As the global economic crisis hit Middle East economies in late 2008, all eyes were on Dubai to see if its real estate-focused business model would prove fallible. But in November last year, work stopped on high-profile projects such as Nakheel's Palm Deira and Dubai Waterfront.

However, in the UAE capital Abu Dhabi, construction work has continued, albeit at a slower pace than before the downturn.

Key projects such as Aldar Properties' $40bn Yas Island, which will host its first Formula One Grand Prix this year, and Saadiyat Island, the local Tourism Development & Investment Company's (TDIC's) $27bn project to build a cultural centre for the emirate, are maintaining activity in the sector.

Recent awards

In May, MEED reported that Abu Dhabi was set to award $7bn worth of construction contracts this year, underlining the strength of the emirate's construction sector.

On 10 May, Abu Dhabi-based private investment company Inter-national Capital Trading awarded a AED1.6bn ($453m) deal to build its Nation Towers to a joint venture of local firms National Projects Construction (NPC) and Arabtec.

The financial health of Abu Dhabi is a good indicator of whether construction contracts will continue to be awarded. With an account surplus of about AED200bn, the government has the money to fill the gaps created by the disappearance of private finance.

But despite its undoubted financial strength, contractors are not completely confident in Abu Dhabi's prospects.

"Abu Dhabi is positive, but it seems to us that clients remain unconvinced about the emirate," says Phillipe Dessoy, general manager at Belgian contractor Six Construct Besix. "There are plenty of tenders and we are putting in lots of bids, but there are few decisions being made, which is a bit worrying.

"They are always retendering, reviewing costs or engaging in further meetings."

Dessoy is hopeful for the latest package of the Abu Dhabi National Exhibitions Com-pany's conference centre extension, valued at $300m, which is expected to go out to tender this month.

According to Dessoy, Besix's Gulf work is split three ways, with 60 per cent in Abu Dhabi, 25 per cent in Dubai and 15 per cent in Qatar. Over the next 12 months, he anticipates this will be closer to 75 per cent in Abu Dhabi and 25 per cent in Qatar, with little work in Dubai.

"Dubai we are concerned with, to say the least," he says. "We have not put in a tender in Dubai for six months now. And there are simply not that many invitations at the moment."

Another Dubai-based contractor, Al-Shafar General Contracting (ASGC), is also planning to ramp up its exposure to the Abu Dhabi market. "We have had a branch there since 2007, but now we are actively pursuing work opportunities," says Bishoy Azmy, chief executive officer of ASGC. "I am very bullish about Abu Dhabi. There are lots of ambitious projects that have been started the right way. And I don't think there is an issue obtaining the financing. We are looking at Yas Island, Saadiyat Island and Al-Raha beach."

Saadiyat Island is currently uninhabited, but will have a permanent population of 350,000 people when the project is completed. The plans for Saadiyat Island include a cultural district accommodating the Guggenheim Abu Dhabi and Louvre Abu Dhabi museums.

Yas Island, which will be Abu Dhabi's principal leisure zone, is forecast to have 100,000 permanent residents and a day-time population of about 250,000 people. Most of the work on its first phase, which includes the Yas Marina racetrack, is expected to be completed ahead of the Formula One Grand Prix on 1 November.

Both projects have the full backing of the UAE and are key drivers for Abu Dhabi and the construction sector.

"Work is ongoing but obviously Yas Island is a special case because the client is the government of the UAE, not just Abu Dhabi," says Lee Kandalaft, deputy director of infrastructure for Yas Island. "It has not been affected by the economic slowdown."

The slowdown has meant that for those projects with the capital to continue, conditions are far more favourable.

"It certainly helped us when the work was slowing down around us," says Kandalaft. "We had the pick of the best contractors, the best consultants, the best engineers. It is sad to say but true. If before a contractor said he could get us 500 labourers, he is now able to get us 1,000."

As head of infrastructure, Kandalaft must ensure power, water and other services are connected to the track in time for the November Grand Prix. "It is just one of the pieces of the project, but you need to be able to get 50,000 people in and out, so you need road, logistics and tunnels prepared," he says.

Huge amounts of finance are being poured into infrastructure projects beyond the showpiece island projects. Schemes include a major highway under construction - the Shahama-to-Saadiyat freeway, a 10-lane, 24-kilometre-long highway that will connect Abu Dhabi Corniche with the main highway to Dubai.

Work has also begun on the Al-Salam tunnel, which at 3km long will be the longest road tunnel in the Middle East. A joint venture of South Korea-based Samsung Engineering and Abu Dhabi-based Saif bin Darwish won the contract to build the tunnel in March 2008.

The client, Abu Dhabi Municipality, has set aside $815m for the project, which also includes the construction of a $500m flyover that will link Abu Dhabi city to Al-Reem Island. "Abu Dhabi has suffered, but the government is pumping lots of money into infrastructure work," says Kandalaft.

Meanwhile, five prequalified consortiums have been invited to bid by 30 September for the 325km Mafraq-to-Ghuwaifat highway, extending to the Saudi border. Bids have also been submitted for a contract to build the Hudayriat bridge to link the islands of Hudayriat and Abu Dhabi, which is part of the government's Plan Abu Dhabi 2030 urban structure framework.

On 8 July, Abu Dhabi Ports Company (ADPC) awarded a AED1.4bn infrastructure contract at Khalifa Port & Industrial Zone (KPIZ) to the local/Australian Al-Habtoor Leighton Group. The contract is for the construction of the onshore port facilities and includes the construction of 47 buildings, the largest being the central facilities building, which is more than 300 metres in length and five storeys high. Work includes associated infrastructure such as building roads, bridges and utilities.

A report on the infrastructure industry published in June by Bahrain-based investment bank Sico says spending in 2009-10 will be a priority. It considers Abu Dhabi a "robust market for contractors", which is in a much better position to weather the crisis. It claims that Abu Dhabi plans to spend about $275bn on infrastructure over the next five years, creating opportunities for contractors.

But Abu Dhabi construction veterans advise caution in investing too much hope in the emirate as a saviour for the UAE construction sector. The pace of business in Abu Dhabi is slower than in Dubai, thanks mostly to its practice of reviewing costs. In the current pricing environment, in which labour and materials prices could dip yet further, Abu Dhabi clients may prove reluctant to award major contracts in the hope that in a few months' time, project costs will be even lower.