`A CASE STUDY OF THE DUBAI CONSTRUCTION SECTOR

A Case Study of the Dubai Construction Sector

A Case Study of the Dubai Construction Sector

Introduction

With the imminent exodus of more than 300,000 illegal workers from the construction sites, a subsequent delay as well as an escalation of project costs is also feared by some industry players. The illegal workers, who constitute 20 per cent of the 1.5 million construction industry workforce, have been given a three-month reprieve to legalise their status or leave the country without penalty. "The move, aimed at regularising and streamlining the expat labour sector —while surely benefiting a significant number of workers who arrived on visit visas but eventually stayed in the country illegally, as well as those who could not afford to pay the fines or penalties for overstaying or those absconding from their employers — will severely hit several construction companies and sub contractors who have been heavily dependant on lower-priced illegal labour force," said an industry source. Wages of illegal labour force, often referred to as "khallivallis," range from Dh5 to Dh7 per hour for helpers and Dh8 to Dh9.5 for skilled workers, while those with legal status get between Dh10 and Dh13 per hour. The shortage, although expected to be temporary — as the industry expects the concerned government departments to be lenient with the issue of new visas to facilitate redeployment of the required workers from overseas — will certainly have its short-term impact on the construction sector, particularly for those projects which are depending on subcontractors and labour supply companies, most of which currently outsource readily available illegal workers, sources said. (David , 2008)

The UAE currently has the most high-rise construction in the world with 329 buildings under construction and at least 10 supertall skyscrapers being built and what is billed as world's tallest — Burj Dubai. Dubai currently has the most buildings under construction that will be over 150 metres than anywhere in the world, with over 60.

Work on some of these mega projects, which are already running behind schedule and exceeding initial cost estimates due to a price surge for  building materials, will now face further delay as the sharp drop of 20 per cent labour force will take at least several months to be rectified. "Besides, the labour cost, which normally accounts for 20 per cent to 24 per cent of the total spending on a project, will now escalate by at least 20-30 per cent as a result of the acute shortage of labourers in the coming months," he said. (David , 2008)

On the back of the unprecedented building boom, the UAE Contractors' Association, the professional body for the Emirates' building and engineering sectors, has doubled its membership to 700 companies in just three years.

The boom was also sustained by the introduction of freehold property ownership by non-UAE and non-GCC residents has helped the industry grow. With some of the most innovative projects under way, analysts and top executives associated with mega development projects in the UAE expect the construction ...