City, close to historic Flag Square. SSH was the lead architecture and engineering designer and worked with renowned specialists in lighting, acoustics, theatre engineering and historical archives on the project which includes a performing arts centre, music centre, conference centre, historical documents centre as well as libraries, parks, and fountains. SSH’s Executive Partner Sadoon Al Essa, said: “It was a challenge for us to complete the design and construction of a project of this size and complexity in
Sheikh Jaber Al Ahmad Cultural Centre (SJAAC)
22 months. This achievement was made possible by the Amiri Diwan’s intervention in expediting the project and overcoming obstacles.” Bob Hope, CEO of SSH, added: “Successfully delivering this world class project makes me immensely proud of the
Etihad ESCO signs with Seven Tides
SSH team. We have designed to the highest international quality standards within such a challenging time frame. I hope that this achievement makes SSH the 'Consultant of Choice' and the Region's 'Go to Guys' for future world class cultural and heritage projects.”
Construction complete on $1.2bn Palm project
Deal covers 22 properties
Etihad Energy Services (Etihad ESCO) has signed its first private sector service agreement with UAE based developer Seven Tides. Under the deal, the company will tender for energy conservation and solar solutions for a portfolio of 22 properties. Dubai-based Seven Tides has developed and owns a variety of projects spanning residential, commercial and resort properties, including premium hotels such as DUKES Dubai, Anantara The Palm Dubai Resort, and Ibn Battuta Gate Hotel. “Our partnership with Seven Tides is
16 construction business news me January 2017
an important achievement. We believe this will inspire other private sector players to implement energy efficient measures, which will help them with sustainable and long-term cost savings,” said Ali Al Jassim, CEO Etihad ESCO, at the signing ceremony. The service agreement is the first private sector contract that Etihad ESCO has signed after a number of successful retrofit projects for public sector organisations including, DEWA, JAFZA Mohammed Bin Rashid Housing Establishment (MRHE) and Dubai International Financial Centre (DIFC) to name a few.
SKAI Holdings completed construction work on its $1.17bn (AED4.3bn) Viceroy Palm Jumeirah Dubai project which will officially open to guests in March 2017. China State Construction Engineering Corporation (CSCEC), the main contractor and equity partner in the project, has been on site over the past two years overseeing more than 4,000 workers. “The completion of our flagship project ahead of schedule is testament to our commitment and confidence in Dubai’s growing hospitality sector,” Kabir Mulchandani, group chief executive officer, SKAI, said in a statement. The hotel comprises 477 rooms while the residential component consists of 221 units, with handover of units underway. SKAI Holding is developing a second hospitality and residential project, the $350mn Viceroy Dubai Jumeirah Village, which is 32 percent complete and will start operations in 2018.
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Work begins on JBR’s tallest building
Construction work has started on The Address Residences Jumeirah Resort + Spa, set to be the tallest building at Dubai’s Jumeirah Beach Residence (JBR) area. Middle East Foundation Group is undertaking the foundation work, which will feature 22 km of bored piling for the two-tower development. Over 222,000 cubic metres of earth will be excavated for the three basement levels. The beach front development is being built on the last available land plot on Jumeirah Beach Walk opposite the under construction Bluewaters Island. The Address Residences Jumeirah Resort + Spa is essentially a single tower, arranged in a split formation to maximise light and ensure sweeping views of the Arabian Gulf and Dubai Marina. Ahmad Al Falasi, Managing Director, Hamptons International, said: “The award of the enabling works contract to Middle East Foundation Group underlines the commitment to work with best-in-class partners, for the on-schedule delivery of the project. As the leading foundation contractor, the company has proven expertise in undertaking largescale projects.”
18 construction business news me January 2017
ACC to build Cyprus skyscraper
Arabian Construction Company (ACC) and joint venture partner J&P Group (Joannou & Paraskevaides Group) have signed a new contract to build a 170 metre luxury residential tower called ‘ONE’ in Cyprus. Upon its completion in 2019 this will be the tallest residential seafront tower in Europe, and represents the company’s first project in the country. The 37 storey tower will be located on 28th October Avenue, Limassol's prime seafront boulevard, and is set to become a Cyprus landmark. Maher Merehbi, Chief Executive Officer of Arabian Construction Company said: “We are proud that the client has placed their faith in the combination of our high-rise expertise and the local experience of our J&P Group partners, to build what will become one of the most iconic buildings in Cyprus.” ACC has constructed some of the most impressive high-rise buildings across the GCC and MENA regions, including a number of the tallest towers in the UAE. Famous names include the Almas Tower, Princess Tower, Sky Tower, Gate Towers, Etihad Towers, Fountain Views, Sky View, World Trade Center Abu Dhabi and Rose Rotana.
Dubai Properties hands over first tower at Dubai Wharf Dubai Properties (DP) has handed over the first of four towers at the Dubai Wharf development ahead of schedule. Two other towers in the residential development in the heart of Culture Village overlooking Dubai Creek are scheduled for completion in Q1 2017, while the fourth tower and the retail space will be completed later in 2017, Dubai Properties said. Dubai Wharf features 594 studio, one-, two-, and three bedroom apartments as well as 110 retail, F&B and entertainment outlets on the ground floor that overlook the canal.
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Appointments
Emaar appoints hospitality chief Emaar Properties has appointed Olivier Harnisch to take its hospitality division to the next level. He joins Emaar from Carlson Rezidor Hotel Group in Brussels, where he was Chief Operating Officer, responsible for a portfolio of over 350 hotels in Europe, the Middle East and Africa. Harnisch will be tasked with helping Emaar deliver its ambitious project pipeline which includes over 35 new hotels and serviced residences.
Mourad Hedna in at UD Trucks Mourad Hedna has taken over as President for the Middle East, East and North Africa (MEENA) region at Japan’s UD Trucks. Hedna was previously Vice President Powertrain Business Strategy for Volvo Group in Sweden, and has been working for the Volvo Trucks Group since 1996. The new man made the move to the UAE on November 1 and is permanently based at Volvo Group Regional Headquarters in Jebel Ali.
Al-Futtaim E&T appoints new CEO Dr. Hayan Sayed is the new CEO of AlFuttaim Engineering and Technologies. With over 30 years’ experience, he brings knowledge in strategic planning, market assessment, project feasibilities, mergers and acquisitions, engineering business unit management and process re-engineering. Part of Al-Futtaim Group Real Estate, AlFuttaim Engineering is a multi-disciplinary engineering organisation operating across UAE, Qatar and Saudi Arabia with over 30 years of successful operations. 20 construction business news me January 2017
Schneider Electric names MEA President Schneider Electric has named Caspar Herzberg as President of its newly formed Middle East & Africa region, effective January 1, 2017. In a bid to refuel growth, boost organisational efficiency and better leverage opportunities in the existing Africa & Caribbean and Middle East & Central Asia regions, Schneider Electric has merged these two markets into a single Middle East and Africa region. Herzberg joined Schneider Electric in April 2016 to lead the Africa and Caribbean operation.
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Contracts
Kleindienst awards $1.3bn deals
Kleindienst has awarded three contracts worth a combined AED 4.8bn ($1.3bn) for its Heart of Europe project on The World Islands, Dubai. Chinese companies Wuchang and Sino Great Wall will combine
their global experience with JK Bauen to lead the construction. The contract follows the Strategic Cooperation Agreement and the formal MOU signed between the companies in November.
ACTS wins material testing contract for Riyadh Metro
Advanced Construction Technology Services (ACTS) has been awarded a contract to carry out testing and analysis on construction materials to be used for the Riyadh Metro Lines 1 and
Al Hajiry Trading pens $15mn contract in Oman
Al Mazaya Real Estate Company has awarded Al Hajiry Trading with an OMR 5.7mn ($14.8mn) contract to build a residential project in Muscat. Located in AlSeeb Province, Mazaya Residence boasts 120 residential units and 28 shops. The 22-month contract was signed by Ibrahim Al Soqabi, Group CEO Al Mazaya Holding and Jason Sam Varghese, Executive Director of Al Hajiry Trading Projects Division.
Al Nuaimi Group bags $8.16mn enabling works
2. This is the company’s second deal for ACTS on the megaproject after it was awarded a previous assignment to carry out geotechnical and geophysical works on the same metro lines.
RAK Properties has signed a AED 30mn ($8.16mn) enabling works contract with Al Nuaimi Group for its upcoming Anantara Resort & Spa. The contract includes piling and earthworks for the 306-room resort within the giant Mina Al Arab development. The next phase of the mixed use project will feature a 5-star hotel, a 4-star resort, serviced and residential apartments, villas and townhouses, retail,
Al Hassan Engineering pens $67mn contract with Intecsa Al Hassan Engineering Co. Abu Dhabi has signed a letter of intent (LOI) for a $67.1mn contract with Intecsa Ingenieria Industrial SA to build a water treatment plant in Abu Dhabi. The work involves expansion of existing facilities in Ruwais 22 construction business news me January 2017
for the treatment of waste produced by ADNOC operating companies in Abu Dhabi. Works will include civil, building, steel structure, piping, mechanical, electrical and instrumentation works.
DAMAC awards 15 contracts worth $350mn DAMAC Properties handed out 15 major construction and consultancy contracts valued at AED 1.26bn ($350mn) between August and November, bringing the total value of contracts awarded by the developer so far this year to AED 6.51bn. The recent contracts are related to projects in Dubai including DAMAC Properties’ two golf communities AKOYA by DAMAC and AKOYA Oxygen, in addition to multitower projects AYKON City and DAMAC Towers by Paramount Hotels & Resorts.
ACES Doha wins geotechnical work in Lusail
Shapoorji Pallonji contracted for Cayan Cantara project Cayan Group has appointed Shapoorji Pallonji International as the main contractor for its Cayan Cantara twin tower project in Dubai. The project comprises one residential and one hotel apartment tower with a combined total of more than 700 units of varying sizes. The developer revealed recently that it was entering the hospitality arena for the first time with a second tower at the development on Umm Suqeim Road.
Al Hassanain Contracting wins Bahrain Marina works ACES Doha has been awarded the geotechnical investigation for the Commercial Boulevard District in Lusail city, Qatar. The mixed use project comprises shopping malls, residential units, leisure areas and a financial center with a total area of 56 hectares. The extensive scope of work, which was awarded by DP Engineers, includes drilling of 155 on-land boreholes with depths up to 45 meters and excavation of trial pits.
