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Mon 25 Jun 2012 07:34 PM

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Abu Dhabi says steps taken to pay contractors

Construction industry sources estimate several billion dollars owed to contractors

Abu Dhabi says steps taken to pay contractors
(Bloomberg)

The government of Abu Dhabi said on Monday it had taken "appropriate steps" to make sure its entities would pay off money owed to contractors working on billions of dollars worth of construction projects in the oil-rich emirate.

Construction companies, consultancy and architectural firms have faced slow and irregular payments from some Abu Dhabi government-linked entities, in some cases leading to severe financial difficulties.

No total value for the amount owed by the Abu Dhabi government and its entities to contractors has been made public, but it is likely to be several billion dollars, according to estimates by three sources in the construction industry.

"The Abu Dhabi Government is fully aware of its obligations in terms of outstanding payments to contractors, and has taken the appropriate steps to ensure that all these obligations are met by the responsible government entities," the Abu Dhabi Office of Government Communications said in a statement issued to Reuters on behalf of the government.

The statement did not give any further details on what measures had been taken.

Abu Dhabi, home to the capital of the seven-member United Arab Emirates federation, holds some 95 percent of the country's oil. For the past decade, the emirate has been pumping billions of dollars into vast infrastructure and tourism projects, creating a construction boom that drew contractors from all over the world.

Abu Dhabi has fared better during the global financial downturn than neighbouring emirate Dubai, which saw a collapse in its property market that triggered the restructuring of its flagship firm Dubai World.

Still, Abu Dhabi has had to retrench, and last year launched a strategic review of government spending that saw major projects pushed back, funds frozen and numerous top-level management shake-ups.

The emirate now faces challenges as a large supply of high-end homes is expected to enter the market. Housing prices in Abu Dhabi are expected to fall as much as 11 percent this year, according to a Reuters poll of analysts in January.

Abu Dhabi, which rescued Dubai with a $10bn bailout, has spent an equal amount on its own struggling developer Aldar Properties, which landed in debt after a building spree.

"The Abu Dhabi Government and its related entities are currently managing well over 1,300 different projects, ranging in magnitude from several hundred thousand to billions of dirhams," the statement said.

"One may appreciate that the monitoring of progress, verification of contractual obligations, and scheduling of payments is a highly complex process, and that in such a large portfolio of projects some delays in delivery or payment are to a certain extent inevitable."

The statement added, "The Abu Dhabi Government recognises the valuable contribution that the contractors and their suppliers make to the local economy, and appreciates how important the timely management of cash flows is to the health of these businesses."

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Sole 7 years ago

Well said , it show the reality of the laws and the double standard practiced .

They accuse people of taking their money and fled the seen , while in reality they take the people money and stay to brag about it , and accuse others of short delivering .

Suleyman 7 years ago

Correct, and well summarised Telcoguy. Speaking as a contractor I confirm your first comment, after years of delayed payments of money owed directly or indirectly from government purses "We'll believe it when we see it".
And as a human being I applaud your highlighting of the hypocrisy of laws that allow massive non-payment from entities effectively immune from action, whilst jailing the guy who lost his job and can't honour his rent cheque.

Phapha Mo 7 years ago

Good comment.
Maybe we will see the day when contractors insist that 80% of their contract value is in signed cheques, deposited with a neutral party offshore and tied to construction milestones, so that default sends the signatory(ies) to jail for a while.

Alternatively, just make "breach of contract" a crime and let owners of buildings who fail to pay and employers who breach employment contracts land up in court automatically.

Ozexpat 7 years ago

What "appropriate Steps" have been taken? These are only words. Why write an article that means nothing. Get some actual facts first from the companies affected. This is just another public relations exercise.

Business Man 7 years ago

Yes you are correct Telcoguy. I closed down my UAE operations completely because of this. 30 staff lost their jobs. Moved everything to Singapore. Too risky with bad debts and no realistic settlement process when the Government is involved. I wasnt prepared to continue in a business environment with two levels of legal obligations.

Hussam 7 years ago

This article reads like official propaganda. It has nothing to do with reality.
We are continuing to see the marketplace deteriorate. Although my firm is lean and debt free and we are still operating (one of the few and last in our specialized field), we have lost the enthusiasm to go on and have lost our faith in the future of the construction sector in this country.
We already have one foot out the door (as locals so eagerly suggest every time we make a legitimate complaint) and can't wait to get the other foot out.
We lost millions due to the broken payment system but we can afford it. I feel bad for those who were devastated personally and there are many individuals and companies in this category!