Report says labour shortage to worsen

The GCC labour shortage is set to deteriorate, a new report has warned, and could seriously threaten profit margins and expansion plans of major contractors.
Report says labour shortage to worsen
By Jamie Stewart
Sat 26 Jul 2008 04:00 AM

The GCC labour shortage is set to deteriorate, a new report has warned, and could seriously threaten profit margins and expansion plans of major contractors.

The depreciating value of the US dollar, the booming Indian economy and the challenge of recruiting staff with the right skills are fuelling the crisis.

The report, released by Al Mal Capital, was compiled for the UAE's biggest contractor Arabtec Holding, which employs 52,000 staff.

It warns that the labour shortage is a capacity constraint that could hinder the giant contractor's ability to expand in coming years.

The firm plans to move into the Saudi Arabian market, before moving internationally to capitalise on growth in other emerging markets including Pakistan, Jordan, Qatar and Syria.

Since 2006, when all of Arabtec's work was awarded inside the UAE, the firm has sought to expand its operations outside of its traditional base. In 2007 and 2008, UAE contracts made up just 63% and 49% respectively.

There is now US $2 trillion (AED7.3 trillion) of projects planned and underway in the gulf region, but work has begun on only 25% of these.

This puts pressure on the industry to keep the supply of labour coming, and will compound the labour shortage over the coming years, the report warns.

Over 160 projects are now delayed in the UAE. This combined with the current backlog will also intensify the labour shortage, tying up staff and machinery for longer than planned.

Arabtec's current backlog is worth $9.8 billion. The report recommends overseas expansion as a safeguard against the deteriorating labour shortage in the GCC. It says this will "solidify international status and provide comfort for investors."

The firm's expansion plans received a boost in April when it was awarded the $2.72 billion contract to build the Okhta Tower in Russia, its most valuable contract to date.

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