Hill pens $15.5mn FM contract with ADNOC Hill International has penned a three-year, $15.5mn facilities management deal with Abu Dhabi National Oil Company (ADNOC). Hill will provide services for ADNOC's existing portfolio of assets, management of day-to-day operations, support for future expansion plans, management of construction phases including pre- and post-construction, contract management and project controls.
Bahrain Marina Development Company has awarded Al Hassanain Contracting Company the contract to execute and complete the marine works for the Bahrain Marina project by 2020. The contractor will undertake all the enabling and marinerelated works, including dredging, land reclamation, earthworks, shore protection, quay walls and culvert crossings.
construction business news me January 2017 23
The year in review
The Year in Review 2016 was a mixed year for the Middle East construction sector but there were still a number of highlights. We take a look back at some of the key moments.
24 construction business news me January 2017
JANUARY
MARCH
Etihad Rail suspends tendering for stage two
Multiplex to build Omniyat’s One at Palm Jumeirah
A sign of slowing government investment in the region came early on in the year when UAE-based Etihad Rail announced it would suspend the tendering process for stage two of the project while it reviewed the investment. Stage two included construction of a rail network in Abu Dhabi that connects with Saudi Arabia and Oman. “A decision has been taken to suspend the tendering process for stage two while we review the most appropriate timing for this investment,” an official said.
Dubai-based developer Omniyat announced the appointment of Multiplex as the main contractor on its AED 2bn ($550mn) One at Palm Jumeirah project. Drake & Scull is also a partner on the high end residential project which is located at the first plot on the west trunk of Palm. The building’s 90 apartments start at AED14m and go all the way to AED200m for the penthouse.
FEBRUARY
milestone at its Midfield Terminal Building (MTB) when it completed the steel structure for the roof of the building. Situated between the two runways, the MTB will be the largest architectural structure in Abu Dhabi when complete. The roof spans 319m at the widest point with 18 arches, the largest of which is 180m wide and 52m high. The multibillion dollar development will increase the capacity of the airport to more than 45 million passengers per year when it opens by the end of 2017.
APRIL
JUNE
Emaar unveils The Tower at Dubai Creek Harbour
Middle East contract disputes on the rise
Nakheel awards $390mn contract for The Palm Gateway
The Dubai-based developer handed responsibility for construction of one of its key projects to Ssangyong Engineering & Construction Co and China State Construction Engineering Corporation (CSCEC). The pair were awarded a AED1.4bn ($390mn) deal to build The Palm Gateway consisting of three residential towers along with retail and a beach club on Palm Jumeirah. The towers will be constructed on top of the existing Palm Monorail terminal, which includes 14 levels of parking spaces.
Emaar chairman Mohamed Alabbar launched what will become the tallest building in the world, around 100 metres bigger than current title holder Burj Khalifa. Designed by Spanish ‘starchitect’ Santiago Calatrava, The Tower will cost around $1bn to build and should be ready around 2020. Unlike Burj Khalifa, the tower will have just 18 usable floors near the top of the building and is more of a monument designed to raise the value of property in the surrounding Dubai Creek Harbour development.
MAY Abu Dhabi completes steel structure for MTB Abu Dhabi Airports reached a major
The Middle East was the only region that saw its dispute values rise last year, according to a report by Arcadis. The report found that construction disputes were the highest in the Middle East at $82mn, followed by Asia at $67mn. “In an economic environment impacted by the oil price, the market continued to see a restriction in decision-making within the industry. This drove a lack of appropriate delegation to project management consultants and client representatives, thereby prolonging critical commercial decisions and generating cash flow issues related to instructed variations,” the report said. construction business news me January 2017 25
The year in review
JULY
SEPTEMBER
NOVEMBER
RTA hands out $2.8bn Dubai metro contract
Dubai unveils $20bn Jumeirah Central
Meraas unveils Dubai Arena
Dubai’s Roads and Transport Authority (RTA) awarded a consortium of France's Alstom, Spain's Acciona, and Turkey's Gulermack with a AED 10.6bn ($2.8bn) contract to extend the Dubai Metro up to the Expo 2020 site. The Expolink Consortium beat stiff competition from nine other ventures to win the huge contract in an international tendering process. The official operation of the service is set to on 20 May, 2020, five months ahead of the opening of Expo 2020.
Dubai unveiled one of its most ambitious mega projects to date, a $20bn mixed-use district in the heart of the city alongside Sheikh Zayed Road opposite Mall of the Emirates. Jumeirah Central will comprise 47 million sq ft of gross floor area and be home to 35,000 residents, 7,200 hotel rooms, nine million sq ft of retail space and more than 44,000 car parking spaces. HH Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, said: “As our vision for future cities evolves, Dubai will continue to set the benchmark for city development across the globe.”
Property developer Meraas announced plans to build a new state-of-the-art multi-purpose arena with a capacity of 20,000. Spanning an area of half a million square feet, the Dubai Arena is set to enhance the city’s leisure and entertainment offering and become the ‘go to’ venue for large scale international music concerts, sporting events such as hockey and NBA as well as other entertainment events. Located at City Walk, ground has already been broken on the project which is expected to be completed by the end of 2018.
AUGUST Nakheel declares itself debt-free
OCTOBER Sheikh Mohammed breaks ground on The Tower
Dubai developer Nakheel announced itself completely debt-free after repaying a AED4.4bn ($1.2bn) trade creditor sukuk (Islamic bond). The payment marked the end of the company’s financial restructuring, which began in August 2011. Ali Rashid Lootah, Chairman of Nakheel, said: “In six years since, since March 2010, Nakheel has achieved what some considered impossible: completion – ahead of time – of one of the largest, most complex financial restructuring exercises, followed by the successful execution of a new business plan that placed us on a new path to growth.” 26 construction business news me January 2017
The groundbreaking ceremony for The Tower at Dubai Creek Harbour, the brand-new icon that will be the world’s tallest tower when completed in 2020, was held in the presence of His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai. Mohamed Alabbar, Chairman of developer Emaar Properties, said: “We are pushing our boundaries in every aspect of this new master-planned development, one of the largest in the world, which underlines the spirit of positivity and hope that our nation celebrates.”
DECEMBER Lane wins Al Maktoum Airport expansion project
Lane Construction Corporation and National Contracting Transportation Corp of Sharjah bagged the $125mn contract for the next phase expansion of Al Maktoum International Airport in Dubai. The US subsidiary of Italian contractor Salini Impregilo Group will be responsible for 60 percent of the project which entails new terminal facilities, concourses, runways, roads and tunnels. Work is scheduled to start in January 2017 and finish in 31 months. Al Maktoum International will gradually be scaled up to a capacity of 220 million passengers per year, the largest airport in the world.
Cover story
The past 12 months have been a tricky time for companies operating in the Middle East construction sector. But what will 2017 hold? Will it be an improvement on last year? What will be the biggest challenge for the industry? Which sectors will provide the best opportunities? And what will be the key trends to emerge? At the dawn of a new year, Jason O’Connell spoke to some of the biggest players in the market to find out their expectations for the year ahead. 28 construction business news me January 2017
One current trend that we are already witnessing is a rise in what one can call ‘creative financing’, where contractors may end up taking on additional risk of delayed payments, or taking onboard ownership of the project, until the project is actually delivered
Bishoy Azmy CEO of Al Shafar General Contracting (ASGC)
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ur outlook for 2017 is a positive one, having been aware of several Dubai projects that were in the planning phases, and our expectations are that many of them will be announced during 2017. We also expect to see an increase in construction and real estate investment activity in Abu Dhabi, albeit in the second half of 2017. 2017 will not be without its challenges, both external & internal. Our external challenges come from the fact that today we have in our portfolio several large important projects which clients need delivered in a constrained timeframe. Hence our challenge would be to make sure that this happens, by overcoming our own deficiencies and limitations, the clients’ occasional inclinations for delays and changes, and by overcoming market conditions and any hurdles that official authorities or other 3rd parties may impose. Internally, we are labeling 2017 as the age of digital transformation. We have recently hired a Chief Information Of-
ficer, and under his tutelage, we envisage a lot of change in how we conduct our business. This would include everything from recording attendance, performance assessment and asset management, to invoicing clients, and dealing with our subcontractors. We also envisage improvements in our procurement activities as well. This transformation is what we are considering to be the challenge. We are expecting continued activity and growth in social infrastructure projects, over the next several months. These include airports, road works, tunnels and metro works, in addition to canals, hospitals, universities and educational complexes. One current trend that we are already witnessing is a rise in what one can call ‘creative financing’, where contractors may end up taking on additional risk of delayed payments, or taking onboard ownership of the project, until the project is actually delivered. On a related note, we are also seeing export finance becoming very active. construction business news me January 2017 29
Cover story
Simon Moon CEO of Atkins in the Middle East & Africa
Our strategy is aimed at carefully selecting critical, complex projects and programmes with established key clients who need a long-term partner
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e expect that the sustained lower oil price and continuing reviews of government spending priorities will result in ongoing uncertainty across regional markets. At Atkins our business success is firmly built on our ability to be agile and responsive. We expect 2017 to be similar to 2016. 2018 onwards should be back to a reasonable level of growth in the infrastructure and property sectors especially with the growing population. Liquidity challenges across all markets mean that, like many, managing cash will be our major focus and challenge. In addition, there will continue to be both broader challenges and opportunities as the GCC governments balance managing their budgets whilst delivering on their ambitious long-term goals and national visions. I expect to see increased opportunities arising from alternative financing models in infrastructure, with a focus on PPP, BOTs, BOOT, IWPP. There is a strong demand for infrastructure developments especially in Saudi Arabia, however until the establishment of the PMOs in the government entities, it will likely remain quiet. 30 construction business news me January 2017
The region offers good opportunities linked to the drive for economic diversification and the need to invest in social infrastructure; transport infrastructure; retail, hospitality and defence. Our strategy is aimed at carefully selecting critical, complex projects and programmes with established key clients who need a long-term partner. A key area to look out for is technology / digital. I truly believe that rapid and disruptive advances in technology in our market represent the most exciting opportunity facing us today. Technology is revolutionising what we do and the way we do it. We are investing in technology innovation to offer clients more efficient and economic solutions using digital engineering and digital asset management. Another really exciting trend which could offer some fantastic solutions for the region is intelligent mobility which harnesses emerging technologies to improve the movement of people, goods and services. Again, we are investing in this area across a number of related activities covering connected/autonomous/electric vehicles and platforms to link many modes of transport to provide mobility as a service.
