The 16-month finance facility is part of the US$12bn Shah sour gas field development, a project which includes the construction of a four-lane dual carriageway connecting the Shah area to Liwa Road.

AJES was awarded the gas project by Abu Dhabi Gas Development Company, a subsidiary of Abu Dhabi National Oil Company.

Also as part of the project, 27 million cubic metres of cut, fill and leveling work will be done to prepare the site for process, production, sulphur recovery, utilities and off-site packages for the development.

Mohammed Al Jaber, Al Jaber Group chief executive officer, said the financing agreement will allow the group to “accelerate project development work on ground”.

Tirad Mahmoud, ADIB chief executive officer, said: “This is a large scale development that Al Jaber Group has undertaken to complete in a very short span of time. I congratulate them on their ambition and the capabilities they have demonstrated.”

Several challenges need addressing if global Islamic finance industry is to reach growth potential, experts says.

The global Islamic finance industry could potentially hit $2 trillion within the next three to five years, providing it overcomes various challenges, according to Rushdi Siddiqui, global head of Islamic finance at news organisation Thomson Reuters.

Though the industry’s value is already estimated at around $700bn, Siddiqui and other speakers at the MENASA Forum in Dubai highlighted a number of challenges it must address to achieve this potential.

Mutlaq H. Al-Morished, executive vice president of corporate finance at Saudi Basic Industries Corporation (SABIC), the world’s biggest chemicals maker and largest Sukuk issuer in Saudi Arabia, said Islamic finance had to be competitive as an alternative to traditional financial services and products.

“It’s a competitive business, and Islamic finance has to be compatible for the business environment…the Sharia compliance framework has to be practical,” he said.

Al Morished and Siddiqui both argued that Islamic finance must have the product suite to meet the end-to-end needs of customers, in order to capture more market share.

According to Siddiqui, there is a lack of connectivity within Islamic financial institutions, particularly between banks in different countries. “There is very little cross-pollination of ideas,” he said. “Where we are in Islamic finance today is where foreign exchange was in 1971. We are on that cusp – technology is the next stage.”

Another significant challenge referred to was the lack of standardisation among Shariah boards that govern Islamic financial institutions. With opinion on the subject divided, Al Morished called for organisations such as the Islamic Financial Services Board and the Accounting and Auditing Organisation for Islamic Financial Institutions to develop common Sharia standards.

The shortage of high quality Sharia scholars was a further challenge raised by Harris Irfan, head of Islamic products at Barclays Capital and Barclays Wealth. “Their quality is of great importance to banking and other financial institutions …and there are only a few of them, maybe 15 very well known international names.”

PRINCE CHARLES

Property developer claims the Prince of Wales convinced Qatari Emir to pull plug on illustrious UK housing project.

The Emir of Qatar was persuaded by British royal Prince Charles to block one of Britain’s most expensive housing projects, a property developer has claimed.

Christian Candy, who is suing his Qatari partners for $116 million dollars over breach of contract, told a UK High Court that Prince Charles had written a letter criticising plans for the Chelsea Barracks scheme in Central London.

Candy alleged the Emir pulled the plug on the development, designed by architect Richard Rogers, after speaking with Prince Charles in the UK, according to an AFP report.

It was claimed that Jeremy Titchen from development company Qatari Diar admitted to one of Candy’s colleagues that during his UK visit, the Emir was told how “awful the scheme was” by Prince Charles.

Candy said he learned of the Emir’s desire to withdraw the planning application for developing 650 modern flats during a meeting with a Qatari prince in March 2009.

When giving evidence, Candy claimed the application would have succeeded had Qatari Diar backed the bid. He also said Prince Charles’ intervention ruined any attempt to secure project approval.

The hearing continues.

Financial crisis forces major slowdown in UAE construction, with just 1,600 properties still under development, Proleads Global report reveals.

More than US$350bn worth of construction projects across 842 separate sites within the UAE are on hold, according to figures from locally-based research company Proleads Global.

However, 1,600 properties are still proceeding, with almost 1,300 at active building stage and around 300 at the planning and design phase.

According to Graham Wood, director of IIR Middle East, which organised the CityBuild Abu Dhabi exhibition: “The construction boom has slowed down in the UAE as it has elsewhere, but there is still projects worth over $560bn either in execution or about to start construction.”

Additionally, the rapid growth in new projects has now stalled, coupled with an increase in the number of new projects now reaching completion.

Measured expansion key to UAE capital’s redevelopment, says UPC’s Michael White.

A senior figure behind Abu Dhabi’s 2030 urban development plan has insisted measured growth will enable the emirate to withstand any market fluctuations.

Michael White, senior planning manager at the UAE Capital’s Urban Planning Council (UPC) said establishing a clear, manageable timetable was critical to the success of any large-scale redevelopment.

“What we do is to have measured and coordinated growth, so putting a framework in place helps the government understand where and when developments should be happening,” he told commerce-magazine.com at Cityscape Abu Dhabi.

“It [having no framework] actually does a disservice to the market and industry, which is completely unguided because there is no way to prevent the fluctuations that we have seen. In Abu Dhabi, it’s about more consistent planning and delivery of both residential and commercial property, and that’s helped by having the framework in place.”

Limited supply of commercial and residential space has helped protect Abu Dhabi’s property industry from the financial crisis.

In contrast, many analysts believe Dubai’s real estate sector has suffered far worse following years of rapid construction before the downturn. With supply outstripping demand, property firms are still struggling to fill vacant homes and offices across the emirate.

White said less demand leading to falling property prices had created “a lot of vacant units in Dubai”.

He added: “In Abu Dhabi, there hasn’t been the same flood of units on the market whether commercial or residential with a more consistent delivery. Also, you haven’t seen such a fluctuation in prices.”

While relatively resilient to the downturn, recent research claims rents in Abu Dhabi will drop 20 per cent as 15,000 new residential units come online this year.

“In Abu Dhabi, much of the new supply expected for delivery this year will rejuvenate a market that has a low average standard of quality for existing housing supply,” said Jesse Downs, director of research and advisory services at Landmark Advisory.

“About 5,000 of these residential units will be delivered in the Investments Zones, like Marina Square, and we expect most of the hand-overs to be concentrated in Q3 2010, which will result in a few key trends.”

A similar trend in Abu Dhabi’s commercial market is expected, according to White.

“You will find a lot of commercial space coming online in the next couple of years and that’s going to balance out [rents] for sure. If you drive around Abu Dhabi right now you see a lot of projects underway and that’s a lot of supply for residential and commercial.

“It follows the basic economic theory that as supply increases it negates the price and we are seeing that on residential. We will be seeing that on commercial.”

White was commenting at Cityscape Abu Dhabi, where UPC’s 23-metre by 17-metre scale model of the UAE capital’s 2030 urban landscape is one of the showpieces.

The huge display showcases several residential and commercial projects that UPC is overseeing for “one of the world’s most ambitious” urban developments.

Areas set for regeneration include Shahama, Mussafah and Al Falah on the mainland, and the Reem, Sowwah, Yas and Saadiyat islands.

The 2030 redevelopment will also cover the Corniche, Al Ain’s city centre and Liwa in Al Gharbia, which is earmarked for Dh98bn worth of investment. The remote area accounts for 40 per cent of Abu Dhabi’s gross domestic product.

On Sunday, UPC and Sorouh Real Estate signed a AED5.4bn agreement to build Watani, a residential development with 1,370 homes for Emiratis. The site will be located on the edge of the new Capital District, another project also being developed as part of UPC’s 2030 strategy.

The director of Booz & Company Ideation Centre, Hatem Samman, on making education a national obsession in the GCC.

If there is one thing that will determine nations’ economic competitiveness in the 21st century, it is their quality of education. In today’s global race for talent and innovation, it is not only important to provide education for all, but also to ensure that the quality of education is globally competitive. For emerging countries such as the GCC, which must leapfrog to higher educational standards in the decades ahead, quality of education must become a national obsession. By creating incentives in the education market and opening up the landscape to competing ideas in education, local governments can improve the GCC’s return on investment and engender fervor and excitement about the education system.

Encouraging innovation
For starters, inducing private-sector competition tends to make up for demand gaps in public education by increasing the quantity and quality of education providers. Indeed, competition will improve education quality, especially when aided with government regulation that promotes the entry of reputable institutions with a history of education excellence. The success of the few will encourage many more quality players to enter the education market. In an increasingly global world with more liberalised markets, international investors are bound to play a crucial role in shaping the GCC’s education system.

In India, Educomp Solutions Limited, one of the largest providers of technology education products and services for kindergarten up to 12th grade, helps millions of students domestically and internationally in countries including the US, Canada, South Africa, Australia, Malaysia and Vietnam.

Closer to home, the Lebanese Choueifat School – renowned for quality education – has helped improve the education of GCC pre-university students through its franchises in the region. More such schools are needed and more should be encouraged by providing more autonomy for schools, public-private partnerships and by facilitating investments in the GCC’s education system through the easing of rules and regulations for the provision of education in GCC countries.

The competition will help reduce government expenditure on education which, in the GCC, ranks among the world’s highest.

Kuwait’s public expenditure from primary to tertiary education reached close to US$47,000 per student in 2006, compared to US$27,000 for Finland in the same year and about US$8,000 for Korea in 2005. Oman’s and the UAE’s total public expenditure on education reached 31 per cent and 28 per cent of government expenditure in 2005 and 2006 respectively compared with 12.6 per cent for Finland in 2006 and 15.3 per cent in 2008 for Singapore – two of the leading countries in education.

Fuelling innovation
Furthermore, competition tends to breed innovation in educational methods in order for competing parties to survive and grow. This process will continue ad infinitum, spurring more innovative ways to improve the return on education. For example, competition has led education organisations in India to develop breakthrough innovations in education software and teaching strategies via information and communication technology. These have helped to reduce the overall cost of education and improve teacher salaries through economies of scale and provide education access to previously unreachable rural areas – all the while making good profit.

On the government side, market forces will generate results that will encourage governments to hand over poorly performing schools to the private sector in order to improve their returns on educational investments. It will also encourage governments to enter into public-private partnerships to increase the number of quality schools and reduce government expenditure.

Tackling education quality is never an easy task for any nation. But there are encouraging examples from around the world that give hope to the prospects of quality education in the GCC region. Some countries, such as India and Brazil, sought to introduce more incentives for the private sector; in other countries, such as Singapore, governments have taken the lead. What all winning countries have in common, however, is a national obsession with education.

Hatem Samman the director and lead economist of the Booz & Company Ideation Center, a Middle East business think tank with the mission to spearhead innovative research and idea generation on prominent socio-economic topics in the region.

Construction company Arabtec refuses to resume work on a residential property development until Nakheel pays its bills.

Bosses at Nakheel should check their mail or answer phone messages more regularly if they hope to avoid public spats with UAE construction companies.

The Dubai government-owned property developer stands accused of failing to pay Arabtec for work on one of the emirate’s largest housing projects.

Arabtec’s chairman Riad Kamal recently said that his company’s $816 million contract to build 1,500 of the 4,000 homes at the Al Furjan development in Dubai was suspended early this year over outstanding invoices. Clearly, attempts to secure payment by calling, emailing and sending letters to Nakheel have failed.

A frustrated Kamal said Arabtec had received no money since Dubai secured a $10 billion cash injection from Abu Dhabi last December.

Kamal isn’t the only one waiting for cash as Nakheel struggles to pay construction companies during the economic downturn. With no word from the developer, it’s unclear if or when these contractors will get paid. In the meantime, developments like Al Furjan remain unfinished and nowhere near completion. Imagine how the investors, who have snapped up 2,000 units between them, must feel. All they have to show for their money is a pile of bricks, or even worse a grossly expensive plot of sand. Neither represents good value for money.

Buyers caught in the middle of the Arabtec-Nakheel dispute must be praying for a quick resolution. Whether one materialises is anyone’s guess, but it seems fairly certain that Arabtec has no intention of getting back to work until all bills have been settled. For the investors’ sake, let’s hope that happens sooner rather than later.

Drop in construction costs prompts ADAC to revise its budget for a new Abu Dhabi airport terminal.

The Abu Dhabi Airports Company (ADAC) is reviewing the budget for the $6.8bn expansion of its Midfield Terminal to capitalise on reduced raw material prices and construction costs.

In an exclusive interview published in .Commerce in March, ADAC chairman HE Khalifa Mohamed Al Mazrouei, says project costs are being examined as part of an efficiency drive at the airport operator.

The Midfield Terminal, a huge development to open in 2015, could initially serve more than 20 million passengers a year, or roughly triple the capacity at the airport’s existing three terminals.

Al Mazrouei is hoping to strike a more favourable deal for ADAC, which involves negotiating with suppliers to reflect the reduced raw materials costs thanks to the downturn.

“There is a major review of the Midfield Terminal $6.8bn budget. With the current market prices I think we have an opportunity to reduce the capital budget, so I think it will be less than what it was, certainly,” he says.

“The review will consider the market conditions at the moment and the construction prices, which have gone down so I’m assuming we’ll benefit from the current stage of the economic cycle.”

ADAC recently invited contractors to bid for Midfield and is in the process of compiling a shortlist.

The new terminal has run into controversy after its opening date was pushed back a year. According to UAE daily The National, officials said plans were delayed due to the time needed to bring together all of the stakeholders, from immigration, customs, police and the transport departments, and because Etihad Airways’s new fleet orders meant changes to the design.

“The Midfield Terminal will be there to serve us in the next coming 30 years. This piece needs to be well developed on all aspects, be it operational, maintainability or just catering for the duty free and hotels,” says Al Mazrouei.

He adds a refurb at Abu Dhabi’s Terminal 1 has recently been completed, saving him 30% on running costs.

“Financial crises and slow-down periods are a part of the life-cycle of any business. It enables organisations, in general, to think more efficiently. Normally during an upturn or a boom period people tend to go after growth in an excessive way; slowdown periods give you a chance to shape-up and streamline business practices.”

Read the full interview with HE Khalifa Mohamed Al Mazrouei in the next edition of .Commerce, published March 1.