ECONOMY

Big construction opportunities in the Persian Gulf

Greek construction companies are returning to the countries of the Persian Gulf with the government’s encouragement, almost three decades after the disappointing end of their presence there. Despite the great number of entrepreneurs escorting Greek politicians on their visits to the Arab world, very few of them have actually set up shop there. The main target of construction companies is the United Arab Emirates (UAE), a country seeing construction soaring, as its authorities are trying to translate the cash flow from oil into the creation of a tourism and business center in the Middle East. In an interview with Kathimerini, Deputy Foreign Minister Evripidis Stylianidis recognized that the area is not free of risk, but «in this context Greeks have much better chances of succeeding, first, because they know the mentality of the Arab people, second, because they have traditionally had good relationships with them, and third because they have the flexibility, thanks to the structure of their enterprises, to handle problems and win over the market they address.» According to a report by Vassilis Skronias, the head of the Greek Embassy in the UAE, to the Foreign Ministry in Athens, there are today construction projects of $300 billion under way in seven emirates, while in the entire Gulf the projects under way total $1 trillion. Notably, 15 percent of all construction cranes working around the world today are operating in Dubai. Only a few Greek companies have remained in the Gulf, such as Archirodon and J&P, following the liquidation of the Greek giants of the 1970s (EDOK-ETER and Skapaneas), but other local construction companies are absent from the region. Aktor has offices in Oman and has recently attempted to win some contracts in UAE, while others, such as Athena, are implementing certain contracts. Very few Greek constructors have set up subsidiaries there, despite the positive response Greek companies receive in the region. The incentives that authorities in the UAE provide for the entry of foreign companies are considered particularly attractive, although their legislation includes a provision that multinational groups do not like. Nikos Stratigeas, head of the Anaplasi technical company which a few days ago founded a subsidiary in the UAE, explains that foreign companies are obliged to have a local partner (sponsor). The sponsor controls 51 percent of the joint venture regardless of the amount of money it contributes to share capital. Any UAE resident can sponsor up to four foreign groups. The local partner of Anaplasi, based in the Ras Al Khaiman emirate, is Sheikh Talib bin Saqr Al Quassimi. Sponsors get a predetermined commission, depending on the contracts their partner company signs. Generally, however, foreign companies located in the UAE are not required to pay any taxes, except for banks and oil companies. They also have the right to the free repatriation of invested capital and profits. UAE authorities are asking Greece for an agreement to waive double taxation, which they believe will clear the way for the realization of Arab investments in Greece and vice versa. A key detail for local construction firms is that most buildings in the UAE have an expiration date. «After 30 years, they are demolished and new buildings are built in their place,» notes an architect with local knowledge. Nevertheless, foreigners who buy holiday homes in the area sign contracts lasting 49 years. Holiday homes are possibly the most important construction sector in the UAE today. Island shopping New island complexes have been created by embanking huge spaces in the sea, which are later on sold on to foreigners. For instance, Jumeira Palm, a complex that looks like a palm tree from above, will have 40 hotels and 3,000 villas. With a $5 billion budget, it will be delivered by year’s end. The same group constructing Jumeira Palm is also creating an island complex named «The World.» This consists of 200 islands that comprise a world map and are situated 5 kilometers off the coast of Dubai. The project covers an area of 60,000 square meters, has a budget of $5.5 billion and will be delivered in 2008. Access is possible only by helicopter or boat and buyers should know that every island costs $7 million. Over a billion dollars is being invested in the erection of the Burj Dubai Tower, the highest building in the world, which is to include hundreds of apartments for very rich buyers. Apart from this tourism infrastructure, there are also dozens of other projects (airports, metro systems, and exhibition and conference centers) under way.