Enrich BMT L.L.C is one of the Leading Trading Company in supplies ,Imports & Exports of Various Metals, Fasteners, Electrical, Plumbing , Mechanical , HVAC, Timber, Wood & Oilfield supplies. We carry wide range of quality materials to meet industry requirements. Our association and collaboration with reputed suppliers enable us to supply on a large scale . We pride ourselves on consistently offering HIGH QUALITY, COMPETITIVE PRICES and EXPEDIENT SERVICES. Material Supplied in Projects : ADNOC Head Quarter, Abu Dhabi. Al Mafraq Hospital Project, Abu Dhabi. Midfield Terminal Building Abu Dhabi International Airport, Abu Dhabi. ADGAS. High-Rise Towers Desax Properties
Enrich Building Material Trading L.L.C. P. O. Box : 182615, Dubai, UAE. Tel : +971 4 2566698 | Mob: +971 50 4045470, Email : info@enrichbm.com
Cover story
Olivier Crasson EVP, BESIX/Six Construct
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e expect a general slowdown in activity in 2017 compared to 2016, mainly due to the level of the oil price which will have an effect on all industries. However, due to a number of strategic projects such as Dubai Expo 2020, we will focus our attention on the larger projects as the necessary infrastructure work will continue to develop in order to be ready on time. The Qatar World Cup 2022 is obviously also an important driver. In general, all our projects are considered to be a challenge as such, due to their inherent complexity. However, if we have to identify a specific challenge, it would be to make sure that our payments are received on time, but we trust that a follow up and a dialogue with our partners will help us to overcome these challenges if they occur. Infrastructure and environmental projects in the broad sense are where we believe opportunities will come. We also see prospects in transport, health, sport, leisure and tourism. Alternative financing such as export finance and private-public partnerships (PPP) as new procurement mechanisms will become more popular in the region. Furthermore, there is a definite trend towards privatisation in a number of GCC countries, but the process is logically longer, as we will have to see how this materialises in 2017 and beyond.
Senan Al Naboodah MD, Al Naboodah Construction
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l Naboodah Construction Group (ANCG) has significant private sector orders in the pipeline for the first quarter of 2017, the majority being real estate sector clients, the sector which is providing the best opportunities for us. We did not see a significant decline in the number of tenders issued in 2016 and do not predict a decline in 2017. The biggest challenge in 2017 for the industry will be managing project financing and payment delays. ANCG has successfully avoided these through careful assessment of the projects we work on, and the financial security of who we partner with. We are extremely selective with RFP participation and diligently ensure the projects we pitch for are financed securely. Equity partnerships, joint ventures and public private partnerships are a trend we expect to be embraced in the coming years across the industry. We have implemented innovative and flexible pricing structures with our clients to take account of continuing fluctuations in commodity prices. In 2017, we will continue to embrace industry best practice in technology with our in-house BIM modelling team and our use of robotics saving time and manpower and creating savings for our clients. Our heritage is firmly in the UAE, but we will continue with expansion plans in the GCC and East Africa in 2017. We are pleased with the state of our order book for 2017, putting us in a strong position to start the New Year.
Our strategy is aimed at carefully We have implemented innovative and selecting critical, complex projects and flexible pricing structures with our programmes with established key clients clients to take account of continuing who need a long-term partner fluctuations in commodity prices 32 construction business news me January 2017
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Cover story
Our strategy is aimed at carefully selecting critical, complex projects and programmes with established key clients who need a long-term partner
Kez Taylor CEO of ALEC Building
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he main challenges in 2016 and also the biggest opportunity for the construction community is to work in alignment to achieve project success. Each stakeholder must take responsibility and accountability for their roles and work together to achieve the project outcomes. Alignment and collaboration is a challenge but when done correctly it opens the door to many opportunities. The construction sector at the moment is very positive and there are plenty of opportunities in the next 5+ years. We will be focusing on operational efficiency in 2017 and ensuring that
34 construction business news me January 2017
we create an environment on projects where all our stakeholders and subcontractors are able to succeed. Having effective relationships, alignment and trust in the supply chain is our key priority. There will be more emphasis on design and build projects as well as diversifying the core business. Renewable energy has become a priority and businesses need to respond and adapt to the changing requirements which have been set to make the UAE a smart city. ALEC’s continuing growth is to offer complementary services which add value to our core business as a contractor.
Cover story
Richard Marshall Senior Infrastructure Analyst, BMI Research
Ahmed Alkhoshaibi Group CEO, KBW Investments
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To find the best opportunities, firms should look to those projects which are key for economic diversification
he outlook for 2017 for the KBW Investments portfolio companies looks promising. Specific categories in our construction-oriented ventures are already heavily engaged for the next two to three years – depending on which segment we’re looking at - with large-scale projects that have already broken ground. Currently, with the existing confirmed projects, contracting, engineering and architecture are projected to be KBW’s biggest profit-drivers. Early Q1, KBW Investments will be announcing two new endeavors that will significantly impact our corporate landscape internally, and externally will substantially increase our level of market penetration and diversify the business. Over the course of 2016, KBW was extremely active across almost every segment. In 2017, we will be building on that momentum by focusing on the new entities in the Group including Grayscale Interiors in fit-outs, KBEC in MEP, Ascorel Middle East in heavy machinery safety technology, and our various on-going projects such as the PPP with Dubai Courts and the Novotel Sharjah Expo. This, together with our upcoming announcements, will propel the Group into what we consider very advantageous positioning.
verall we anticipate that 2016 was the bottom in terms of growth in GCC construction markets. The year saw that initial expectation that the wealthy GCC markets could sustain their infrastructure project pipelines during a sustained period of lower oil prices was untrue and planned projects began a period of rationalisation. There has been pain in some markets – notably Saudi Arabia, which we forecast went into recession over 2016 – but 2016 also saw markets begin a fundamental transformation which should set them on the path of more sustainable growth as they look to increasingly tap the private sector. That said, 2017 will still be challenging as markets are not yet attractive enough generally to attract massive infrastructure investment and governments remain very selective in which projects they finance. There will be a heavy focus on cost efficiency and margins at construction firms will be under even more pressure than ever. To find the best opportunities, firms should look to those projects which are key for economic diversification. For example, freight rail projects connecting to powers over long distance passenger rail. In particular though, we highlight industrial construction sector in 2017, as we expect GCC countries will seek to move further downstream into the petrochemical sector to capitalise on growing demand for plastics at a time when excess refining capacity combined with tepid demand for refined fuels weighs on margins in the refining industry. While each GCC country will view expansion in the petrochemicals space as a means to accelerate economic diversification, Saudi Arabia and the United Arab Emirates in particular announced ambitious growth targets.
Currently, with the existing confirmed projects, contracting, engineering and architecture are projected to be KBW’s biggest profit-drivers
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36 construction business news me January 2017
Engineering the future. Providing confidence.
In the construction business since 1915. We don’t just sell trucks – We provide piece of mind solutions. www.man-middleeast.com
Cover story
Andrew Jeffery Partner – Capital Projects Leader – MENA, Deloitte
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ndoubtedly 2016 was a very challenging year with falling order books month on month for most companies across the GCC due to government spending reprioritisation, low oil prices, falling consumer demand, cash flow and liquidity management as well as political uncertainty in some areas of the region. Accordingly securing timely payment has certainly been top of the list for most companies. Ensuring strong cash management will be ‘the’ differentiator to leading companies moving forward, allowing them to better invest, strengthen their business and talent for when the market starts to recover in mid-2017. We believe the winners will be those companies who more quickly adopt leaner operating models and use technology to maintain margin despite falling tender prices. Time and cost overruns look likely to continue as a result of all of the above as well as the need to slow things down in some geographies as budgets are reprioritised. On the upside, Expo 2020 and WC2022 are increasingly looming and so will present more and more opportunity. The KSA NTP offers the biggest game changer, by size, for the region when it’s publicised project pipeline start coming to market in 2017. Unfortunately we see the headwinds of 2016 continuing well into 2017. In this context it seems inevitable that some of the larger International companies will choose to exit some of the regional markets while others may merge to provide better scale and stronger balance sheets. The funding and payment of projects will continue to be a challenge with increasing levels of bonds likely. The focus on KSA for most companies looks to increase as the KSA NTP moves from strategy into delivery. PPP will continue to be an area of interest.
38 construction business news me January 2017
It seems inevitable that some of the larger International companies will choose to exit some of the regional markets while others may merge to provide better scale and stronger balance sheets
Building the UAE’s highest road Jebel Jais is part of the Hajar Mountain Range in Ras Al Khaimah. It is the highest peak in the UAE. And for centuries unreachable by most. For 8 years, a fleet of Volvo FMX Trucks carried a total of more than 5.5 million cubic meters around the clock building a 36 km road that goes up more than 1910 meters. The rugged terrain, steep slopes and loose rock were not a challenge for Volvo FMX, which is built tough for such conditions. That is why more than 30 of our Volvo FMX trucks completed this ambitious road project without any major breakdown. To watch the full video please visit www.volvotrucks.ae/jebeljais
www.volvotrucks.ae/jebeljais
Cover story
Campbell Gray MD, Middle East - Faithful + Gould
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016 has undoubtedly been challenging, with the region in a period of slow down and re-assessment and I forecast continued tight liquidity for 2017 with a revaluation and reprioritisation of mixed use schemes and how they can be delivered more efficiently. Major programmes of work will reach peak load and start coming to an end, placing pressure on businesses to win new work to replace backlogs and maintain cash flow. However, I believe that to ensure the successful delivery of Vision 2030 and the Fifa World Cup 2022 in Qatar, the demand for project and programme services will rise in Q3 next year. In KSA, the National Transformation Strategy is driving diversifica-
tion in the Kingdom and the Project Management Office (PMO) law passed this year, will encourage best practice and drive procurement. We see the industry sector presenting opportunities in 2017 and so we’re currently diversifying into this sector with energy our prime focus. Currently in the Middle East the majority of our activities are within the property sector, with a large focus on what we call lifestyle; retail, leisure and hospitality and going forward I would like to see industry account for approximately 30 percent of Faithful+Gould’s Middle East revenue. We are maintaining and building relationships for the future and investing in the learning and development of our employees to enable us to deliver on our clients’ requirements when the market begins to build again in 2018/19. In 2017 we will focus on continued delivery to our clients and ensuring excellence in the management of their programmes and projects. We will continue to invest in technology 2017 as we continue to move into the digital construction era. Technology and innovation play a key role in what we do and facilitating continuous improvement within our business, enabling our clients and people to benefit from finding better and more efficient ways of working.
