Building and construction to the United Arab Emirates

(Last updated: 10 June 2008)

Trends and opportunities

The market

The building and construction sector is the third largest sector of the United Arab Emirates (UAE) economy after oil and trade and it has experienced rapid growth in recent years.
The level of construction spending per capita is high – second only to Japan. The future prospects for the sector in the UAE also holds much promise.

In 2007, construction contributed approximately seven per cent to the overall GDP of the UAE. From 2008 to 2012, growth within the construction industry is anticipated to expand at an average rate of five per cent per annum. The three main areas for construction in the UAE are Abu Dhabi, Dubai and Sharjah, with Abu Dhabi currently the epicentre of construction activity.

Factors driving construction spending in the UAE include:

• Government spending on infrastructure such as roads, ports, airports and rail to support its commitment to becoming a business and tourism hub for the Gulf region.
• High rates of imported labour (both blue collar and professional) who further add to the demand for residential housing, commercial suites and solid infrastructure.
• The positive outlook of private-sector developers who are constructing a raft of high-rise commercial and mixed use buildings, shopping malls, hotels, tourist resorts and low-rise residential complexes to support the rapidly growing population.
• The high oil price which contributes significantly to the wealth of the UAE.
• The relaxation of foreign investment laws to allow non-UAE nationals to purchase property.

Opportunities

Services:

• Urban design and master-planning
• Architecture and design (including green design)
• Landscape design and services
• Interior design
• Spatial information services
• Consulting engineering
• Construction contracting
• Facility management
• Engineering construction
• Project management

Products:

• Construction equipment
• Lifts, elevators and building maintenance units
• Landscape supplies
• Kitchen fittings, sinks and tap-ware
• Flooring products
• Paints, coatings, adhesives and waterproofing products
• Windows and door products including insulated glass
• Hot water systems
• Lighting systems
• Building automation systems/smart house technology/electronic products and systems
• Building security products – alarms, security grills, locks, door handles, fencing
• Air-conditioners and associated products
• Fixing and fastening systems
• Soft furnishings including carpets/blinds/curtains/shutter systems
• Swimming pools and associated equipment and chemicals
• Safety products
• Environmentally friendly products

The UAE is Australia's second-largest market in the Gulf, with strong growth prospects:

• It has a sound economy, a fast-growing and youthful population, a well-established and managed banking system, excellent infrastructure, and a sophisticated business community familiar with Western practices.
• Australia's profile in the UAE is high. There is increasing recognition of Australian companies and capabilities. Over 100 building-related Australian companies have established themselves in the UAE.  Many take advantage of the UAE’s world-class transport, financial and communications infrastructure and make their offices there a regional base.
• Australia's advanced engineering and building-services, innovative products, can-do approach and ability to deliver are ideal for the UAE's huge infrastructure programs.

The UAE Government is continuing to promote capital development projects in the areas such as power, desalination, manufacturing and industrial zones. These developments represent opportunities for Australian firms, as they are significant in value and number.

Projects usually call for tenders from local companies with international joint venture partners.

Private sector projects such as commercial buildings, malls, entertainment complexes and hotels also represent significant opportunities as they are in line with the drive to develop infrastructure in the tourism and leisure sector. This is highlighted by the government of Dubai promoting large ‘city-within-city’ projects. While in Abu Dhabi, there is large-scale development of a number of the natural islands.

Infrastructure development

Dubai is a Gulf trading hub and 73 per cent of imports are re-exported. Dubai’s ports are ranked the world’s third busiest after Singapore and Hong Kong. A new port is being built at Ras Al Khaimah and a second terminal at Jebel Ali is due for completion in 2008. In Abu Dhabi, feasibility studies are being completed for a proposed US$400 million port expected to commence operations in 2009.

Airport expansions are planned in order to cope with the expected doubling of tourist numbers to 15 million per annum by 2012. At Dubai International Airport (DIA), a third terminal and two additional concourses to accommodate a large order of Airbus 380s are under construction at a cost of US$4.5 billion. A whole new airport called Dubai World Central International Airport is being built at Jebel Ali. It will be 10 times the size of the existing DIA and Dubai Cargo Village combined, and have six runways. Activity, however, is not restricted to Dubai. The Abu Dhabi Airports Company is also undertaking significant projects, spending US$8 billion on the construction of a new control tower, a new terminal building for Etihad Airways and an additional 4km stretch of runway.

Until the rail system is complete in 2009, the UAE will continue to rely heavily on its road network. Some significant new road projects include plans to build parallel routes to Skeikh Zayed Road, starting with a widening of Emirates Road through the Al Quoz industrial area. The road between Dubai and Sharjah will be upgraded and widened. Forty-five new pedestrian crossings are being built in Dubai, particularly across Sheikh Zayed Road. In Abu Dhabi there is significant road construction, particularly around the Al Raha Gardens development.

