Category Archives: Underserved areas in ininfrastructure

Infrastructure Arabia summit- Abu Dhabi UAE- April 2012

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INFRASTRUCTURE ARABIA SUMMIT

Building a sustainable framework for the Middle East

I had an opportunity to attend the Infrastructure ARABIA Summit conference alongside WORLD ecoConstruct, 22-25 April 2012 Abu Dhabi National Exhibition Centre (ADNEC). Extracts are presented here for awareness of the readers,

Among other seminars, there was presented a White Paper examining the opportunities and challenges facing the infrastructure industry in the Middle East in the wake of economic and political turmoil. (In certain issues parallels can be drawn as highlighted in bold letters ,with   conditions in J&K State, which need our urgent attention.)

Infrastructure projects worth billions of dollars have featured high on the agenda of most countries in the region, in spite of the turmoil that swept across the Middle East in the past year.

The total value of infrastructure projects stands  at US$ 408.8 billion. While many industry experts now point to Saudi Arabia and Qatar as the two GCC states offering the most opportunity in infrastructure and construction at wide, the UAE still holds the lion’s share of infrastructure projects.  Accounting  for US$ 187.2 billion. Abu Dhabi alone has earmarked US$ 15 billion on expansion of infrastructure projects between 2009 and 2012. (In J&K State funds are earmarked in the Annual plan for various development works, which include infrastructure development  in public sector.)

The White Paper has been drafted based upon a round table discussion held by Matthew Plumbridge, Consultant, Environment and Sustainability Planning, Department of Municipal Affairs (DMA), Abu Dhabi; Ivan Woods, Head of Project Finance Advisory, BDO Corporate Finance (Middle East) LLP and Dr. Ghassan Ziadat, Director of Infrastructure (UAE) and Regional Head of Bridges, Middle East and India, Atkins. The moderator was Meelanie Mingas, Head of Editorial, The Big Project. The discussion was organized by Informa Exhibitions.

THE IMPACT OF POLITICAL AND ECONOMIC TURMOIL

The Middle East region experienced a wave of political turmoil, when the world was starting to recover and regroup in the wake of the global economic crises, which contributed to the challenges being faced across all industries. The construction industry on the whole continues to deal with delays, projects on hold or shelved, while the tender process becomes more rigorous and stringent.

Social Infrastructure

In light of the Arab spring and the seismic shift in global finance opportunities, governments in the region are placing more emphasis on social infrastructure in order to create sustainable communities, job opportunities and comfortable living.

According to Ghassan Ziadat, “the UAE government has responded to make sure social infrastructure was adequate for the population, and the people are satisfied with the level of education and healthcare they receive.

“Social infrastructure has been less well served (in recent years) than the big power and water projects.” ( J&K State has witnessed a haphazard growth of social infrastructure development in violation of Master Plans, particularly in Srinagar.)

Sustainable workforces

Yet, a result of political turmoil is the talent gap. While the UAE remains relatively unscathed by the Arab Spring, many skilled expatriate workers have left the region, specially Libya, Bahrain and Egypt, which once again draws a spotlight on the region’s reliance on international, skilled workers employed in order to fulfill project’s needs. (Most of the workforce in Srinagar city consists of migrant laborers from Bihar and local labor seems to be diminishing.)

City versus rural living

The ratio of people living in cities to those living in rural areas is approximately 4 to 1. According to  Dr. Ziadat. “It is a misconception that in the Middle East, people are still living basic lifestyles in rural areas. Across the region, actually about 80% of the population lives in cities and this itself creates challenges. ( Reverse is the case in J&K State, where 80% population lives in rural areas and the trend to shift to the urban areas is on the increase.)

“If you plan infrastructure to create new jobs, you may be solving one problem and creating another in Abu Dhabi, and across the region, there is significant migration from the rural areas to the cities which puts pressure on the built environment of that city. By leaving the rural areas, we deprive them of the working population and its sustainability in the long term.” (This holds true in case of J&K State too. Most of the new generation is reluctant to attend to ancestral agricultural jobs and are on hunt for alternative office works.)

There needs to be investment, not just in the urban population centers but in the rural areas too in order to stem the migration and relieve the pressure on the cities. To achieve that, you need a whole gamut of different measures. (In J&K State too we need to create facilities in rural areas like those of the urban areas in order to check migration from rural areas , putting pressure on the existing urban facilities designed for the existing urban population only.)

“People don’t mind living in rural areas such as the Western Region  of Abu Dhabi, as long as they have the necessary high quality social infrastructure provided- healthcare, housing, jobs and education (This shall equally be true for J&K State as rural areas provide attractive natural surroundings.)

“In addition they must be well-connected with the rest of the country. If they decide to go to the city it should only take them an hour or two in comfortable transport.”( So is the case of J&K State, which warrants construction of good quality roads of standard design.)

One of the biggest changes witnessed at the turn of the decade, in light of the economic downturn has been a shift to a more managed economy. Dr. Ziadat explained, “Two or three years ago, the market was driving things, particularly in the private sector with the property market boom. There was a lot of construction going on to service the private sector and the private investor which created a lot of jobs and economic growth. With the global financial situation, this has been slowed down significantly and so the governments are dealing with the fact that the private sector has slowed down. would help solve the age old problem of unemployment of the younger generation.) (Unfortunately the private sector has not grown much in J&K State except construction of a few individual houses, and some shopping malls here and there. The development of private sector could generate lot of jobs, which could solve the longstanding problem of unemployment in new geheration.)

“Many countries in the region… are trying to steer the economy into growth, create jobs by investing in infrastructure, which is a good thing for the industry but the type of construction has now changed quite dramatically in the last few years with more emphasis on wider infrastructure than the high-end property type construction.”  (The high rise buildings are already restricted in J&K State in order not to obstruct mountain view and also because of the area being a seismic zone. Hence the lateral development has been recommended.)

Woods agreed, and stated ”The shift can only be a good one for the foreseeable future-the property bubble was clearly unsustainable, and in the short term governments are surely right to steer their economies to more sustainable sectors.” (In case of J&K State the power and tourism sector would be the sustainable sectors.)

Today’s Middle East landscape

Dr. Ziadat and Plumbridge use examples outside of the Middle East from which the region can learn when dealing with economically and politically challenging times. Now is the time, they believe, for governments in the region to spend and intervene to keep the ‘bicycle’ moving, from both an economic and psychological point of view.

Public Spending Injections

Dr. Ziadat identifies the Far East-citing countries such as Singapore, Malaysia and Hong Kong-which take advantage of slow cycle in construction. He said, “when the economy is booming and the private sector is healthy and strong, (the governments) slow down on public expenditure to prevent the economy from overheating.

“But when the economy slows down, they want to prevent the economy from shrinking, so they invest by spending into infrastructure. They got much better value for their money in upgrading the infrastructure when the market prices are more competitive, they invest in the economy and the public spending on infrastructure maintains job creation and keeps things going.”

Plumberige said,”This has been the case historically. The Hoover Dam helped America out of the Great Depression and today we see Obama’s government look at infrastructure projects as critical to economic recovery. Drawing a similarity:  ”{History is witness to the event, when people of Kashmir were struck by famines and in order to provide livelihood, The Moghul King Akbar engaged common people of the valley in building a huge wall of stone masonry around the Hari Parbhat/ Kohi Maran hillock.)

In Australia, during the down times, Contractors will tender on low margins, but they make their money in between payments, that they receive and then they pay to the sub-contractors. So they invest in the short-term money market and the little amount they eke out keeps them afloat.” (Such practice already exists in J&K State.)

Woods also says that, “Governments often see infrastructure spending as a good way to help an economy out of a downswing.

“While this should still involve the private sector as much as possible, countries across the globe are increasing public investment on needed infrastructure-even with the austerity measures many are enforcing-to boost employment and give a long-term stimulus to their economies.” (So is the case with J&K State. Construction of roads, railways, drainage etc, is made possible only with public investment with little private sector involvement.)

Regulation Codes

With sustainability now on every business and government agendas, cynics question the viability of implementation. Plumbridge points to the energy code currently being phased into the industry in Abu Dhabi as the “best in class”. He said, ”We will hit the UN Green Building targets for ‘extremely hot climates’. If the UN gives you achieve that. You’re doing pretty well as a minimum standard.”

Dr Ziadat believes achieving the water balance in the sustainable design phase is an important factor.  “If you look at the overall picture in terms of carbon emissions  on the sustainability agenda,  the majority are water, electricity and energy related. Cutting down the demand for water, electricity, heating, cooling and making optimal use of water recycling is vital to achieving the carbon emission targets set in Copenhagen.”