We see the industry sector presenting opportunities in 2017 and so we’re currently diversifying into this sector with energy our prime focus 40 construction business news me January 2017
Craig Plumb Head of Research, MENA - JLL
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he UAE is expected to remain one of the most active construction markets in the region in 2017, with focus on Dubai where a number of the Expo related projects will move into the delivery stage. Data from MEED Projects suggests there will be a sharp increase in the value of real estate projects tendered in the UAE in 2017 (around $100bn), which would be the highest level of new tenders since before the Global Financial Crisis. After several years of focus on infrastructure and nonreal estate projects, the focus could shift back to commercial and residential real estate construction in 2017. In addition to major projects associated with Expo 2020, Dubai is likely to see construction commence on a number of major new retail and mixed use projects in 2017. Data from MEED Projects suggests that real estate could account for over 60 percent of all new construction contracts let in 2017 in the UAE. The biggest challenges facing the construction industry in 2017 are likely to revolve around financing of projects. Problems with raising finance are likely to ensure that many of the announced projects do not proceed on schedule and those that do are likely to be those where the developer can provide a combination of both financing and contracting expertise. It is notable that Chinese contractors are becoming more active across the region (especially in Egypt and the UAE), in addition to bringing in their own construction labour, many of
It is notable that Chinese contractors are becoming more active across the region these developers also benefit from government backed financing. This model has also been successfully used by Korean contractors to win major infrastructure projects in the region. Related to the issue of funding, we expect to see significant levels of delay in the completion or delivery of many announced projects in 2017. This is certainly not a new problem, with only 35 percent of all announced residential projects in Dubai actually being delivered in the scheduled year of delivery in Dubai over the past 5 years. We see little reason to expect a major improvement in this materialisation rate in 2017.
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Bill Bodie (MEA Group Executive VP, Business Development) - Parsons
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espite the market headwinds, we see good opportunities for growth in 2017. Innovation and diversification are key. The GCC countries’ effort to diversify their economies away from a disproportionate dependence on oil and gas revenues and their focus on infrastructure development for tourism, trade, and finance presents opportunities for Parsons to provide solutions in multiple sectors that are not reliant on oil prices. We are equipped with the right people, processes, and technologies to support the government diversification efforts, and we have vast experience with a variety of services in many diversified markets such as transportation, leisure, housing, and security. Several projects have already been put on hold. However, because of our extensive track record on major projects
in the region, we have honed our value engineering offerings, so we can drill down on the services previously provided and identify savings for our customers as they move forward on projects. Other projects are proceeding more slowly as governments cut or stretch out capital spending; Infrastructure spending is being scrutinised heavily by government agencies, and low-price only contract awards are now becoming more frequent. While we always look for ways to field competitive cost structures, the environment today is that the lowest price is more important relative to everything else. We can compete on price, however, we are not going to race to the bottom just to win work if we don’t think we can deliver the quality that is part of the reputation and brand value that Parsons enjoys in the region, and the reason why we have built market share.
Infrastructure spending is being scrutinised heavily by government agencies, and low-price only contract awards are now becoming more frequent 42 construction business news me January 2017
Robert Hope CEO of SSH
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believe that market sentiment is improving however it will still be a tough year for trading in 2017 on tight margins in the MENA region. Certain markets and sectors are being hit harder than others and the key for SSH is to navigate a steady course around the region focusing on our key client relationships and delivering to the very demanding schedules. We are often teamed with international partners and in some cases getting them to appreciate the time and budget pressures that our clients face in this regional market can be a challenge. Also, as with most businesses in the current market conditions, cash flow is critical and must always be a focus for us to earn and collect the cash in a timely manner especially given the tight margins available. I think that we will see a trend towards utilising consultants committed to and based in the region, who can draw upon world class expertise locally to meet the
budget and time constraints that our regional clients face. SSH is shaped and focused to respond to this market trend and as one client said 'you have hit our sweet spot on what we need to deliver our projects'. I also see progress on increased private sector engagement in major project delivery and a genuine desire to move the private partnership agenda along especially in the UAE. However, more needs to be done at governmental level if this is to truly flourish and properly fill the budget gap that the new oil price levels have created. I would also like to see the trend of rail investment in the region continuing as a catalyst for further general market growth and particularly in the Kuwait market. However, I currently believe that this is something that the individual governments are reviewing as these are significant long term investments and major budget commitments.
It is notable that Chinese contractors are becoming more active across the region
Cover story
Ahmed Alhatti CEO, Cayan Group
Ashraf Samy Botros MD of Al Shafar United Electro Mechanical Engineering (ASU)
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etermination is key to success and to reversing any negative impacts around. The fluctuating economic conditions will continue. However, additionally, in Saudi Arabia, we expect there to be some challenges arising in recruitment and in order to oppose these, we have put in place policies to offer internships, and partnerships for training with educational and vocational institutes. Preparation is key, so eventually we recognised that a contingency plan should be in place to face any persistent economic conditions in 2017 locally & internationally. In fact, this will back us up and at the same time will add value to our business. In 2016, Cayan Group broke-into the hospitality sector through Cayan Hospitality, and the development of projects such as Cayan Cantara. Hence, the new area of focus and strategic expansion for us at Cayan will embrace hospitality given that this sector is emerging effectively and widely. We can’t underestimate the significance of investing in this area since it is a fastgrowing sector in the region with many opportunities because of well recognised global events such as Dubai Expo 2020 and the booming events, exhibitions and conferences sector. Besides that, Cayan Group will continue to spin its development wheel and seek expansion and penetration opportunities in 2017.
E Samer Halabi Regional MD, KONE Middle East
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he start of 2017 will be in line with 2016. However, there seems to be encouraging signs appearing towards the second half of the year in a couple of countries which will have some positive impact on the whole year of 2017. The biggest challenge this year is obviously the cash flow required to keep the business engine running. It is important to carefully manage the running costs in order to pass the challenging period.
xpo 2020 is the most important catalyst for growth over the next three years. Considering the large scale investment in infrastructure, we can say that construction will be providing the best opportunities in 2017. Big MEP projects awarded to ASU recently are Dubai Arena (Meraas), Mohammed Bin Rashid Library (Dubai Municipality), Refurbishment of Dubai International Terminal 1, Halls C&D (Dubai Aviation Engineering Project Corporation), Boulevard Point (Emaar) and Mediclinic Parkview Hospital (Mediclinic Middle East). Green building and Building Information Modelling (BIM) will be the key trends for the coming years. The benefits of Green Building are manifold, and may be categorised along three fronts: environmental, economic, and social. BIM will deliver benefits throughout the building project lifecycle. In our field it will make better design decisions, build more efficiently, and manage and maintain building portfolios more effectively. Our biggest challenge for 2017 is to be one of the best MEP companies in the UAE.
In each country there are different sectors that could provide good opportunities
Cayan Group will continue to spin its development wheel and seek expansion and penetration opportunities in 2017 44 construction business news me January 2017
In each country there are different sectors that could provide good opportunities. Obviously those are related to the well-known events such as the Expo 2020 in Dubai, the World Cup 2022 in Qatar and other events and demands happening in different countries in the region. Creativity is a key differentiator in the coming year. Sustainability and quality is a key success factor for the future.
Green building and Building Information Modelling (BIM) will be the key trends for the coming years
Construction Machinery
Making the big calls Ritchie Bros. has been in the Middle East for 20 years but regional manager Eduard Faig is looking forwards not backwards By Matthew Treanor
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t’s been a frantic couple of days at Ritchie Bros.’ last auction of the year when Construction Business News Middle East manages to catch up with Eduard Faig, the regional sales manager for the Middle East, Africa and India. Not only is it one of the biggest auctions Ritchie Bros has ever held at its Jebel Ali home, it has also been an opportunity to celebrate the famous house’s 20th anniversary in the region. The first Ritchie Bros. auction was held in a huge tent in 1997 and the scene in the UAE has changed dramatically since that time. Where once machinery and equipment buyers travelled over the country to purchase their new kit – some industry veterans can romantically recall the early and dusty sales in Ras Al Khaimah – today there are only a handful of opportunities to experience the hustle and bustle of an auction day. Online auctions, and the global marketplace they access, have also al-
46 construction business news me January 2017
Top 5 most frequently sold items 1. Hydraulic excavators (2,760+) 2. Wheel loaders (3,050+) 3. Crawler excavators (1,260+) 4. Motor graders (940+) 5. Rock trucks (360+)
tered the way many owners and plant managers want to sell and buy. They have slowly carved their own niche by providing an almost year-round marketplace and forcing the big auction houses, who have to carry the costs of owning and running their facilities, to change their decades-long approach to hosting sales. Few analysts were consequently surprised when Ritchie Bros hit the acquisition trail to bolster its online
presence in 2016. In February, it completed the purchase of Mascus, a listing service and trading platform for equipment dealers and brokers. It also managed to use its muscle to takeover one of the world’s largest web auctioneers via the acquisition of Ironplanet for almost $800 million in August. The deal effectively knocks a major competitor out of the equation and gifts Ritchie Bros. with a platform to be both the biggest traditional and web-based auction house in the world. It is yet to be seen how Ritchie Bros. will integrate Ironplanet’s online-only auctions, which offers a reserved daily marketplace and buy-now selling and buying options with the NYSElisted house’s more traditional onsite and unreserved auctions – where you have no guarantee of what your kit will sell for. Faig tells CBNME that Ritchie Bros. is currently exploring how the two will come together.
