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What does Dubai’s new budget mean for the construction sector?

MENA 10 February 2022

Following the Dubai government’s recent announcement of the new 5.2 billion AED budget for the construction sector, Richard Stratton, Partner and Managing Director MENA spoke to Construction Week magazine about what it means for the industry.

The below excerpt was originally published in Construction Week, February 2022.

Richard commented “The market has been quiet in Dubai over the last 18 months or so, but there does seem to be some stimulus created by Expo 2020 Dubai. The further confirmation of a specific budget allocation to the construction sector will give greater confidence to stakeholders. Undoubtedly, this announcement generates expectations for new projects and this government stimulus is likely to give some private sector developers confidence also. However, I think that further detail around the planned construction expenditure is necessary to give further confidence.”

As part of the general budget, Dubai has also activated the Public-Private Partnership Law (PPP) and is looking to develop new project financing mechanisms.

Richard continues: “Securing long-term financing should mean that the capital is allocated and available from the outset of projects to serve the entire supply chain, but the emphasis is on 'secure'.”

“There are many reasons for considering a PPP procurement strategy, but in the context of social infrastructure (schools, hospitals etc.), it can be an opportunity to rapidly implement development and regeneration programmes that could otherwise be constrained by available public financing. It may be an opportunity to capitalise on the private sector expertise in specific areas of this infrastructure, providing financial benefits to the public sector. In many cases it is a combination of both. Essentially, this should release more development projects to the market with the associated opportunities created for the entire supply chain. However, PPP procurement is not without its risks and the cost to the private sector in bidding for PPP projects is high. It is therefore essential that the procurement process defined by the public sector is as efficient as possible to encourage greater participation by the private sector.”

“PPP contracts are long-term, anywhere from 15 to 30 years, so in order to offer the best value, the private sector must carefully assess the whole life cost, value of design, operation and financing, whereas historically most traditionally procured projects have been very capital cost driven. Cundall has always been very whole life focused with sustainability at our core. For any building to be sustainable and achieve net zero, the whole lifecycle must be looked at very carefully. We look forward to capitalising on the new PPP opportunities, bringing our significant experience in the area and adding real value to the whole life outcome. We believe that PPP procured projects can create and stimulate significant benefit to the planet in efficiently and effectively designing, building and operating assets.”

Read the full feature in the February edition of Construction Week here.

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