Tuesday, March 27, 2007

Reuters reports:
DUBAI, March 26 (Reuters) - Privately held Dubai developer Damac Properties called on Monday for the Dubai government to help curb soaring construction costs by easing restrictions on foreign contractors and encourage more competition.

Construction costs in Dubai, the Gulf's international commercial hub, have doubled in the last four years as demand for building materials has outpaced supply and contracting costs have risen, Damac Chairman Hussain Sajwani said.

"There is a lot the government can do about this," Sajwani told the Reuters Middle East Investment Summit on Monday. It could cut the time it takes contractors to get a licence, which runs as much as a year, and encourage more foreign contractors to work in the emirate, he added.
Gulf Arab governments have been investing windfall oil revenues in developing tourism and infrastructure projects across the Gulf, driving demand for everything from cranes to cement.

... Sajwani said the government must ease restrictions on foreign contractors, or construction costs would continue to rise 15-25 percent annually during the next several years.
"Instead of a 25 percent margin, contractors' margins could go back to 10 percent if this [entry of new construction firms] happens," Sajwani said. "The government should encourage the world's contractors to come to Dubai."
Relaxation of government-created barriers to entry in other products -- from juice to nuts -- would curb the demand-driven inflation the UAE is experiencing. With fewer restrictions on entry of new competitors windfall profits prices would more quickly evaporate as prices returned to normal.

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