Late payments continue to be an issue for firms working in the region, according to a recent survey conducted by MEED.
According to the survey, which included architects, engineering firms and contractors, 51 per cent of respondents believed that the issue of late payments remains the same as last year. Additionally 41 per cent of those who took part in the survey believed that the issue has actually worsened compared to last year.
Contractors working in the region have also told MEED that government clients are usually better paymasters. This becomes problematic in the coming period as government and government-related entities curb their spending, hoping for the private sector to plug the gap.
Contractors say government clients have a government guarantee and even if the project exceeds its initial budget, it is possible to engage with the client body and resolve the issue.
With the private sector, this is not always possible; leaving the contractor with little recourse for the outstanding payments it is owed.
Special purpose vehicles (SPVs) set up by the private sector can also be problematic. Contractors say this is because SPVs tend to be funded with bank debt, and the bank is unlikely to extend that funding any further due to little built-in flexibility in the business model. This means if there are variations or overspending on the project, the SPV is unable to meet these additional costs.
Companies will be hoping for an improvement regarding payments, with the region witnessing a recent uptick in contract awards. During the month of July all the GCC states except Bahrain recorded increases in the value of deals signed, with Qatar inking $896m of deals in July, up from $221m in June, Saudi Arabia $1.5bn, compared with $638m the previous month, and the UAE out in front with $2.9bn, against $664m in June.
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