“Each country and geography has been set targets and they have signed up to achieving those targets by 2020. In terms of annual carbon emissions per capita, the USA is one of the largest at about 30 carbon tonnes  per year per person, which is similar to the UAE’s carbon emissions.”

“Everyone in the world realizes something needs to be done about it. The UAE is committed to driving down carbon emissions and introducing sustainability initiatives such as Estidama and model city in MASDAR. The Estidama  program  goes a long way towards setting a benchmark to encouraging people to design sustainable buildings and communities.”Plumberidge reiterated that Estidama is a rating system under which a robust set of regulations is needed.

Understanding the codes and the way they are applied to your region is vital, says Dr. Ziadat, in being able to create designs at tender which can stand up against the sustainable agenda and save money. “You could, with good design, save about 20 percent of construction materials in a project.

{ During the question hour in one of the seminars, I asked, ”What methods were adopted to ensure implementation of codes of practice and if the testing laboratories are licensed, which is necessary for ensuring the safety of the structures?”  The reply was that tests were being conducted; besides implementation of the proper design was ensured by timely inspection by the authorities. In addition the testing facilities are being centralized under one roof, for which a central laboratory has been proposed to be constructed. In fact I found that the construction of a ten story block in our neighborhood in Abu Dhabi was stalled by the Municipal authorities due to use of lesser than designed  reinforcement in the foundation. However in J&K State It is a matter of great concern that in spite of the fact that the area falls under seismic zone, there is hardly such a check being conducted by the authorities. Besides the laboratories conducting the tests are hardly licensed from the recognized authorities, putting the  lives of the people in great danger without proper verification of the safety of the structures, which are mostly made of reinforced Cement Concrete as against the timber structures of the earlier days.}

“Integrating the design and construction through the Design and Build collaborative approach can also be a catalyst to innovate and produce more buildable and cost-effective infrastructure.”

“I think the market here is still fairly conservative and people have been traditionally suspicious of the construction industry. I think it’s reached the stage now where it needs a re-look. The quality of construction on some projects in the UAE now is absolutely world class and this is a good reflection on the capability and professionalism of the developers, consultants and contractors in the region.” (We have yet to see a world class construction to come up in J&K State)

Plumbridge points to the Burj Khalifa as a ‘feat in engineering’ and believes the UAE must play to its strengths-the speed and rate of construction while moving towards more modern methods of construction such as modular, pre-fabrication, pre-casting and using prototypes more often in order to increase worker health and safety and reduce waste.

Urban Planning

Today, the focus in Abu Dhabi is to create a cohesive city where people can comfortably live, work and raise families; addressing the fact that living in an extremely hot climate plays an important role in achieving that.

One of the aims of the landscape strategy currently being compiled by the DMA is to create continuous pedestrian and cycling networks throughout the UAE capital but when the sun’s influence affects your daily movements this is especially challenging. Plumbridge believes we can learn from ancient cities in Morocco and Egypt in which passive breezes are maintained and the overall objective is to keep the sun off everything. “Urban planning (in this region) is driven by sun and breeze,” he said. { In J&K  State in our city of Srinagar, not to talk of cycling network, even pedestrian foot paths are occupied by vendors to the  great inconvenience of the pedestrians. Being a tourist destination, we need to provide  proper pedestrian and cycling networks in the city and ensure and even enforce their use without any hindrance.}

This form of natural cooling is essential according to Dr. Ziadat. “For cities to be more sustainable it makes sense for the buildings to be closer together and in a dense environment so people can walk from one tower to another. This dense environment is going to be the future across the globe for city planning.” {The old city of Srinagar contained houses huddled together, with narrow lanes, which proved favorable in severe winters as heat loss was minimized and very few homes needed hamams as against the new trend of construction  where hamams or central heating is needed in isolated houses in the newly developing residential areas.}

Woods is also encouraged that “new developments such as Masdar have integrated traditional techniques from the region (such as use of shading and wind) with modern technology” and believes that such sustainable planning models will only become more important going forward in the region.

And cultural and leisure infrastructure is also important to recognize. “Once the infrastructure is there, where basic needs are met, people don’t want  to be bored spending all their free time at home; they want to be outside and they want to live in cities that are exciting and interesting.

“The Government is investing in culture, such as museums, water parks and attractions like Ferrari World and the value of these destinations should not be underestimated.” (There is need for providing in J&K State  recreational parks for children  and for public stroll in all the localities where such facilities are lacking.)

It is expected that this cultural investment will help curb the transient nature of the UAE and contribute to retaining talent. Plumbridge said, ”The Municipal System is looking at social responsibility, promulgating areas such as volunteerism, getting to know your neighbors etc.” (In the old city of Srinagar people were living closer  sharing joys and sorrows together as compared to the new colonies, where  individual cares little for his neighbor. Now mosque is the only place, where people can meet.)

Financing mega projects

In relative terms, the UAE and other GCC states such as Saudi Arabia and Qatar are wealthy nations rich in resources and are not as dependent on foreign investment as other countries. The increase in the number of mega projects in the region, however, does shine in the spotlight on capital finance and the introduction of public private partnerships (PPPs).

The number and scale of large infrastructure projects currently being developed in the UAE, such as the Step Tunnel, MASDAR city, the new energy and power desalination stations, the nuclear programme and the number of transportation programmes from roads and railways, port and airport expansions to bus stations and depots, create financial constraints.

Dr. Ziadat believes that the region must pull together in order to survive and PPPs need to be considered, especially in less wealthy nations. “The majority of our countries in the Middle East may well need to on foreign direct investment and private sector investment to achieve their development programmes. The wealthy countries in the region are playing a part; they are investing and helping their neighbors, which is essential for the region’s stability, but involving the private sector and bringing in foreign direct investment is a must, it has to happen.” (Presently there seems to be no policy for the foreign investment in J&K State. It could definitely change the shape of the country/state, if foreign investment was allowed for the development of the infrastructure on the mutually agreed terms.)

Woods points to countries like Kuwait and Egypt which have successfully utilized PPPs but warns that many countries come across issues when getting these projects started, largely due to complications in developing new financial models and fully understanding the requirements of a PPP project.

He believes, ”PPPs can be of great benefit, particularly to maximize the private sector’s involvement and added value. The challenges of implementing a PPP properly, however, and ensuring value for money for the government and the wider public, must be addressed upfront. In some cases projects have fallen over because initial plans weren’t well thought through-look at the Mafraq-Gweihat highway.”

Woods says that financing remains a challenge given global economic concerns, although for good projects funding should still be available and the region is generally seen as a relatively safe investment opportunity.

Transparency, says Plumbridge, is the key to attracting foreign investment and the genesis of the PPP model is to provide  critical infrastructure.

The adoption of the PPP model is growing in Abu Dhabi,; Plumbridge highlights both a sewerage infrastructure project and a crushed  rock, recycled concrete aggregate facility which are being constructed in collaboration with the private sector.

Aside from financial constraints, one of the biggest challenges in delivering mega projects in the region is finding the human resources and skilled labor. “The boom time happened here (in the UAE) now it’s in Qatar and Saudi Arabia,” said Plumberidge. “If  you want to do a mega project now. The resource pool has moved so you might have to bring in people who don’t necessarily know or appreciate how the UAE operates.”

Underserved areas in infrastructure

Woods believes that the region still has some way to go before the needed level of infrastructure is available. “There are significant shortfalls in a number of areas,” he said. “Affordable housing has not been made available in sufficient quantity and this has been recognized in Saudi Arabia, Bahrain and Oman.”

Given increasing demand for improved social services such as health and education, as well as needed improvements to transport links and the continuing need for clean water and power, he emphasizes, ”it’s a long list.”

And while Woods believes power projects have been developed more successfully than housing in the region, Dr Ziadat points to the energy sector as the still most important infrastructure factor in the Middle East, particularly as they relate to water projects because of the lack of natural resources. He explained, “Jordan only has water supplied to its population once a week for a few hours. It is the poorest country in terms of water in the world and it has a growing population and no financial resources to address the situation.” (We should be thankful to nature, who has provided us with water in abundance, but its exploitation for power production and as portable drinking water is much behind the target and has a great scope of investment.)

“Energy, water and environment are all related in this region: you need to desalinate the water and you can’t create energy to desalinate without affecting the environment. The UAE is very fortunate with its hydrocarbon reserves and is trying to diversify its energy supplies through the nuclear programmes and through renewable solar and wind power. If you have adequate and renewable energy supplies, the water issues can be solved.”

