PAKISTAN

FOLLOWING the dismissal of Prime Minister Benazir Bhutto on 5 November, Pakistan is in limbo. President Farooq Leghari has promised elections on 3 February, while Bhutto is petitioning the courts to return her to power. Where there is government involvement in projects this means a period of uncertainty for Pakistan’s construction industry.

However, the scale of public sector activity is declining and construction companies in Pakistan are operating in a market increasingly dominated by the private sector. The budgetary pressures on the government and the success of the private sector power initiative mean that build-operate- transfer (BOT) is spilling over into every sector. Potentially this means more work, but it will also mean keener pricing.

Although much construction work is concentrated in the private power sector, new sources of work within the BOT framework include the development of Pakistan’s ports. American President Lines and International Container Terminals of the Philippines are expected to award work in 1997 for a new BOT container terminal at Karachi. Neighbouring Port Qasim is also to be the site of private sector development. The port authority has invited separate offers to develop a liquefied petroleum gas terminal and a liquid cargo terminal. The offers will be evaluated in 1997 and the successful bidders are expected to subcontract out much of the construction work.

At Gwadar, port development is set to remain in the public sector at least in the first phase. This means that the project is on hold until the political situation is clarified. The project involves the dredging of a five-kilometre shipping channel, and the construction of three multi- purpose berths, quay walls, warehouses and associated infrastructure. An award for civil works is expected in 1997. A second phase is anticipated to be on a BOT or similar basis.

The National Highways Authority (NHA) is also looking to BOT to finance some of its projects. A list of prequalified companies has now been drawn up to finance, design, construct and operate a 35-kilometre urban expressway from Islamabad to Rawalpindi. The total cost of the project is about $75 million. At the same time, however, the NHA is also looking to more traditional sources of finance and has applied for funding from the Asian Development Bank for reconstruction work on 230 kilometres of highway in Baluchistan.

One construction project facing possible difficulties is the $1,600 million Islamabad New City housing project. The scheme is being developed by Singapore’s Asia Challenge Investments, the state National Housing Authority and Capital Development Authority. The development is planned to include housing, a mass transit system, road and rail links and power and water infrastructure. Asia-Link Construction has been appointed prime contractor for the project. The new government has described the project as ‘dubious’ and said that it is enquiring into the involvement of the two state entities. At the same time the government has said that state television will not be allowed to advertise the project.

The coming year is also expected to see progress on a number of industrial projects. The UK’s Foster Wheeler is already working on the construction of ICI Pakistan’s purified terephthalic acid (PTA) plant. Another PTA plant is planned by the local Dewan Mushtaq. In the longer term construction work may come from a planned hydrocracker, and proposed oil refineries. Government involvement in such projects means progress is likely to be slow until a new government is installed.

QATAR

QATAR’S recent track record of implementing two-three major projects a year will be maintained in 1997. With Doha’s attention still firmly fixed on developing its gas-based industrial sector, two new refining and petrochemical projects are expected to get under way, along with a major expansion of power and desalination capacity at the Ras Abu Fontas complex.

In the early part of the year, much of the attention in the market will be on concluding some unfinished business on the Ras Laffan LNG Company (Rasgas) integrated gas scheme and the Qatar Fuel Additives Company (Qafac) petrochemical project. A steady stream of subcontracts are expected to be let by the Japanese/US joint venture of JGC Corporation and The MW Kellogg Company, the main contractor for the Rasgas liquefaction plant project. Activity at Qafac will also be closely monitored. Although Japan’s Chiyoda Corporation received a letter of intent last June to build the planned methyl tertiary butyl ether (MTBE) and methanol plant, the estimated $420 million contract had still to be formally signed by mid-December.

Hopes for new industrial project work are vested in three Umm Said-based schemes. National Oil Development Company (Nodco) is expected to come to the market in the first quarter of the year for the $300 million-400 million expansion of its refinery. Prequalification of engineering, procurement and construction (EPC) contractors is proceeding on the project, which involves increasing crude throughput by 30 per cent, upgrading the facility to a

conversion-oriented operation and installing a 30,000-barrel-a-day condensate processing train.

