Financial turmoil 'threat to GCC projects'
Manama, January 29, 2009
The GCC region now has around $3 trillion tied up in construction and infrastructure projects, of which at least 10 per cent are in serious trouble due the global economic crisis, an expert said.
Economics and petroleum market behaviour associate professor at the Abu Dhabi-based Petroleum Institute Dalton Garis said Dubai is perhaps the most seriously affected though other parts of the region are 'weathering the storm well'.
'There is a severe shortage of money everywhere and these projects might well be shelved if the meltdown continued for a while,' he told the GDN on the sidelines of the 12th Project Management Institute - Arabian Gulf Chapter (PMI-AGC) conference at the Gulf Hotel.
The event, which concludes today, is being held under the patronage of Prime Minister Shaikh Khalifa bin Salman Al Khalifa and serves as a forum for project management practitioners, engineers, planners, academicians and management to interact, share their experiences, improve their knowledge and showcase their projects and best practices.
Garis, who is one of the prominent speakers at the conference, said the Gulf region as a whole is in better shape than the Western world primarily because of their wealth.
'Banks in the GCC also appear to have money to lend and the capital markets are more accommodating.'
He said the Islamic banking industry in the GCC is extremely mature which has resulted in the region offering a model of relative financial stability.
'Project management in this part is more stable as well as is able to manage long term projects fairly well.'
He said the problem is that when the massive projects were being planned, no one envisaged the sharp fall in oil prices.
'That has been their undoing. By the end of the year, when these prices are expected to stabilise at around $60 we shall see some kind of stability returning to the sector.'
By then, he added, severe damage would already have been done.
'Dubai grew as if there was no tomorrow. A mall here, a building there, a shopping complex at another place - this haphazard activity is now showing up as a real problem.
'There are no takers, no tenants and nothing to show in terms of economic viability.'
Jordan-based Intrinsic Management consulting manager Nada Abandah said hundreds of buildings were built in an unorganised manner just to create a business opportunity.
'Now, just to find people to stay in those buildings and to have businesses running is proving to be a real crisis.'
She said there was no idea to have indulged in such kind of growth because 'trying to even utilise what has been built is deepening the crisis.'
She said while a majority of the GCC has not been affected, the UAE is in 'very bad shape'.
PMI Karachi Pakistan Chapter president Aslam Mirza said it is a real challenge for project management professionals in the GCC to 'minimise the impact' of the global crisis.
'The expertise in this field here will now help.'
He said the GCC is very rich in resources and there is extensive experience in project management.
'I have no doubt the region will emerge virtually unscathed from the crisis.'
Pakistan-based Techno Legal Consultants chief executive officer Mazhar-ul-Alam said there is little planning in the GCC region and some Asian nations when drawing up contracts to begin projects.
'This has to change to bring about some kind of professionalism.'
He said this is the time for nations in the region to develop their infrastructure since prices are crashing all the time.
'Nations can benefit in these times, as opposed to private developers who are under threat of liquidation.'
Earlier, PMI-AGC Bahrain vice-president Majeed Al Gassab said the co