Of further interest, in Abu Dhabi, the Industrial Zone is being extended by the Higher Corporation for the development of Special Economic Zones (HCSEZ). Plans are also under way for the construction of the largest, single-site aluminium smelter in the world in the heavy industry zone of Khalifa port and industrial area. Phase 1 is expected to be operational in 2010. A steel complex is being constructed in Mussafah city.

Hotel construction

It has been anticipated that 100 more hotels will commence operations in the UAE within the next three years. This means an additional 30,000 hotel rooms. In Dubai, resorts will be built on the three Palm Islands and The World project. In addition, many hotels are planned for the newly developed areas of Dubailand, Bawadi and in the Burj Dubai precinct. In Abu Dhabi, planning is well under way to develop Yas and Saadiyat Islands.

These will offer a range of facilities including extensive cultural and commercial precincts, residential and hotel accommodation. On Saadiyat Island, the Abu Dhabi National Hotels Group (ADNH) is planning to build a 400 room hotel, estimated to cost US$190 million. Completion of this project is scheduled for 2009. The same company is also building the 300 room Gulf Hotel.

Residential and commercial construction

A series of residential projects are underway to cope with the influx of expatriate workers. Residential towers are being built at Dubai Marina, around the Burj Dubai and as part of the Dubai International Financial Centre development. Significant residential, retail and health-related facilities to house 87,000 middle income workers is also underway at Dubai Industrial City at a cost of US$436 million. 

Extensive commercial development is taking place at Business Bay and in the Bawadi area. In Abu Dhabi, a development to house 140,000 is underway in the Al Raha Beach and Gardens area. There will also be significant opportunities arising from the Saadiyat, Yas Island and Masdar development. Finally, new facilities are being planned for Abu Dhabi’s police which will include police stations, clinics, hospitals, staff accommodation and training facilities. 

Dubai projects: 

• Dubai Marina – US$4 billion (residential and commercial)
• Dubai World Central – US$33 billion (airport and logistics precinct)
• Bawadi Project – US$27 billion (tourism and entertainment – 30 hotels)
• Dubai Festival City – US$2 billion (mixed use)
• Oqyana – US$3.5 billion (resort – Australasian section The World)
• Dubai International Finance Centre – US$2 billion (commercial)

Abu Dhabi projects:

• Al Raha Beach Development – US$14.6 billion (residential and commercial)
• Shams Abu Dhabi Project – US$6.8 billion (residential and commercial) 
• Abu Dhabi Airport Expansion – US$6.8 billion (airport and related services)
• Khalifa Port and Industrial Zone – US$2.2 billion (port and industrial)
• Masdar Initiative (Green City) 
  Saadiyat Island

Competitive environment

There are around 6000 construction-related companies in the UAE of various sizes and specialisations. Initially, products and skills demanded in the market were not available locally, which meant that over 80 per cent of construction material and equipment was imported. In the '90s, around 85 per cent of major contracts were awarded to foreign companies (in partnership with local companies).

The major American and European services providers are well established in the market. In addition, the services and manufacturing industries are maturing and an increasing range of products are now manufactured in the UAE. The combination of these factors makes the UAE construction industry very competitive and price conscious.

Tariffs, regulations and customs

There are no significant restrictions on foreign involvement in infrastructure projects, except that in order to bid for a project tender, a foreign company must be represented by a local partner. Depending on the nature of the project, there are various options open to foreign companies with regard to the constitution of the company that bids on the project.

There is a five per cent duty on the import of materials, except for steel and cement. Imports of materials for government-initiated projects are duty exempt.

Industry standards

In the absence of a formal building code, over the years, the municipality of the Emirates accepted the practice of British standards. However, in the last three years the Dubai municipality led the way with the development of a UAE building code.

The implementation of the code being carried out in a phased manner. At this time, the standard market practice is still the use of British standards or equivalent. Australian standards are also generally considered acceptable.

Marketing your products and services

Market entry

Australia enjoys a good reputation in the UAE and Australians are influential leaders in construction management, both in local and Australian-owned companies. Australian products and services including consultancy, contracting, technology transfers and materials are heavily utilised,

Opportunities for Australia exist in almost all areas of the construction industry. Suppliers of products and materials usually require an agent who can work to ensure their products are pre-qualified with the architects and consultants. Providers of specialised services need to bid for projects and therefore, a local presence is recommended. Australian companies are encouraged to leverage the strong UAE-based Australian construction industry network.