Qatar General Petroleum Corporation (QGPC) and its European partners are expected to push ahead with the planned ethylene dichloride (EDC) project. Details on the project and the new joint-venture company responsible for its implementation are expected to be finalised in January. With the estimated $600 million plant scheduled to be operational in 2000, the EPC contract will have to be awarded in the second half of the year, if the timetable is to be met.

Qatar Steel Company (Qasco) also holds out the prospect of new construction opportunities, as it embarks on its 10-year programme to invest $1,700 million in expanding steel capacity and introducing new product capabilities. The company is hoping to start implementing its $400 million hot-briquetted iron (HBI) project, as well as proceeding with its large expansion scheme, aimed at increasing its molten steel output to 1.5 million tonnes a year by 1999.

Substantial investments will continue to be made in the upstream hydrocarbons sector. Both Occidental Oil Qatar and Maersk Oil Qatar have ambitious capacity expansion programmes planned in their offshore fields, while QGPC is expected to invite front-end engineering and design (FEED) bids in early 1997 for the long-discussed natural gas liquids four (NGL-4) plant scheme at Umm Said. Construction bidding will also gather pace on another QGPC scheme, the estimated $100 million consolidated facilities upgrade programme in the onshore Dukhan field.

Doha’s priority on the infrastructure front will be to expand capacity in the power and water sector. A consultant was due to be formally appointed in mid-December for the addition of 500-MW of generating capacity and 33 million gallons a day of desalination capacity at Ras Abu Fontas. The Ministry of Electricity & Water (MEW) project is expected to be implemented on a fast-track basis, with the first output coming on stream by the summer of 1999.

The other major public sector project will be the estimated $90 million expansion of Doha International Airport. Private investors are also planning several schemes in the hotel and leisure sectors, including a $110 million, five-star hotel in the West Bay lagoon.

SAUDI ARABIA

PLANS for three major construction projects in Riyadh are due to move ahead in 1997. Civil contractors are waiting to see whether the capital can support two similar prestige developments to be built within a few minutes’ drive of each other.

Bids for the contract to build the Al-Faisaliyah complex for the King Faisal Foundation were submitted by international contracting groups in late October. The construction work is being let in a single package but several elements could be subcontracted out, project sources say. Negotiations with contractors for financial and technical clarifications are expected to continue into early 1997. An award could be made in late January.

The project entails construction of a residential and commercial complex on a 120,000-square-metre site in the Olaya district of the capital. The development includes a 240-metre-high landmark tower block, a 300-room five-star hotel, residential accommodation, a shopping mall, banqueting rooms, parking, landscaping and infrastructure.

Following discussions with contractors, the total cost of the project is understood to have been brought down to less than SR 1,000 million ($267 million). The architectural designs were done by the UK’s Sir Norman Foster & Partners. Buro Happold, also of the UK, is doing the civil, structural, mechanical and electrical design work and is also responsible for cost consultancy and overall project supervision.

Plans for the Kingdom Trade Centre, also in Olaya, are at a less advanced stage. Project managers Bechtel are understood to be finalising the details of the project, which calls for construction of a commercial complex on a 230,000-square-metre site. The client is Kingdom Establishment, the holding company of Prince Alwaleed Bin Talal Bin Abdulaziz.

The development, which is expected to cost at least SR 1,125 million ($300 million), will include a Four Seasons hotel with banqueting hall and conference facilities, a shopping mall, office and retail areas and a bank headquarters. The centrepiece will be a 300-metre-high mixed-use tower block, which will be the tallest in the kingdom. The construction contract is expected to go to tender in the second quarter of 1997. The work is likely to be let in more than one package.

A third prestigious project in the capital is also due to progress in 1997. The Qasr al-Murabba scheme, being developed for the Riyadh Development Authority, comprises several elements: construction of a national museum; a landscaped public park; and the renovation of mud buildings in the area.

The site, between Batha Street and the King Fahd Highway, originally had an area of 300,000 square metres, but has now been extended south to Qasr al-Murabba itself. Total investment in the scheme could be as much as SR 600 million ($160 million). The project is expected to go to tender in February 1997. The client hopes for completion by December 1998 when the kingdom will celebrate the centenary of Ibn Saud’s capture of Riyadh according to the hijri calendar. A consortium of local and international cost consultants and engineers is being coordinated by the UK’s Buro Happold.

