Global project opportunities

New technological breakthroughs will dramatically alter construction

Researchers in New South Wales, Australia have found that the new roofing system can ensure indoor temperatures of 25⁰ C even during winter. The material that they are using has ‘built in’ photovoltaic cells that are capable of producing electricity that can be sold locally, in addition to providing warm air inside the building.

The material has the potential to reduce energy use, since in countries with similar climates buildings are responsible for about 40% of total energy consumption.

At the University of Illinois, another research team has created a SMA using a ‘smart’ nickel-titanium-niobium alloy that ‘remembers’ its original shape and returns to it when heated. They are testing its use in repairing damaged concrete columns of a bridge.

The process, which is to be tried out on a few bridges in the state soon, is simple and fairly fast, and may even make the repaired column stronger than it originally was! Loose concrete is removed and replaced with quick setting mortar. A spiral wire made from the alloy is stretched and wrapped around the column. After treatment with a blow torch, it contracts to its original length, forming an extremely tight bond around the repaired column!

If successful in actual conditions, what once took from a few days to a few weeks and required highly skilled labour will now be completed in hours.

Iraq moves to improve rail network

The government wants to regain the country’s position as the region’s premier railway system and plans to upgrade existing lines, construct new track and find funding for its schemes

With a pedigree spanning almost 100 years, Iraq’s rail system can stake a legitimate claim to being the oldest national network in the Middle East.

Although the 2,000 kilometres of functioning track is small when compared to the country’s size, and frequency is low at just four to six trains a day on most routes, rail is nonetheless an integral component of Iraq’s transport system. Trains will play a pivotal role in connecting the country in the future.

It took just a couple of weeks after the US-led invasion of Iraq in March 2003 before trains were back up and running on the Basra-Baghdad route, proving the durability of a network that has been hampered by maintenance problems stretching back many years.

The system did not emerge unscathed from the turmoil in the country. At the end of major combat activities in 2003, looters damaged state railways firm Iraq Republic Railways’ (IRR’s) train control dispatch centre in Kirkuk.

However, an attitude of make-do-and-mend – an approach used by Iraq’s oil industry over years of war and sanctions – has been applied to the country’s railways with some success.    

Large segments of the country’s railway track are outdated and have defective signalling systems. Nonetheless, the main lines – including Baghdad-Basra, Baghdad-Mosul-Rabia, Bagdhad-Ramadi-Al-Qaim and Kirkuk-Baiji-Haditha – are all functioning.

IRR is now looking to double the single-track Baghdad-Basra and Baghdad-Mosul lines and has also secured a budget to focus on essential maintenance and ensure that current connections run smoothly.

“We are upgrading existing lines to double-track and are spending about $200m a year on track reconstruction and upgrading,” says IRR director Helal al-Quraishi. “As far as rolling stock goes, we are spending about $20m annually to rehabilitate and maintain this.”

About 100 passenger carriages are out of service and in need of repair, while only one in five of the country’s 5,000 cargo wagons are currently operating.  

There has been significant progress made in rehabilitating the system in the years since former president Saddam Hussein was overthrown. In 2009, the first rail cargo was moved from Camp Taji to the port of Umm Qasr. More recently, in mid-July 2012, Iraq took a giant technological leap forward with IRR’s introduction of computer-based train control and digital microwave radio communications networks. The new radio network for voice and data communications comprises 33 microwave transmission towers installed between Umm Qasr in the south and Rabia on the Syrian border.

Large-scale rail plans

The increasing political stability since 2007 has allowed Iraqi transport chiefs to start thinking on a larger scale. “In the period up to 2035, we want to transfer about 300 million tonnes of  freight transport to rail, with about 60 per cent of this coming through Iraq via GCC and Asian countries and onwards to Europe,” says Al-Quraishi. “We want to increase seating capacity to about 20 million a year.”

We are now upgrading existing lines to double-track and are spending about $200m a year on track reconstruction

Helal al-Quraishi, Iraq Republic Railways

The ultimate aim is to increase the length of the rail network five-fold to 10,000km. The government wants to regain Iraq’s position as the region’s premier rail network. In February 2012, Transport Minister Hadi al-Amri announced plans for the construction of more than 1,200km of new line, involving double tracks that allow speeds of 250km an hour (km/h).

“For the new fast lines, we plan a big project to implement a north-south railway route on the east of Iraq, starting from Faw and going through Basra, Amara, