United Arab Emirates Infrastructure Report Q1 2008

As it transforms from a buyers' market to a sellers' market, the UAE construction industry is witnessing a construction boom with Dubai and Abu Dhabi at the heart of this impressive expansion. Home to nearly 6,000 construction companies, the UAE figures at the top, globally, in terms of per-capita expenditure on construction. According to this report the UAE construction industry is forecast to be valued at US$15.26bn in 2008 and grow to US$22.44bn by 2012.

The UAE construction industry is relatively free of entry barriers. In fact, the liberal business environment, tax-free status and political stability of Dubai have been major drivers for the industry to expand. Growing demand from the tourism and housing sectors, as well as promising growth of the economy in general, is providing the momentum for the construction industry. Ambitious projects such as the US$20bn Burj Dubai tower, the US$8.3bn Al-Salam city and the US$4.22bn Dubai Metro have been instrumental in attracting greater capital flows in the form of international joint ventures, especially with British companies for other such projects.

The construction industry of the UAE comprises many illegal workers. The recent government efforts to legalise their status have witnessed a mass exodus of these workers from the country, leading to a labour shortage. Consequently, the construction industry is set to experience escalation in project costs as well as delays. Further, the local building materials sector has been unable to keep pace with the surge in demand for construction material As a result, as much as 80% of construction materials and equipment are imported into UAE, increasing the overall production costs.

Backed by robust demand, especially from the housing and tourism sectors BMI forecasts the UAE construction industry to grow at an average of 5.06% during 2008-2012 and contribute nearly 9% to the nation's gross domestic product (GDP) by 2012.