Arabtec strike deal raises costs 1%

Construction firm declines to give settlement details but says labour accounts for 10% of total costs.
By Reuters
Mon 12 Nov 2007 01:57 AM

Arabtec, the largest United Arab Emirates construction firm by market value, said yesterday a settlement with up to 35,000 striking workers in Dubai would increase the builder's costs by about 1%.

Arabtec, one of the contractors building the Burj Dubai project that includes the world's tallest skyscraper, said on Saturday it had reached a deal with striking workers after many labourers protested for 10 days over wages.

It did not disclose details of the settlement, which included a wage increase.

"We are in the process of calculating the impact of the settlement on our revenues and profits," Arabtec Managing Director Riad Kamal told Reuters, declining to say by how much Arabtec had raised wages.

Labour costs account for not more than 10% of Arabtec's total costs, Kamal said.

The UAE labour ministry was not party to the agreement, Humaid bin Deemas, a ministry assistant undersecretary, told Al Arabiya television. "The issue of wages is a matter between the employer and the worker ... The government is not a party to this ... We have a free economy."

Shuaa Capital last week estimated Arabtec's profit margins could shrink as much as 1.5% points if a pay hike is implemented.

"That is a bit exaggerated. The impact will not be more than 1%," Kamal said.

Arabtec would reduce the impact on profit margins in 2008 by increasing its charges, he added.

"We will be able to pass the settlement costs on to our new projects next year," Kamal said. "This will be done by changing our pricing mechanism and estimation figures in 2008 to compensate for the settlement”.

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