“We’re still acting as two separate companies right now and awaiting final approvals,” he states. “But we’re becoming more of a multi-channel provider of solutions with new strategies. I’m sure very interesting things are coming in 2017.” Ultimately, the recent purchases of Ironplanet, Mascus as well as a number of regional auction operations offers those wanting to dispose of parts of their inventories a larger selection of buyers than ever before. While both its consignors and bidders are now able to enjoy a global marketplace, Faig stresses that the Middle East is still a region where the onsite, physical auction remains the preferred format for most buyers and sellers. “I think what’s happened today and yesterday is a clear example that we do onsite auctions. We had close to 1,000 registered bidders and close to 3,000 people coming here over the two days. Here in Dubai 25% of
For some people (there is nothing like) the touch of the machine, the smell of the oil, to run the machine to see the engine. We recommend to everyone to come and inspect the machines. We create an event here. the purchases go to online bidders. In the company the average is 50%. It is a clear example that here in the Middle East and Africa people love to come to Dubai and inspect the machines. Or they may send some people to come and inspect and they bid online.” When asked whether bidders will
continue to prefer to visit in person at such high rates in the years to come, he says that technology is leading to an increase in online sales but we are not watching the inevitable end of being onsite. “People are getting more used to new technologies all the time; that’s why every year we improve with new systems like our new interface that we have online – which has been completely renewed. We of course have iOS and Android apps. People in the Middle East are getting used to our timed auctions systems. Right now you can zoom in on machines and have a look at engines, tyres, etc, but who knows in a couple of years you’ll be able to check in 3D and see any details.” He stops himself for a moment to touch upon a key point that any new technology on the horizon will not deliver. “But for some people (there is nothing like) the touch of the machine, construction business news me January 2017 47
Construction Machinery
In numbers
72
Number of auctions held since 1997
120,000+ lots sold
40,000+
Since 1997, 40,000 bidders have participated at Ritchie Bros.
bidders registered
12.500+ consignments
25%
Number of online bids
the smell of the oil, to run the machine to see the engine,” he remarks. “We recommend to everyone to come and inspect the machines. We create an event here.” Faig talks a lot about creating a welcoming atmosphere at the auctions and if you haven’t yet visited one, then maybe it’s time you put it on your bucket list. There is certainly something special about the spectacle you can see at Jebel Ali. The callers or auctioneers which orchestrate the proceedings are firing what sounds like a 100 words per second at those sitting in the main auction hall as we talk. A great auctioneer can not only speak at machine gun-like speed, they can also read the crowd and be ready to pick up on online bids coming into the fray. Small wonder the job is so specialised that it requires being educated at special schools. Faig tells CBNME that becoming an auctioneer is every bit as difficult as it looks and 48 construction business news me January 2017
Visitors come from across the Middle East, Africa and Asia
We’re the ones where everyone looks at the prices at the auction to see the trends in the market. The market has been a little bit tough, everyone knows that. But we’re positive that’s going to change. sounds. It helps that the journey for most of them starts in childhood and they often come from machinery or auction backgrounds. “Even I don’t understand them sometimes,” he jokes. “It takes a long time to become one and a lot of practice. As Ritchie Bros. we always get
the best ones.” As the auctioneers shoot lot numbers and bids from their elevated podiums, a noisy train of heavy machinery passes behind. The scene plays out like the noisiest and biggest stage show you’ve ever seen. It is easy to appreciate why people travel from across the region as well as Africa and Asia to buy here. “We’ve had people bidding from Africa, Europe, Asia and the Middle East. We always say at Ritchie that it is a global market,” says Faig. “Dubai is the hub for Africa, India and the Middle East and the only one we have in those territories. We get consignments from different places across the world not just the GCC. Bringing the equipment to our facilities is always an investment (for sellers) but it is the best way to sell to the world. He adds: “It’s also the best place to buy – people are going to come and inspect. Buyers have always come here because they have a need.”
Ritchie Bros. has sold 120,000 individual items over the past two decades
Looking back at 20 years in Dubai Jeroen Rijk, managing director Europe at Ritchie Bros. remembers setting up the first three auctions in Dubai. “In those days, I worked at Ritchie Bros. as a yard manager and our EMEA team was a lot smaller than it is today,” he says. “I remember travelling to Dubai and helping out with the first auction in 1997. We rented a yard, which was practically a stroke of desert with a big fence around it. When we arrived on the first day we noticed the fence didn’t have a gate and there was no way to get in. It took us hours to get hold of a bolt cutter – meanwhile a huge line of trucks was waiting to drop off equipment for the auction. “There was a great sense of relief when we finally opened up the fence and the trucks started moving. However, the relief was short-lived when the first five trucks got stuck in the sand up to their axles! Luckily it is in the Ritchie Bros. DNA to work together, find solutions and get the job done. And so we did.”
Our interview takes place with only a couple of hours remaining in the last auction of 2016. Just a few lots are left – everything goes at an unreserved auction, even if sellers are occasionally disappointed with the price they receive. Faig is happy to tell CBNME that the week has seen some strong sales. “So far we are really happy, it’s been a really good sale,” he chimes before telling CBNME that two of the biggest sales were cranes. “We had a 220t Sany Crane which we sold for $560,000. That was a nice 2013 crane and the highest one we sold; and we had people bidding from different places from across the world like, Africa, the Middle East and South America for the cranes. We also had a 200t Manitowoc tower crane sell for $517,000.” When Ritchie Bros. decided to make Dubai its home in the mid-1990s – the first auction was held in 1997 and its current facility opened in 2000 – it construction business news me January 2017 49
Construction Machinery
was one of the last pieces of a globally spread jigsaw that saw it set-up in Australia, Japan, across South East Asia and Mexico. Since becoming a mainstay in the Middle East market it has experienced both boom and bust periods but throughout it has provided a way of contractors and project owners to free up cash and keep their machinery and equipment inventories moving. “We’re the ones where everyone looks at the prices at the auction to see the trends in the market,” he says. “The market has been a little bit tough, everyone knows that. But we’re positive that’s going to change. You see new projects in the area. Africa is also growing. “It’s true that some markets have reduced their number of projects and some that have changed the way you financing for equipment. Maybe sometimes there are less projects in some markets, but there are a lot projects coming up in other markets and throughout the world.” Faig, who is three years into his stint in the region, says that Ritchie Bros. uses time between sales to target new consignors and markets to encourage companies to use its auctions to free all-important capital. Ritchie Bros. is playing its part in moving machines from struggling areas to booming ones. “The market is volatile right now but we knew that. So we work hard to get buyers from around the world. We try to target countries that are looking for new projects to get new buyers. These are markets where previously we had less customers there,” he comments. “One of our main targets here in the Middle East and worldwide is to meet as clients and companies as much as possible. We’ve been working hard, doing things in the proper way and increasing and marketing and the number of companies we send information about the auctions to. We’ve also been targeting Africa a lot.” 50 construction business news me January 2017
25% of bidders go online that’s the global Ritchie Bros.’ average
It’s also the best place to buy – people are going to come and inspect. Buyers have always come here because they have a need. In terms of the types of equipment at the December auction, he also notes that Ritchie Bros. saw a “small” increase of equipment originating from Asia. Another trend he sees is the
movement of companies in the GCC trying to free themselves from the financial binds of holding onto large fleets of equipment: “You are starting to see more of what we see in Europe and the US such as subcontracting and renting equipment. People are often now just buying for a specific project.” While he is happy to look back on Ritchie Bros.’ achievements so far in the Middle East, Faig is fixated on the future. “It has been 72 auctions here in the Middle East, we’ve created an accepted and trusted system in the region 20 years is a nice milestone but we need to look now at the 50 years and 100 years celebrations.”
The best way
to buy and sell equipment, trucks, tractors & more
Ritchie Bros. is the world’s largest industrial auctioneer. From humble beginnings we’ve grown to serve equipment buyers and sellers all over the world. How? By staying focused on great customer service and our commitment to unreserved auctions. Find out more about buying and selling with Ritchie Bros. on our website: rbauction.com/buying | rbauction.com/selling
Some examples of what we sold in our December 2016 auction:
2010 CATERPILLAR D7R SERIES II Sold for $200,000
2012 CATERPILLAR 966H Sold for $89,000
2010 KOMATSU PC1250-8R Sold for $120,000
2013 CATERPILLAR 12K Sold for $137,500
2014 SANY SAC2200F 220 Ton 10x8x10 Sold for $560,000
UNUSED – 2013 XCMG QY130K 130 Ton 12x6x8 Sold for $300,000
2011 CATERPILLAR P36000 16 Ton Sold for $85,000
UNUSED – 2015 MERCEDES-BENZ ACTROS 4040 6x4 Sold for $97,000
rbauction.com | +971.4.812.0600
Gate 8, Junction 9, Jebel Ali Free Zone P.O. Box 16897 Dubai, United Arab Emirates
COMMERCIAL VEHICLES
The versatile Atego
Nothing Wasted CBNME looks at Mercedes Benz’ ever-evolving waste management range.
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he typical impression of waste management trucks is that they are noisy, chugging and dirty because, well, they do a dirty job. Ironically, because of increasingly strict regulations and growing environmental concerns, they are instead chosen by public authorities and contractors for their green credentials. Rapidly growing cities, an expanding construction industry, large seaports and airports – all generate increasing quantities of refuse that needs to be disposed of professionally. This process normally involves two stages. The first stage involves refuse collection. In the second stage, refuse is either taken to a sorting plant, where reusable items are separated from the residue, or it is taken directly to an incineration plant. Mercedes-Benz says its trucks for municipal operations are tailor-
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By Matthew Treanor
The urban operator Econic
made for the wide variety of tasks in cities and rural areas. “When times are tough, we all have to be more productive – demanding more from our products, more from our services, and more from ourselves. And
in the municipal sector it’s all the more crucial, as any downtime can impact service levels and cause more inconvenience,” says the German automaker. The full range of Mercedes-Benz trucks has been designed and built
with an uncompromising commitment to excellence. “Efficiency is the motivating force behind our range, designed to drive down not only fuel consumption, but every aspect of the cost of ownership and operation.” Mercedes-Benz trucks offer a number of solutions for every demanding task in the municipal and waste management industry. Supported by a comprehensive after-sales network of over 40 Dealer locations and a comprehensive roadside assistance network, Mercedes Benz understands what’s important to operations. The overwhelming majority of Mercedes-Benz trucks become tailor-made customer solutions by installing a body designed for the intended application. After rolling off the production line, two out of three Mercedes-Benz trucks head to professional bodybuilders for completion. Thus, the quality which customers of a Mercedes-Benz truck finally experience is not only based on the quality of its chassis, but also in the particularly skilled and professional installation of the body: “For this reason, we at Mercedes-Benz consider Bodybuilders as our partners in the task of supplying our customers with the most suitable vehicle: fitted with the right body for their operation, and meeting all technical, safety and legal requirements.” Bodybuilder Management The Bodybuilder Management offered by Mercedes-Benz and its General Distributors has been developed to improve the coordination between the product planning and production processes of everyone involved. Special frames, chassis or equipment details are discussed at an early stage, so that the optimum solutions can be found in advance. For example, when a chassis is placed on the production line, the body for which it is intended can already be preconfigured by its manufacturer. Production of the body can be simultaneous, minimising time loss during the overall manufacturing phase. And delivery times for the end user are correspondingly reduced.
