Achieving good business in Qatar
Industry-watchers are cautiously optimistic about the prospects for construction. Government commitment to investing in infrastructure is underpinned by a healthy current account. “We believe Qatar will outperform other GCC states in structural resilience and growth momentum in 2009,” says Ala’a Al Yousef, chief economist at Gulf Finance House.
UK players in Qatar include Hyder, Atkins and Halcrow. Atkins sees Qatar Diar’s new urban development to house 150,000 and the £1.8 billion Energy City in Lusail as major opportunities. Energy City, the region’s first energy business centre, launches in 2010. Qatar’s largest real estate venture is United Development Company venture The Pearl, which has £4.3 billion of current projects in progress, according to MEED Projects. Foreign nationals who buy property on the Pearl are guaranteed residence rights.
Halcrow is engaged in five major Qatari projects, including the convention centre, the causeway and NDIA. “The received wisdom in the construction industry is that if there are two good places to be right now, those places are Qatar and Abu Dhabi,” says Halcrow regional managing director, David Yaw.
“Unless you work in process plant construction, Qatar has been spared the worst of the downturn. What we are seeing is that clients in the private and public sector are repositioning their mix of developments to best advantage. But it is almost a matter of pride that it is business as usual in Qatar.”
Labour and material costs peaked last summer. Steel prices have fallen two-thirds since then, and one concern for construction companies working in Qatar is that clients are delaying projects to negotiate or renegotiate tenders at more competitive prices. This is slowing the flow of projects. Recession abroad has made Qatari clients determined to drive down costs - and brought an influx of new players, shifting the balance of power from supplier to buyer.
“Securing strong cash flow is absolutely the priority,” Yaw says. “As market conditions have softened, payment terms are getting tougher. Getting paid has always been an issue in the Middle East. Things are bureaucratic and move slowly, and cash flow is determined at tender stage. It is critical to agree and understand the payment process.
“In Qatar, if the agreement is that payment will be made in 45 days, it will be made in 45 days - not in 46 days and certainly not in 44. But while there will always be clients who use every means possible to defer payment, that’s where our 10 to 15-year relationships with clients become a real competitive advantage.”
Qatari inflation topped 16 per cent in 2008, soaring living costs making the country less financially rewarding for expatriate postings. Another barrier - which is also a construction opportunity - is the shortage of commercial and residential space, occupancy rates currently at 95 per cent and 99 percent.