SYRIA

FINANCE – or the lack of it – has been the key issue for foreign contractors in the Syrian market. For the past few years, the only major projects to go ahead have been those backed by Arab or Japanese aid, or paid for by the foreign partners in Syria’s oil and gas fields. Now the range of projects may be about to expand, with France’s decision in late 1996 to conclude a bilateral settlement of its debt problem with Syria.

The French debt totalled about FF 1,900 million ($370 million), almost half of which was arrears. France had previously taken a tough line, demanding that Syria should either pay its obligations or go to the Paris Club for a multilateral rescheduling. Syria’s refusal to do either meant that some $285 million in EU loans remained frozen, and Damascus was off cover to international export credit agencies. Now France is prepared to provide fresh finance, and Paris is also expected to lobby for an unfreezing of EU loans.

This bodes well for a number of projects, including delayed cement and steel schemes, and a long-awaited refinery revamp programme.

Private business leaders say they hope the increased European involvement will encourage the government to introduce financial reforms, such as creating a stock market and allowing private banks to operate. The lack of these sources of finance has been a major impediment to private investment schemes, and is one of the reasons why no major international construction companies are active in Syria, outside the oil and gas and power sectors.

TURKEY

The government has raised hopes of a turn-around in the domestic market for large contractors, with the promise of a 131.6 per cent increase in state investments in the 1997 budget. Notably, the budget allocates TL 96 million million ($565 million) to highway construction.

Such encouragement is sorely needed. Although the economy registered an overall growth of 10.3 per cent in the first half of 1996, construction output fell by 0.2 per cent . However, analysts say activity picked up in the third quarter. The seasonal nature of the industry means it is expected to expand again in the second quarter of 1997, to return an overall growth rate of 1-2 per cent for the year. This assumption is based on a stable political and economic outlook, which will encourage investment to catch up on ground lost since the economic crisis in 1994.

The sector’s hopes have also been lifted by the invitation of feasibility bids for a series of power stations to be constructed on build-own-operate (BOO) and build-operate- transfer (BOT) terms. As private sector franchises, these are not accounted for in the budget.

Otherwise, externally-funded water supply and sewerage projects will continue to provide a work staple. The invitation of construction tenders for the $1,400 million first phase of the Greater Melen river water supply project for Istanbul is expected in 1997. Other major projects for 1997 include plans by Istanbul municipality to revive a $1,000 million scheme for a third rail crossing under the Bosporus.

UAE

ON a per-capita basis, Abu Dhabi has the potential to be the most active construction market in the Gulf in 1997. With major public sector projects planned in the hydrocarbons, infrastructure and industrial sectors, the emirate promises a wide range of new opportunities. If realised, they will lead to a significant increase in the contribution of the construction sector to the UAE’s gross domestic product (GDP).

The performance of the construction sector in 1996 was generally disappointing, despite the $3-a-barrel increase in the price of oil. In the core Abu Dhabi market in particular, the volume of new business failed to live up to expectations with a series of large-scale schemes at Abu Dhabi National Oil Company (ADNOC) and the Water & Electricity Department (WED) suffering delays in their implementation. Contractors also had to contend with labour shortages, brought about by the government’s decision to bring in a new residence law in November, and a 15 per cent increase in the price of diesel.

The new year should bring some better news, however. The first quarter of 1997 is expected to see progress on a number of major projects planned by ADNOC. Bids are due back in January and February for the first engineering, procurement and construction (EPC) packages on the Ruwais refinery expansion and the Asab gas development (AGD) scheme, worth more than $500 million. The joint venture of ADNOC and Scandinavia’s Borealis is also expected to tender the ethylene package on the planned $900 million Ruwais petrochemicals project. Later in the year, phase two of the onshore gas development programme and the offshore Khuff gas development are expected to come to the market.

