By: Mahmoud Gamal
Dubai – Mubasher: Forecasts for 2018 and 2019 in the UAE’s real estate segment are optimistic as 2020 approaches, Andrew Mackenzie, UAE Arbitration practice partner at Baker McKenzie Habib Al Mulla told Mubasher in an exclusive interview.
The Expo 2020 is the largest event of its kind that will be hosted by the emirate of Dubai both in terms of the number of investments and participants, Mackenzie commented.
Below is Andrew Mackenzie’s full interview with Mubasher:
Are there legal disputes over project contracts related to the implementation of Expo 2020?
Andrew Mackenzie: Expo 2020 is the single largest event to be hosted by Dubai in terms of both investment and attendee numbers. Over AED 56 billion (around $15.25 billion) has been budgeted for, with the primary focus on infrastructure projects leading up to the event. Large-scale projects of this nature are invariably complex, from both a commercial and legal perspective. Thousands of contracts will be tendered and entered into in the lead up to Expo 2020 of varying size and scope. Disputes can be inevitable if problems arise during the course of the project that are not properly addressed by the relevant parties. That being said, despite the size and scale of the various projects, we are not aware of any large-scale formal disputes to have been lodged specific to the Expo itself.
How do you see the attitude of the companies and their commitment in meeting deadlines related to the implementation of projects related to Expo 2020?
Andrew Mackenzie: From our experience of the market, the attitude of companies involved in Expo 2020 has been very positive. They know the importance of the event to the UAE, its leadership and people, and so all efforts are being made to ensure deadlines are being met well ahead of schedule. Dubai has considerable experience in managing large-scale projects particularly in infrastructure, and it is drawing on that experience to ensure that the key critical projects (such as the metro expansion and Expo 2020 site) are on course to be delivered in time.
What are the main problems facing the construction sector currently in the UAE?
Andrew Mackenzie: There is currently a liquidity issue in the UAE and wider GCC construction sector. Payment deadlines are being pushed back and all the major players in the industry are experiencing problems. Cash flow is the lifeblood of the industry and without a steady and consistent approach, projects can be delayed or postponed indefinitely. This often results in an increased number of disputes.
How did the political dispute between the UAE and Qatar affect the situation of Qatari companies in the UAE and what are the most prominent problems in this regard?
Andrew Mackenzie: The ongoing political issues have impacted the ability of Qatari companies to operate in the UAE and wider GCC region. Business and investment have slowed as the outcome of the dispute remains uncertain.
What are the current trends of the construction market in the UAE?
Andrew Mackenzie: The construction market in the UAE continues to mature. Some of the major international players have pulled out of the market as it becomes more competitive. Local and regional players have risen to take their place. There is certainly still plenty of work in the UAE, but the market is ever more cost-conscious and, with a few expectations, smaller scale projects are currently the norm.
Has the cost of construction in the UAE increased with the rise in the prices of some materials?
Andrew Mackenzie: Material and labour costs continue to rise, in many cases above inflation. Although there are ways of protecting your business against the sudden increase in material costs, companies often do not take advantage of these options until it is too late. Given many contracts are tendered in the UAE on a lump sum basis, ensuring that you are protected from any adverse change in material and labour costs is critical.
Will the implementation of VAT play a role in the way the construction sector is heading in the UAE?
Andrew Mackenzie: The construction sector is still coming to terms with the implementation of VAT from a practical perspective. It has increased the cost of conducting business as VAT needs to be factored in when pricing future projects. VAT will, however, generate government revenue for further investment in infrastructure in the UAE and so will also lead to additional opportunities in the sector.
What is the outlook for the construction and contracting sector in the UAE?
Andrew Mackenzie: The ongoing political issues have impacted the ability of Qatari companies to operate in the UAE and wider GCC region. Business and investment have slowed as the outcome of the dispute remains uncertain.