The bulk of building materials are imported through Dubai. Major importers have significant warehousing facilities and well-developed distribution networks. The major importers have branches in at least the three major Emirates – Abu Dhabi, Dubai and Sharjah. The Middle East has a strong manufacturing base and well developed relationships with suppliers in India and China. Australian companies compete best when they have a value added product with a distinct competitive advantage. Commodity-style products which do not have a strong technical component and are easy to produce do not generally fare well in the UAE.

All government purchases are carried out through tenders, which only UAE owned agents can bid for. Therefore in order to sell to government, a foreign company usually requires local representation. In order to encourage local manufacture, the government provides a 10 per cent price advantage to local manufacturers over the equivalent imported product for local government purchases.

In the Middle East there is a strong focus on forming relationships to do business. For this reason, companies aspiring to success generally need the commitment and resources to make a number of visits to maintain relationships with their partners or establish an office.

Links and industry contacts

Building and construction–related resources

UAE Contractors Association
PO Box 6226 Dubai, UAE
Tel: +971 4 297 9559
Fax: +971 4 297 7848 
Email: info@uae-contractors.com

Abu Dhabi Municipality
PO Box 263, Abu Dhabi, UAE
Tel: +971 2 678 8888
Fax: +971 2 677 4919

Dubai Municipality – www.dm.gov.ae
PO Box 67, Dubai, UAE
Tel: +971 4 221 5555
Fax: +971 4 224 6666 

Abu Dhabi Water and Electricity Authority
PO Box 219, Abu Dhabi, UAE
Tel: +971 2 694 333
Fax: +971 2 694 3192

Dubai Water and Electricity Authority – www.dewa.gov.ae
PO Box 564, Dubai, UAE 
Tel: +971 4 324 4444 
Fax: +971 4 324 811

Government, business and trade resources for United Arab Emirates

Arabian Modern Equipment (AME) – www.ameinfo.com 
Department of Foreign Affairs and Trade (UAE fact sheet) – www.dfat.gov.au/geo/uae/index.html
DubaiCityGuide.com – www.dubaicityguide.com
Etisalat's Official UAE Yellow Pages Online Directory – www.yellowpages.net.ae
Government of United Arab Emirates – www.uae.gov.ae 
UAE Federation of Chambers of Commerce – www.fcci.gov.ae

Australian Business Council in Dubai - www.abc-dxb.com
PO Box 20183, Dubai, UAE
Tel: +971 4 367 2437 or 390 0467
Fax: +971 4 367 8640

Australian Business Group in Abu Dhabi – www.ausbg.net
Tel: +971 50 264 1134
Email: office@ausbg.net

Abu Dhabi Chamber of Commerce and Industry – www.abudhabichamber.ae
PO Box 662, Abu Dhabi, UAE
Tel: +971 2 617 7266
Fax: +971 2 617 7288
Email: services@adcci.gov.ae

Dubai Chamber of Commerce and Industry – www.dcci.gov.ae 
PO Box PO Box 1457, Dubai, UAE
Tel: +971 4 228 0000
Fax: +971 4 221 1646
Email: info.member@dubaichamber.ae

Sharjah Chamber of Commerce and Industry – www.sharjah.gov.ae  
PO Box 580, Sharjah, UAE
Tel: +971 6 568 8888
Fax: +971 6 568 1119
Email: scci@sharjah.gov.ae 

Government of South Australia Commercial Representative Office
PO Box 58048, Dubai, UAE
Tel: +971 4 343 2884
Fax: +971 4 343 2885
Email: sagovtme@emirates.net.ae

Victorian Government Business Office
PO Box 58004, Dubai, UAE
Tel: +971 4 321 2600
Fax: +971 4 321 2700
Email: dubai@iird.vic.gov.au

Western Australian Trade Office
PO Box 58007, Dubai, UAE
Tel: +971 4 343 3226
Fax: +971 4 343 3238
Email: info@wato.ae  

Trade Queensland
Office 801, Level 8
Lulu Building, Salam Street
Abu Dhabi, UAE
Tel +971 2 696 8700
Fax +971 2 678 2824
Email: Susan.rae@trade.qld.gov.au

Media

Gulf Construction Online – www.gulfconstructiononline.com

Middle East Economic Digest – www.meed.com

Contact details

The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.

Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.

Austrade:

• Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
• Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
• Administers the Export Market Development Grants scheme.
• Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
• Provides advice to the Australian Government on its trade and investment development activities.
• Delivers consular, passport and other government services in designated overseas locations.

A list of Austrade offices (in alphabetical order of country) is available.

More information

For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au

Sources

• DFAT Country Brief for the UAE
• Successive BMI Infrastructure Reports