Work in the hydrocarbons sector will be accompanied by increased activity in the power and water market. ADNOC is expected to have decided by early January on the scope of works for the general utilities plant package on the refinery expansion programme. WED is scheduled to invite consultants to bid for an extension to the Mirfa power and desalination plant and release tender documents to contractors for the Taweelah A expansion. Moreover, the utility is planning to implement a series of large-scale power transmission and distribution schemes.

A series of other large-scale projects are also on the agenda in Abu Dhabi. Design work is expected to commence in early 1997 on the $500 million programme to expand the emirate’s two international airports. At General Industry Corporation (GIC), construction should begin on the $40 million expansion of the Abu Dhabi flour mills complex and the steel-rolling mill at Taweelah valued at more than $100 million. The Public Works Department (PWD) is also expected to push ahead with the $570 million development of the Taweelah industrial port.

Outside Abu Dhabi, much of the attention will be on the industrial and buildings sectors. In Jebel Ali, two new industrial plants: the $160 million fertiliser complex planned by India’s Southern Petrochemical Industries Corporation (SPIC) and the $200 million topping plant for Emirates National Oil Company (ENOC), are expected to proceed into construction. More contracts will be awarded on the ongoing Chicago Beach resort development project and the estimated $530 million expansion of Dubai international airport, while the first packages are set to be let on the Emirates towers’ project. At Dubai municipality, the two largest projects planned are the estimated $60 million expansion of the Al-Awir sewage treatment plant and the Jebel Ali-Sharjah dual carriageway project.

In Sharjah and the northern emirates, additional desalination and power generation capacity is planned, along with further expansion of the ports’ infrastructure. The largest building project on the drawing board is the estimated $120 million Sharjah World Trade Centre & Exhibition development, for which contractors are being prequalified.

YEMEN

The government appears to be committed to its ongoing economic reform programme, but public sector construction projects will remain limited until government revenues pick up. Until then, one high-profile private development scheme remains the focus of construction work in Yemen: the redevelopment of the Aden port and free zone.

Progress on the scheme has been delayed by the restructuring in late 1996 of Yemen Investment & Development International (Yeminvest), the consortium supervising the work. Yeminvest still expects to meet its March 1999 deadline for the completion of the first phase of the scheme, and potential investors will have been encouraged by the decision of its Saudi backers, the Bin Mahfouz family, to take a more prominent role on the board of the company.

A number of contracts were awarded earlier in the year for a wide range of studies for the scheme, all of which have now been completed. The way has now been cleared for the award of the first phase dredging contract, with the release of tender documents for the second phase dredging expected to follow closely. The completion of the dredging work will allow construction to proceed, starting with the container terminal, to be located on an artificial island. Revised tender documents will also be released soon for the construction of a 130-MW power plant to serve the free zone.

A consultant is expected to be appointed for design work and construction management for the rehabilitation of Aden international airport in the near future. The work is being financed principally by a loan from the World Bank. The revamp, expected to cost up to $20 million, includes the reconstruction of the terminal building, which was severely damaged during the 1994 civil war.

Elsewhere, construction projects are either moving slowly or have ground to a halt. Nine groups of international contractors were expected to submit offers for the $60 million Sanaa wastewater scheme in December, but the date of a contract award is hard to predict, despite the availability of all the required finance. Misr Consulting Engineers of Egypt was appointed construction manager on the scheme in late 1996.

Other areas of the country are also in urgent need of new water and wastewater facilities, but the difficulty of raising finance for these expensive projects remains, for the time being, an almost insurmountable obstacle. The same problems apply to power generation projects. The Netherlands’ branch of Wartsila Diesel was awarded a contract to build a 60-MW power plant in Mukalla in mid-1996, with Dutch aid providing 60 per cent of the finance. However, the project is expected to remain on hold until the Yemeni government manages to raise the remaining $24 million.

A small number of road projects overseen by the World Bank are progressing slowly, but hardly constitute a solution to Yemen’s chronically inadequate transport system. Snowy Mountains Engineering Corporation of Australia and the Beirut-based Dar al-Handasah both submitted offers in late 1996 to provide technical assistance for two years to the government’s Road Maintenance Fund. The fund is intended to be provided with increased revenues from fuel sales. Yet with so many priorities pressing on the government at once, considerable doubt must remain about how much such bodies can do both to improve living standards and attract investment.