MERCEDES ON ITS WASTE MANAGEMENT RANGE The productive Accelo “Productivity is the keyword for the Accelo 915 C, the multi-functional 9t GVW truck, with the efficient, reliable 150 hp engine. Thus, the Accelo provides the perfect platform for those who seek practicality, efficiency and agility. Designed for the reality of urban traffic, the Accelo is a compact vehicle that offers great manoeuvrability and comfort for any requirement.” The versatile Atego “The Atego brings versatility and productivity in its DNA for various waste management applications in the city. The Atego feels perfectly at home when space is tight. Efficiency, reliability and quality make the Atego your ideal partner for flexible operations down narrow streets. The Atego’s frame combines low weight with a highly robust design, while its ‘Z’ shape and a 50-mm hole matrix enable bodies and mounted components to be installed without drilling additional holes.” The reliable Axor
“The Axor© Exemplary reliability, high payload, low fuel consumption and driverfocused comfort make the Axor stand out. It features powerful performance and a diversity of variants for everyday operation, leaving nothing to be desired. With its high payload capacity, two applicationbased cab variants and its robust, reliable technology, the 18 – 26t class Axor makes no compromises.”
The rugged Actros “The Actros – which recently celebrated its 20th year (pictured) in the Middle East and North Africa region – offers a wide selection of different applications. Strong and rugged, it meets all the varied requirements throughout the region. Actros refuse collection vehicles can handle large quantities of waste in a single load, thanks to appropriately rated engines. The Actros is the ideal option when it comes to durability, reliability and efficiency – three essential aspects in every segment.” The urban operator Econic “The Econic A Mercedes-Benz truck with a very special feature – a low entry cab with large windows for a comprehensive view. The Econic is ideal in the busy urban environment, with a range of specifications on offer to suit each and every operating requirement. The truck delivers a perfect solution for every application. It has made its mark in the highly specialist refuse collection vehicle sector.”
construction business news me January 2017 53
Commercial Vehicles
Ford Truck’s Ecotorq engines can deliver different emissions levels, including Euro III, Euro V and Euro VI.
Green and clean Mustafa Caner Sinanoğlu, Ford Trucks’ Middle East countries manager looks at how changing attitudes are changing our waste management vehicles. By Matthew Treanor
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o meet their ambitions of lower harmful emissions, GCC governments are currently considering a number of different initiatives to change vehicle standards and regulations. A huge range of programmes and schemes are now underway that are exploring how emerging technologies such as CNG (Compressed Natural gas) dual fuel engines and electric hybrid vehicles can reduce the impact of vehicles on the region’s environment. To meet its emission targets, the region is also considering tightening existing diesel vehicle – one of the highest contributors to harmful emissions – standards. Since the United Nations Framework Convention on Climate Change was signed off by 43 countries in 1992, two major standards in Europe and North America have emerged to reduce the amount of greenhouse gases and particulates, including C0 (carbon monoxide) and NOx (nitrogen oxide), made by diesel vehicles. The GCC has subsequently and gradually fallen behind the progress being made elsewhere in the diesel engines that have been designed
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That means Ford trucks has complied with all environment regulations. Both economically and environmentally friendly, the new Ecotorq engine provides the most appropriate power for various kinds of use. to meet standards that have been introduced through a series of staged targets over the past 25 years. For instance, the current Euro VI standard requires vehicle NOx levels to be as low as 0.4/kWh for heavy trucks compared to the Euro II (7g/kWh) and Euro III (5 g/kWh) engines that are commonly used in the region. With political momentum and techno-
logical progress seemingly opening the door to lower emission standards in the region, it is now a question of when, and not if, there will be a movement to a standard comparable to Euro IV for heavy trucks. This would be a major landmark for companies that operate in the waste management sector, where there is an understandable need to be as green as possible. Mustafa Caner Sinanoğlu, Middle East countries manager at Ford Trucks, predicts we are likely to see more sustainable and green vehicles on the roads in the near future. “Current global vision supports and improves the motivation to develop greener technologies and various industries,” he says. “In the GCC, regulations for transportation could signal an increase of emission level to Euro IV and above which will enable vehicle manufacturers to offer environmentally friendly trucks to the markets. At the same time, improvements regarding fuel quality and stricter older vehicle regulations are expected.”
Building and upgrading towards cleaner fuel
Sinanoglu says Ford Trucks has a product range that has been manufactured especially with municipalities and other public procurement agencies in mind.
Sinanoğlu says we are close to being at a stage where green technology is available globally and accessible to regions like the GCC. “Starting with the EU zone countries, new technology engines with ’green’ features will become mandatory and will be rolled out to all the countries step-bystep after the implementation costs for new technology decrease; and government, as well as customer, behaviour becomes more sensitive and caring to the world environment,” he comments. He sees the reduction of NOx emissions and particulate levels as crucial to protecting the environment. There are further benefits for the vehicle buyer with the technology being developed leading to improvements in power, performance and efficiency. Features he believes are now standard on Ford Trucks’ vehicles. “Durability, power, comfort and efficiency are core features of our products and Ford Trucks combines 2-years unlimited mileage warranty and long maintenance intervals with low fuel consumption to keep customer operat-
In the GCC, regulations for transportation could signal an increase of emission level to Euro IV and above which will enable vehicle manufacturers to offer environmentally friendly trucks to the markets.” ing costs to a minimum,” he says. “Passion for innovation is a tradition at Ford Trucks. With Ford Trucks Road Series, many innovative features become your companion on the road to help increase your profits.” Since launching in the region in 2014, Ford Trucks has successfully improved its presence in a number of segments in the construction and material hauling sectors. Its new Ford Trucks Road Series
The Middle East is moving towards cleaner fuel that has a lower sulphur content. The traditionally high levels of the chemical have been a major barrier in the region’s adoption of modern truck engines. However new methods of processing gasoline and diesel are tempting governments in the Gulf to invest in a new generation of plants that could lead to cleaner engines down the line. Leading the way are Saudi Arabia and Kuwait who have both spent billions of dollars to reducing sulphur content below 10 ppm (parts per million) in diesel and gasoline. In Saudi Arabia, upgrades to existing refineries could see a dramatic drop from levels as high as 500ppm as seen in 2012. There are also many initiatives, such as the Ras Tanura Refinery Clean Fuels and Aromatics project, the Riyadh Refinery Clean Transportation Fuel project and the PetroRabigh Clean Fuels project, which share the goal of the Kingdom becoming a close to zero sulphur producer in the very near future. Kuwait has spent $30bn on its own clean fuels programme and could become the largest producer by 2019 in the Middle East. The UAE is in throes of expanding and upgrading its Al Ruwais, Jebel Ali and Fujairah refineries. Oman has upgraded at Sohar and Duqm. Meanwhile Bahrain has undertaken a modernisation programme at its Sitra refinery complex.
of trucks has a range of features that will appeal to waste management operators and contractors designed to minimise their impact on the environment as well as improve their overall efficiency. “The waste management sector directly touches people’s lives and their ability to live in a healthy environmental area,” says Sinanoğlu. “Often operating at limited times within crowded city streets, the sector requires decreased construction business news me January 2017 55
Commercial Vehicles
vehicle down-time and much more fuel efficiency than construction segments. Ford Trucks vehicles meet all the sector demands with respect to its tailor-made total cost of ownership and durable, unique GCC-tested vehicles.” According to Sinanoğlu, Ford Trucks has a product range that has been manufactured especially with municipalities and other public procurement agencies in mind. “Some governmental departments have started to request green vehicles in their requirements as well,” he says. “We have the capability to share solutions that meet all expectations with our business associates by means of our domestic and flexible engineering power when market conditions and customer expectations change.” Sinanoğlu explains that the new Ford Trucks Road Series reduces operating costs, thanks to the new Ecotorq engine that, “provides fuel efficiency and effortlessly bears the burden of any business.” The Ecotorq engines can deliver different emissions levels, including Euro 3, Euro 5 and Euro 6, he explains. “That means Ford trucks has complied with all environment regulations. Both economically and environmentally friendly, the new Ecotorq engine provides the most appropriate power for various kinds of use.” He adds that there is also a number of power options across its range that can be opted for depending on local regulation or requirements. “For the eco-waste inner city usage road truck segment being ‘green and clean’ is the main topic. For that reason whatever the given emission target of the countries, fuel economy and efficiency of the engine is so important. Thus, as Ford Trucks, we are delivering 4x2, 6x2 and 6x4 waste management systems vehicles with fuel saver engine variants of 9l with 330PS of power and 12,7l with 430PS of power.” Beyond the engine, he comments that its trucks are equipped with many high-tech features for a safer and more powerful, efficient drive, such as an automated gearbox. “Ford Trucks Road Series also ensures that both your load and your business 56 construction business news me January 2017
Sinanoglu claims Ford Trucks are the best choice for construction operations and will enable companies to carry extreme loads of solid and liquid waste efficiently.
easily reach their goals. Ergonomic and technological innovations stand out in all models. A selection of 4x2, 6x2, 6x4 and 8x4 road trucks with different cab options and wheelbases accommodate your business needs and the superstructure you want to use.” Ford Trucks is concentrating efforts in the region from its base in the UAE, Kuwait, its recently expanded Kingdom of Saudi Arabia operation and Oman. He says that in addition to waste management operations, the vehicle are also suitable for large construction operators who generate their own large volumes of waste. “Ford Trucks are the best choice for those operators, the heavy axles, 10 mm chassis thickness, Ecotorq engine will enable those operators to carry their extreme loads of solid/liquid waste on time,” he says. “In addition to that, Ford Trucks is offering excellent warranty
conditions applied in all its international markets. The international network of dealers will support those big operators in all regions in order to keep their trucks on road most of the time.” CBNME asks Sinanoğlu how Ford Trucks feels about contributing to such an important sector for those living in the region. “Since Ford Trucks started operation in Middle East, we shared our brand value which is ‘Sharing the load’. We understand the severe working conditions of heavy loads to carry, long operation times, uptime and operational costs, therefore, we decided to share the load with our customer by offering robust durable features along with Ecotorq engine and an automated gearbox. With this combination, we believe that those specifications are the best to contribute for long relationship.”
