Abu Dhabi forms infrastructure committee amid industry concerns over Covid-19

16 April 2020 (Last Updated April 23rd, 2020 11:16)
Abu Dhabi forms infrastructure committee amid industry concerns over Covid-19

The Abu Dhabi Executive Committee has issued a resolution forming an infrastructure committee that will help accelerate projects and provide the private sector with more certainty and transparency about the procurement of major infrastructure projects in Abu Dhabi. The formation of the committee is not in response to the Covid-19 pandemic but comes at an opportune time when there is mounting industry concern about the future of the construction sector in the emirate.

The committee, which will be chaired by the Department of Municipalities and Transport (DMT), will be the authorised body to modify applications and look into merger of approved capital projects before revealing associated bids. It will also be responsible for issuing direct orders and assessing bids and additional works in the contracts of capital projects. For public and private partnerships (PPPs)-related projects, the committee is to guarantee adherence to the general policies and comprehensive strategic plans approved by the executive council, and appraise them on a periodic basis, providing they fall under the financial limit of the committee. This comes when, earlier in the year, Abu Dhabi revealed its plans to procure infrastructure schemes worth AED10bn ($2.7bn) under the PPP model as part of the Ghadan 21 initiative. Abu Dhabi’s push for PPPs follows the issuance of a law in 2019 by UAE President and Abu Dhabi Ruler Sheikh Khalifa bin Zayed al-Nahyan to regulate PPPs in the capital city.

The formation of the body comes at a critical time, with Covid-19 disrupting economic activity and raising concerns among contractors about the future of the sector, particular over potential liquidity shortages that could prevent the completion of projects. Abu Dhabi’s hospitality sector in particular, which has been a hub for hosting various types of events in 2019, attracting tourists and boosting the sector in the city, will mostly face the brunt of the contagion. The demand for hospitality sector in Abu Dhabi is expected to be severely impacted as major events, such as the F1 Grand Prix, and festivals scheduled for the year 2020 will be cancelled, which will affect the commercial sector in the city and potential derail future investment plans. Earlier in April, the UAE cabinet announced additional measures, notably improving payment terms for contractors involved in government contracts, as well as exempting companies from any fines that accrue from any delays caused by the Covid-19 disruption. For payments, the cabinet instructed federal ministries and bodies to pay contractors and suppliers within 15 days; while for contract delays, suppliers impacted by the Covid-19 crisis are exempted from fines for delays on federal government contracts for a renewable period of three months. The cabinet also directed that small and medium suppliers will be awarded 90% of federal government purchases.

The total value of all projects from announced to execution tracked by GlobalData in Abu Dhabi stands at $495.4bn. Commercial and leisure and energy and utilities projects constitute the highest share of the total pipeline, accounting for 33.6% and 34.7% respectively of the total value. Commercial and leisure projects currently in execution stage stand at $142.2bn (37.6% of the total pipeline) and of which the leisure and hospitality sector accounts for 24.4% of the total pipeline in execution stage. The leisure and hospitality projects already under execution are at risk of facing delays amid the spread of the outbreak in the Emirate.

Abu Dhabi infrastructure committee