Plumbridge refers to Abu Dhabi’s Critical National Infrastructure Authority which is driving programmes such as aquifer storage, which will see the amount of desalinated water in storage increase from three to four days ‘worth to two months’ worth, in light of an unforeseen circumstance or natural disaster. “If you take out the water and you take out the power, you don’t last so long,” he said. (J&K State is rich in both water and power resources, but for their proper exploitation.)

Conclusion

The Middle East is facing an opportunity now, in light of global financial crisis and the Arab Spring. The pressure on the construction industry at large and specifically infrastructure professionals is different to the overwhelming urgency and speed expected in the mid-2000s. Dr. Ziadat believes now is the time to take stock, evaluate and identify how the industry can work more efficiently and provide an even better quality service to the population and environment into the future.

The private sector is so focused on short term return on investment and so now, those pressures have lessened,” he said. “The government-driven properly planned long-term programmes can look at implementation of sustainable policies taking advantage of recycling, efficiency, modular construction, how to improve in the long run and how to attract long term sustainable investments such as pension funds into infrastructure this is where you can move from being a developing country to the next step.

“Being more sustainable by design is an urgent issue which needs to be addressed but it is a journey you have to go through which cannot be simply introduced overnight.”

Railways

One key area of opportunity and growth for the Middle East is the rail industry, according to Dr. Ziadat. He believes the region is poorer off for the lack of an inter-nation railway infrastructure and that the Middle East was ‘left behind’ in the railway transportation age. He asks,  can you imagine Europe without a proper rail network? (So has been the case with J&K State too. Although railway link was introduced in India in British period, it had not reached Kashmir uptil now due to rugged mountainous terrain. However work on the project linking Kashmir is in progress now.)

“I think for sustainability in transportation, (rail) is the future, it is currently more sustainable than air and road travel. Railway transportation is much more sustainable in terms of carbon emissions but you need to have a long-term investment programme to achieve it and build a whole industry around it. You need to support the operation and the maintenance of it, the safety, security and the technological aspects. It would really help to connect and integrate the economies here and in the region in ways other than roads, sea and air transport.

“In Europe, inter-trade is around 60 percent of the gross national product; in the Middle East it is far lower partly because of limitations on efficient rail transportation links. Rail has been left behind over the years because it is quicker to build roads and import cars, but as governments look for medium to long term gains, it is a good investment, it creates healthier environments and makes the economies more sustainable.”
Woods fully supports Dr. Ziadat and says,” The region would be very well served with a rail network, both economically and environmentally. This should continue to be a priority for regional governments as the benefits should substantially outweigh the costs over the long term.”

Human resources

One of the biggest challenges reiterated throughout the round table discussion was the need to retain skilled workers and reduce the amount of talent leaving the region. A direct impact of the economic downturn, many expatriate workers lost jobs and returned to their home countries or moved to other emerging markets throughout Africa and Asia. (Major chunk of workers from India including Kashmiris were affected adversely).

Dr. Ziadat believes that the implementation of GCC-wide working permits would help you curb that trend and retain skills by providing better mobility and flexibility for workers. “At times you’ll have a boon in Saudi and a quiet time to Bahrain or Qatar. Moving to a regional work system would allow the skilled workers and labor to move freely between the GCC countries and thus maintain stability and create flexibility. The cycles in different countries don’t always happen at the same time.”(We have no dearth of skilled labors both within theJ&K State and from outside. Only the opportunity needs to be created.)

“The suggestion of implementing a GCC-wide working permit could be expected because otherwise, these projects will have constraints.”

Creating a legacy

In committing to a more sustainable workforce, Plumbridge believes we take a step closer to engendering a sense of legacy in the region. He calls for professionals in infrastructure to increase their levels of pride and job satisfaction, echoing the achievements from their home nations. “Your building is your legacy and the legacy of your company and of Shaikh Zayed and his vision, and thus we have to consider the quality of our work as the core in what we do and to have pride in every nut and bolt we put in place. Be prepared to put quality and safety first because that is what you do in your home town and it shouldn’t be any different here.”

Compiled by:

Er. Mohammad Ashraf Fazili FIE. (Retd. Chief Engineer)