CONSTRUCTION: Becalmed until the spending is resumed

22 November 1996

BAHRAIN'S contractors have come through another difficult year, marked by tight public spending and low demand from the private sector. However, there has been more work available than in 1995 and most companies expect business to pick up next year. 'We are getting a lot of tenders to price,' says one contractor, 'but competition is fierce.' Hopes have been raised by the increase in the government's revenues. Earlier in the year, Saudi Arabia granted Bahrain the entire revenue from the previously shared Abu Saafa oil field - a double bonus given the strength of oil prices. Movement on the power and water plant to be built at Hidd is also encouraging news for contractors

The experience of consultants confirms the comments about the increasing competition. 'Bids from contractors are coming in within a very tight range,' says one consultant. 'And for most contracts they are coming in from all the main contractors - there is always a strong response to tenders.'

Two of the year's largest contracts were generated by the local industrial sector. These were for work on the urea plant being built by Gulf etrochemical Industries Corporation. AA Nass Contracting won the marine civils package, worth about $10 million, and Ahmed Mansoor al-Aali (AMA) was awarded the onshore package, worth about $7 million. AMA also won work on the expansion of Aluminium Bahrain (Alba). Mannai Engineering has started work on a BD 1 million contract for the construction of a new foil mill being built by Gulf Aluminium Rolling Company. Future planned industrial work includes

a direct reduction iron plant, a steel rolling mill, and a liquid coal tar terminal at Alba.

New projects

Over the last year the local Bahrain Motors Company was the only company to pick up a substantial public sector contract, albeit for the smaller of two options that were outlined in the bidding documents. The contract, worth just over BD 3 million, was for work on aprons at Bahrain International Airport. The Special Projects Directorate of the Housing Ministry has also generated some work. The UK/local Jalal Costain picked up one of the year's prestige contracts in the form of the new headquarters for National Bank of Bahrain. The new building will be Bahrain's tallest and will cost a little under BD 12 million.

The Hidd power plant is the next big hope. The news that Black & Veatch International of the US, the Zurich-based ABB Asea Brown Boveri and Japan's Hitachi Zosen Corporation have been awarded the main contract to build the power and desalination plant has raised expectations of a wide range of subcontracts. 'The power station is a very large contract for Bahrain,' says one industry executive. 'We can only hope that other work will follow.'

There are plans to develop the whole Hidd area as a port and industrial free zone. The project took a step forward in mid-1996 when the government appointed Posford Duvivier and Portia Management Services, both of the UK, to act as joint consultant. The initial consultancy period is expected to last about one year, implying that tender documents could be prepared by mid-1997.

Assuming that the Hidd port project proceeds, expansion plans at the Arab Shipbuilding & Repair Yard (ASRY) could also be activated. Plans were announced in 1995 for a new channel and a new quay wall to be developed in conjunction with the port project. Further associated construction work is possible on a new causeway that will link Hidd to the main island and carry industrial traffic and infrastructure for the power plant. However, this project is at a very early stage. A consultant has yet to be appointed and suggestions that construction work is scheduled to start in 1997 look ambitious in the circumstances.

Contractors may be looking at an impressive list of future projects for 1997 and beyond, but the key issue will be how these projects are financed. In

the case of the Hidd power station, the government and developers are working on a financing package that will be a mix of export credits and commercial debt. Spending on other new projects is likely to increase as the government wants to use the extra revenues from Abu Saafa to boost the domestic economy and create employment opportunities. However, the government is also keen to cut the budget deficit so any new outlays will be modest.

Outside help

Bahrain's GCC allies remain ready todip into their development funds to help pay for projects, but this source of finance is not unlimited as they have their own budget issues to address. This year Saudi Arabia, Abu Dhabi, Kuwait and the Jeddah-based Islamic Development Bank put up the money for an expansion of the power transmission network.

It will still be some time before the planned projects reach the construction stage, encouraging some consultants and contractors to look abroad to boost their incomes in the meantime. 'Things bode well for those who can relocate,' says one consultant. Despite the difficulties of mobilising resources abroad AA Nass Contracting has been successful in securing work in Saudi Arabia, Kuwait and Qatar. Bahrain's other contractors continue to battle it out at home as they wait for the major projects centred around Hidd to materialise.

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