Firms operating in Dubai face payment delays, contract renegotiations and unfair calling of performance bonds now that the emirate’s construction boom has ended, notes Export Finance and Insurance Corporation's (EFIC) World Risk Developments July newsletter released yesterday.
‘US$10 billion in financial support from Abu Dhabi has lowered the risk of default, but this will not stop projects being cancelled, delayed and scaled back’, says EFIC’s Senior Economist Dougal Crawford. ‘Up to US$250 billion worth of projects could be cancelled or postponed.’ As for payment delays, Mr Crawford notes that some contractors and consultants have reportedly not been paid for up to six months and that the large property developers owe billions. Overall, Dubai’s economy could slump by 10% this year, he believes.
The contrast with nearby Qatar is stark. Its economy is forecast to grow by 18% in 2009, thanks to a boom in gas investment and production. US$$90 billion of gas investments are on the drawing boards in the period through to 2012 and gas production is set to double over the next two years.
‘While neither Dubai, nor Qatar, nor the Congo are major trading partners of Australia, they all do matter increasingly to corporate Australia, especially as its resource and engineering companies expand into the Gulf and Africa to take advantage of the infrastructure and resource opportunities on offer there’, notes EFIC's chief economist Roger Donnelly. ‘Needless to say, there are plenty of risks to be managed at present – but also business to be grasped in areas where Australians are competitive.’
The newsletter also covers the threat of an El Niño weather event for Southeast Asia and digs into the latest Australian export numbers.