Abu Dhabi will pay the price for putting projects on hold

03 February 2010

Abu Dhabi has been slow to sign contracts for new schemes and many of them are in limbo. Many contractors will be wondering whether work they are competing for will fall by the wayside

Abu Dhabi’s decision to put a string of hospital building projects on hold could signal the end of its infrastructure boom before it has really got going.

Two medical centres in Al-Ain have fallen victim to a review of procurement strategies and work on a hospital in Mafraq has stopped for the same reason.

The moves add to a sense of unease among contractors. While Abu Dhabi is busy seeking bids for a glut of major infrastructure schemes that together are worth more than $20bn, not many have been converted into firm contracts.

The planned projects range from traditional, heavy-end infrastructure, such as sewage tunnels and pumping stations to transport projects including a metro system and hundreds of kilometres of roads. The shopping list also includes social infrastructure spending on schools and universities.

But Abu Dhabi has been slow to sign contracts for these schemes and many are in limbo, waiting for client approval. Bids from consultants for the metro system and from contractors hoping to build a network of sewage tunnels have been under evaluation for more than six months.

The indecision does not inspire confidence and, with more projects now on hold, it suggests that Abu Dhabi is not sure of the wisdom of rushing ahead.

The underlying issue is Dubai. Abu Dhabi spent $20bn bailing out its troubled neighbour in 2009 and may need to offer a similar amount this year if Dubai is to avoid a default.

Even for oil-rich Abu Dhabi, this is a lot of money – last year’s assistance accounted for about 40 per cent of its $51bn oil revenues.

In its effort to keep its finances in reasonable shape, Abu Dhabi is rationalising its plans. That is sensible for the long-term health of the economy but, in the meantime, many contractors will be nervously wondering whether it means the projects they are competing for will simply fall by the wayside.

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