Legal viewpoint
How fit is your “Fit for Purpose” clause? There are advantages and disadvantages to inserting these provisions into a construction contract, says Heba Osman.
T Heba Osman, Legal Expert
he contractor’s duty under a construction contract is typically a duty to carry out the construction works with reasonable skill and care, in accordance with the contract, and in a manner that can be expected from a competent experienced contractor. This simply means that the Contractor, in order to fulfill its obligations, just needs to show that it has acted in accordance with the usual practice and professional standards current at the time of carrying out the Works to escape liability. However, the “fit for purpose” provisions that are commonly found in many construction contracts that include a design element by the Contractor, aim to set a higher liability on the part of the Contractor over and above this usual “reasonable skill and care”. These provisions have, of course, caused extended negotiations (and disputes) between Employers and Contractors, with the former insisting to maintain such provision in the construction contract while the latter seeking its removal. This Article briefly considers the advantages and disadvantages of these “Fit for Purpose” provisions. Background The concept of fit for purpose has emerged under English law and particularly under the Sale of Goods Act 1979. The concept then found its way
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into construction contracts and was included in the FIDIC 1999 Conditions of Contract for Plant Design Build (the Yellow Book) and FIDIC 1999 Conditions of Contract for EPC/Turnkey Project (the Silver Book). This, most likely, helped to spread the concept of Fit for Purpose in Middle East construction contracts. Both the Yellow Book and the Silver Book require in their Sub-Clause 4.1 that the Works carried out by the Contractor be fit for purpose. This Sub-Clause reads: The Contractor shall design, execute and complete the Works in accordance with the Contract, and shall remedy any defects in the Works. When completed, the Works shall be fit for the purposes for which the Works are intended as defined in the Contract. This Sub-Clause requires that the Works be fit for purpose (1) in accordance with the intended purpose defined in the Contract and (2) at the time the Works are completed. These criteria are, as will be seen later, important safeguards and necessary for the proper functioning of a “Fit for Purpose” provision. Advantages The FIDIC Contracts Guide, 2000 edition, explains that the fit for purpose obligation would be implied under the Laws of many countries and that provisions such as Sub-Clause 4.1 clarify that the fit for purpose obligation
relate to the intended purpose (if any) which are defined in the Contract. In the UAE, it is quite possible such an obligation may be implied (this, of course will depend on the contract itself and the manner in which the terms were drafted). As such, by setting the fit for purpose obligation clearly from the start helps the parties avoid terms being implied into their contract, through the operation of law, at a later date. This provides certainty as to the terms of the contract. This is the first advantage. Another advantage in agreeing fit for purpose provisions is that it gives the Employer assurance that the Works being designed and constructed by the
Contractor under the design and build contract would meet the Employer’s specific requirements. The Employer in this scenario is not concerned whether the Contractor did exercise reasonable skill; but whether the Contractor achieved a specific result. This also relieves the Employer from having to evidence that the Contractor was negligent; and all an Employer would need to do is show that the Works do not match with the Employer’s requirements. It, therefore, shifts the burden of proof from the Employer to the Contractor. Disadvantages The disadvantages of “Fit for Purpose”
provisions are usually seen from the Contractor’s perspective; which can be summarized in the Contractor’s inability to manage the risk attached with such provisions. Contractor’s manage their risk either through appropriate insurances or share the risk with their subcontractors. Typically professional indemnity insurances will cover the holder from a claim against professional negligence. Employer claims under fitness for purpose provisions are not claims for negligence; but claims for breach of contract which professional indemnity insurances would not cover or respond to. This is one reason for Contractors being apprehensive towards construction business news me December 2016 59
Legal Viewpoint
fit for purpose provisions. However, it is not uncommon that Contractors take risks under their contracts that are not insurable; but Contractor’s for the most part are able to pass this risk or share it with subcontractors; which does not happen with fit for purpose provisions. This disadvantage is acknowledged by the FIDIC Contracts Guide, 2000 edition, which states Fitness for purpose is required, irrespective of the level of skill, care and diligence expected from the Contractor’s designers, and irrespective of the likelihood that independent professional designers may be unable to procure insurance other than up to the level of the usual professional duty of skill, care and diligence. Independent professional designers may decline liability other than up to the level of this usual professional duty, irrespective of whether fitness for purpose is specified in the Contract or is merely implied. Another practical difficulty with Fit for Purpose provisions; is that the intended purpose of the Works must be clearly defined in the Contract documents. A simple definition of the works or the intention is not sufficient as it is not measurable. In order to have a workable provision that provides a level of certainty (and therefore helps the parties avoid disputes) is essential to clearly set the specific outcomes that the Project would achieve. If such outcomes are not specified, this opens the door for interpretation and disputes between the parties. It is also worth noting that these outcomes should consider the time that the Project is completed; and that these outcomes are appropriate (in terms of technology) at the time that the Project is completed. Other Wording While the words “Fit for Purpose” triggers all sort of debates and discussions; construction contract drafters have found ways to include the same obligation with a slightly modified
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Another practical difficulty with Fit for Purpose provisions; is that the intended purpose of the Works must be clearly defined in the Contract documents. wording that for most would fly under the radar. An example of such provisions may be worded along the lines of The Contractor warrants that the completed Works shall be in accordance with the Employer’s Require-
ments and/or any specifications. Such provision does not refer to the Works being fit for purpose. However, if the Employer’s Requirements were indeed clearly specified as some form of measurable outcome that the Project needs to achieve upon completion, this would lead to the same result of a fitness of purpose provision. Conclusion As it is clear, the Contractor’s liability under “Fit for Purpose” provisions is substantially higher than under its typical standard duty. It is, therefore, extremely important for Contractors and Employers alike to carefully consider and assess issues relating to risk and liability when negotiating any construction contract specially when there is a design component involved.
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TAKE 10
Take 10
Iconic hotels in the UAE
The country is home to some of the most famous hospitality buildings in the world
Burj al Arab
An iconic symbol of Dubai and famous throughout the world, the Burj Al Arab celebrated its 15th birthday last year. Designed by Atkins, the hotel was built on a man-made island 280 metres offshore by contractors Murray & Roberts and Al Habtoor Engineering. It took three years to reclaim the land from the sea and around three more years to construct the building itself. The hotel has been dubbed the world's only seven star property, though Jumeirah Group says that is not a term that it has encouraged. The helipad near the summit of the building has hosted a number of famous publicity stunts including Roger Federer and Andre Agassi playing tennis, golfer Tiger Woods teeing off and David Coulthard doing donuts in a Formula 1 racing car.
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Emirates Palace This Abu Dhabi government-owned hotel is the second most expensive ever built, exceeding even the lavish Burj Al Arab in neighbouring Dubai. Only the Marina Bay Sands hotel in Singapore cost more than the AED 11bn ($3bn) construction cost of the Emirates Palace which is managed by Kempinski. Completed in 2005, the hotel consists of 394 residences, 302 of which are rooms and the remainder are suites. It is situated on a 1.3 km stretch of private beach and surrounded by 85 hectares of gardens and lawns, with 114 domes 80 meters high.
Jumeirah Beach Hotel The hotel, which opened in 1997, is operated by Jumeirah Group and contains 598 rooms and suites, 19 beachfront villas, and 20 restaurants. The property is located on an island of reclaimed land offshore of the former Chicago Beach Hotel, so called because of the Chicago Bridge & Iron Company which had giant floating oil storage tankers on site. The old name persisted even after the hotel was demolished because it was the project name during the construction phase of the Burj Al Arab until the new name was announced.
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TAKE 10
Yas Viceroy Abu Dhabi Yas Viceroy Abu Dhabi Hotel is located within Yas Marina and is the first new hotel in the world to be built over a Formula 1 circuit. Designed by Hani Rashid and Lise Anne Couture of New York based Asymptote Architecture, the hotel consists of two twelve storey towers, one set within the race circuit and another in the marina itself, linked together by a steel and glass bridge. Of architectural and engineering significance is the main feature of the hotel's design: a 217-meter curvilinear glass and steel covering known as the Grid Shell featuring an LED lighting system.
JW Marriott Marquis The project was originally conceived as a single, 350 metre, 77-storey tower intended to be completed in 2008 and built alongside Sheikh Zayed Road. However, its design and location had to be changed because of the construction of the Business Bay creek extension. The twin 355 metre towers were completed in 2012, surpassing the Rose Rayhaan by Rotana on Sheikh Zayed Road as the world's tallest hotel.
Atlantis Hotel, Palm Jumeirah The 1,539 room nautically themed resort was the first to be built on the Palm Jumeirah and opened to international fanfare in 2008. The building has two accommodation wings, referred to as the Royal Towers, linked together by the Royal Bridge Suite. The architect was international luxury hotel specialist Wimberly, Allison, Tong and Goo (WATG). The principle contractor for the project was UK-based Laing O'Rourke which was responsible for the design and construction phases of the hotel and the adjacent water park.
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Qasar al Sarab This 5 star resort is operated by the Anantara Group and is most notable for being in the Middle of the Liwa desert, close to the original home of the Al Nahyan ruling family before they migrated to establish the city that was to become the UAE capital city of Abu Dhabi. ALEC won a $245mn contract to build the hotel and began construction of the 53,000m2 development in May 2008.
Rose Rayhaan by Rotana Rose Rayhaan by Rotana, is a 72-storey, 333 metre high hotel on Sheikh Zayed Road in Dubai, and was the world's tallest hotel until 2012 when it was surpassed by the nearby JW Marriott Marquis. Contractor Arabian Construction Company began work on the tower in 2004 and completed the job in 2007. The $180mn building - which contains 482 rooms, suites and penthouses - was officially opened in December 2009.
