30 July 1999

1999 has proved to be a disappointing year for contractors. Few projects have been initiated and a number that were due to begin construction remain at the starting blocks. The government's ongoing efforts to redraft the scope and activities of the public bodies charged with executing the reconstruction programme, chiefly the Council for Development & Reconstruction (CDR) and the Investment Development Authority of Lebanon (IDAL), have stifled construction activity. Some major projects have even been abandoned altogether.

The $550 million Linord project to develop the coastline between Beirut and Antelias, was officially shelved in April after investors proved unwilling to bear the risk the project involved. Under the scheme, the developer was to be paid by taking a portion of the 1.4 million square kilometres of land. The recipient would then calculate how much land would provide a sufficient return and bear the subsequent risk of changes in land prices and rents. A consortium led by Kuwait's Kharafi National had been lined up as frontrunner for the project. Contractors expect the CDR to subdivide the project into separate packages.

The government has yet to give the green light to IDAL's planned design- build-operate-transfer (DBOT) free trade zone and industrial zone at Quleaat. The estimated $40 million project would also include an airport, but tender documents are likely to be delayed until the future of IDAL has been clarified.

A state-backed plan to build 10,000 housing units has also been sidelined. The government hopes that the launch in May of the country's first state housing loan programme will boost private sector real estate activity - which would eliminate the need for the original housing project. Private sector activity should also be revived by the issuing of $820 million in dollar denominated treasury bills to pay government arrears, most of which were owed to contractors.

Industry sources suggest a plan by IDAL to implement a 35-year build- operate-transfer (BOT) toll road project in Beirut is unlikely to progress. IDAL has held discussions with UK-based Kvaerner Engineering & Construction to develop the scheme, which is estimated at $950 million. The project would cover the construction of a network of highways, the first stretch between the Beirut central district (BCD) and Zouk and then a section between Khalde and Antelias. The government is understood to have been unwilling to provide the minimum traffic guarantees that the developer demanded to make the project viable.

However, the granting of a $16.5 million loan by the Kuwait Fund for Arab Economic Development to finance the development of Beirut's northern coast entrance should lead to construction tenders for a new road which would run parallel to the Dbayeh highway. This would reduce the need for the Khalde-Antelias ring road. The project is scheduled for completion in 2001. The loan is part of a wider $200 million concessionary loan targeted at upgrading roads and water services. The World Bank's announcement that it would extend $600 million in loans over the next three years, partly aimed at reconstruction projects, has also helped reassure investors that the reconstruction process will continue despite the current slowdown.

Water sector projects have fared little better. The CDR has yet to start the bidding process for the $200 million build-own-operate (BOO) Awali- Beirut water conveyor which is designed to pump 800,00 cubic metres a day of drinking water from the Awali river to the capital. Other water supply and wastewater projects in Tyre, Sidon, Kesrouan and Tripoli remain at the prequalification stage or under review. The bill for rehabilitation of the water and wastewater sectors has been put at $1,200 million.

Local contractors won two contracts to build stadiums in Sidon and Tripoli which will host the 2000 Asian Cup football tournament. Butec was the low bidder at $13.1 million to build the Tripoli stadium and Snam bid at $13.5 million for the Sidon municipal stadium.

Solidere has proved no exception to the construction slump. The real estate giant is considering taking legal action against the government over its decision to cancel the relocation of the Finance Ministry and the Interior Ministry to the Beirut Central District (BCD). Work is behind schedule on the souks project. However, work is due to begin in November on construction of finance house Lebanon Invest's $35 million headquarters in the BCD.

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