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TAKE 10
Raffles Dubai Raffles Dubai’s signature pyramid shape was conceived by architect Bryn Lummus and developed locally by lead architects Arif & Bin Toak. Construction of the $140mn project began in April 2005 and the hotel opened in 2007. Developer Wafi Group entered into an agreement with Singapore-based hospitality chain Raffles Hotels and Resorts to manage the hotel.
Dusit Thani Dusit Thani Dubai is a 153 metre, 40-storey hotel tower in Dubai, Construction was started in 1998 and completed in 2001. The most notable aspect of the tower is that the structure is divided into two bases which join at the halfway point, supposedly to resemble the wai, the Thai greeting with palms pressed together. The left base contains apartments while the right base are fully furnished hotel apartments. The area above the "join" is the hotel with a gym and open air swimming pool on the top floor.
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Packaged with: 3 years Service 3 years Warranty 3 years Financing
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SUPPLIER News
Machinery
CASE signs up new dealer in Oman
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ASE Construction Equipment has appointed International Equipment and Contracting Co (IECC) as its new dealer for the Sultanate of Oman. IECC, a Bahwan International Group company, was established in 1985 and has facilities in Mawaleh, Muscat, along with depots in Sohar and Salahah. The new dealer has committed to sell and support the full range of CASE construction machinery throughout the Sultanate, including heavy and compact line and the new CASE range of motor graders.
At a launch in Muscat, IECC displayed a range of popular CASE Construction Equipment, including 570T and 695ST backhoe loaders, a SR130 skid steer, a TX170 telescopic handler and the CX210B crawler excavator. All of these machines will be exhibited to 150 customers and financiers at a product range display at IECC’s Muscat head office in February 2017. IECC already has a strong relationship with CASE owner CNH Industrial Group already, as an Iveco road transport distributor.
Infrastructure
KEF Holdings unveils $100mn factory in India
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EF Infra, the infrastructure subsidiary of UAE-based KEF Holdings, has launched the world’s largest fully integrated offsite manufacturing park in Tamil Nadu, India. Valued at $100mn, KEF Infra One spans one million square feet and features a diverse range of cuttingedge technology to revolutionise manufacturing and delivery processes in the construction industry. With 10 manufacturing lines featuring industry 4.0 technology, KEF Infra One promises significant cost and time savings in building hospitals, homes, schools, hotels and specialized infrastructure Faizal E Kottikollon, founder and chairman, KEF Holding said: “At KEF Infra, we challenge conventional building methods and move the industry towards an efficient, and automated platform. “The launch of KEF Infra One is an important step towards achieving our vision of pushing forth the next phase of India’s growth through world-class infrastructure. We are proud to introduce this revolutionary concept to the world.” KEF Infra also aims to export its global vision of innovation and technology-led development to various GCC markets, starting with the UAE, to specifically address the sustainable infrastructure demands in the region.
68 construction business news me January 2017
Int
ers Cy ec C be ri 23 r Se tical – 2 cur Inf 4 J ity ras an Con truc ua fe tu ry ren re 20 ce & 17
The world’s leading trade fair for Security, Safety and Fire Protection
22 – 24 January, 2017 Dubai, UAE
www.IntersecExpo.com
Rock-solid security solutions for the Construction industry Explore the most comprehensive range of industry-specific products and solutions: • Safety Design in Buildings • Critical Infrastructure Protection • Intruder & Burglary Alarm Equipment, Perimeter Security and Guarding Services • Monitoring Systems, Surveillance / CCTV / DVR Access / Entrance Control • PPE, Safety at Work and Environmental Protection • Rescue • Emergency Alarm & Warning Systems • Fire Fighting Equipment • Fire Prevention & Protection
Register online today www.IntersecExpo.com/R
SUPPLIER News
Ideal Standard inaugurates Design Bathroom Center in Dubai
Honeywell launches security and fire tech roadshows
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deal Standard has unveiled new bathroom collections at the grand opening of its Design Bathroom Center, on Sheikh Zayed Road, in Dubai. The establishment showcases the company’s bathroom solutions for all building types - DEA, Tonic II, Ventuno, Connect, Strada to name a few – as well as its bathroom mixers, counter tops and vessel basins. The highlight of the event, however, was the reveal of the 2017 launches: Connect Air and Tesi total bathroom solutions, and Ceraflex mixers. Creator, Robin Levien said: “The Connect Air collection offers a comprehensive bathroom solution; it is all about lightness and provides a combination of practicality and affordable luxury.” During the event, the guests were given an overview of Tesi, a collection of bathroom ceramics, furniture, baths and mixers, which combine perfectly together to create a versatile, quality bathroom. The collection is slender, elegant and agile: It’s precisely adapted to suit environment and lifestyle needs, with its smooth lines performing effortlessly in every role and never failing to achieve perfect balance. The range features over 30 products that assemble a beautifully coordinated bathroom.
70 construction business news me January 2017
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oneywell held a Security and Fire Technology Symposium at the Sheraton Oman Hotel in Muscat November 28 and 29, 2016. The symposium, the first of several roadshows to be held across the GCC states, discussed the latest industry trends and technologies with leading Omani consultants, end-users, partners and distributors in the fields of video surveillance, access control, smoke detection as well as evacuation systems and Physical Security Information Management (PSIM), amongst other topics. Following the symposium in Oman, the Honeywell Security and Fire Technology roadshow will travel to Kuwait City, Dubai, Doha, Riyadh and Jeddah over the next six months, where Honeywell will be meeting with partners, distributors and a number of long-term customers. Thanks to its commitment to consistently high quality products, Honeywell technology is currently in use across a number of landmarks and high profile projects across the Middle East, including at high-end hotels, iconic buildings, major airports, universities, stadiums, and shopping malls.
PRESENTS
GULF REAL ESTATE
AWARDS 2017
The Gulf Real Estate Awards are the chance to tell your success story to a regional audience through the Gulf’s most prestigious awards programme. Showcase your businesses achievement to clients and investors, reward staff and benchmark your success against competitors.
CATEGORIES Best Real Estate Project (Affordable Housing) Best Real Estate Project (Luxury Residential) Best Real Estate Project (Hotel) Best Real Estate Project (Commercial Offices) Best Real Estate Project (Commercial - Retail) Best Real Estate Project (Master Development) Best Real Estate Brokerage Firm Best Real Estate – Customer Experience Best Real Estate Developer – Sustainable “Green” Development Best Use of Technology (Smart Project) Most Innovative Real Estate Marketing Campaign Best Facility Management Firm Best Mortgage Provider Best Owners Association Management Firm Best Real Estate Portal Best Employer in Real Estate Happiest Community Media and Communications Best Real Estate Registration Trustee Best Architecture Company Best Legal Services Company
KEY DATES Entry Deadline 19th January 2017 Finals and Awards Ceremony 19th April 2017 Location Dubai, UAE
SAVE THE DATE
Mark your calendar
Construction Business News ME picks the latest and most sought-after exhibitions, conferences and seminars coming up in the construction industry
Eco Waste
January 16-19, 2017 ADNEC EcoWASTE Exhibition is a leading international platform for advancing sustainable waste management and recycling across MENA and beyond. Seeing waste as a valuable economic resource, EcoWASTE Exhibition brings together leading local and international experts and providers with key buyers and decision-makers.
Housing and Residential Development Middle East Conference
January 30-31, 2017 Dubai, UAE Join key developers, government authorities, architects and consultants to gain insight into current and future projects and understand the challenges they face around reducing construction costs, financing, middle-income housing, mixed-use developments and sustainability.
STEELFAB 2017
Kuwait Build 2016
Intersec
CONEXPO-CON/AGG 2017
January 16-19, 2017 Expo Centre Sharjah SteelFab is the Middle East trade show for the metal manufacturing, metal working, material handling, machine tools, pipe and tube machinery and steel fabrication industry. The event will showcase machinery and equipment in metal forming, surface preparation & finishing, grinding & cutting, machining & other allied engineering disciplines.
January 22-24, 2017 Dubai International Convention and Exhibition Centre Intersec 2017 will present over 1,300 exhibitors that will showcase a truly comprehensive range of products across SEVEN broad sections: Commercial Security, Smart Home, Information Security, Fire & Rescue, Safety & Health, Homeland Security & Policing and Perimeter & Physical Security. 72 construction business news me January 2017
March 6-8, 2017 Kuwait International Fair, Kuwait City Kuwait Build Exhibition & Conference will feature over 200 local and international companies in the building and construction sector showcasing the latest products and services in residential and commercial property infrastructure in a business platform of over 4,500 sqm of exhibition space.
March 7 – 11, 2017 Las Vegas, Nevada Where every major construction industry is represented amongst 2,500+ exhibitors over 2,500,000 square feet and more than 140 education sessions including asphalt, aggregates, concrete, earthmoving, lifting, mining, utilities and more.
Editor's pick
Tall Tales in Dubai Emirate makes towering statement with two record-breaking skyscrapers Marina 101
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ast year was a landmark year for tall buildings in Dubai and 2017 is set to be another. In April, the region’s most high profile developer, Emaar Properties announced plans for the world’s tallest building in the form of The Tower at Dubai Creek Harbour, which will stretch around 100 metres higher than the Burj Khalifa. The Santiago Calatrava-designed structure will be the centrepiece of a high end development twice the size of Downtown Dubai. HH Sheikh Mohammed bin
74 construction business news me January 2017
The Tower at Dubai Creek Harbour
Rashid Al Maktoum, ruler of Dubai, has already overseen the groundbreaking for the building which will be genuinely deserving of the heavily overused terms ‘unique’ and ‘iconic’. Sometime in the first quarter of this year the finishing touches should be put to another skyscraper. Marina 101, built by Turkish contractor TAV, will be the world’s tallest concrete tower and the second tallest building in Dubai after Burj Khalifa. According to the Council on Tall Buildings and Urban Habitat,
completion of the project will add another mixed-use building to the world’s 100 tallest, further skewing the list, once dominated by office towers, towards multi-use structures. This long-term shift is emblematic of changing design philosophies, which favour incorporating a variety of needs on a single site, thereby improving the surrounding urban habitat. The first 33 floors will be home to a Hard Rock Hotel while the upper floors will be high end residential units, in the most literal use of the term.
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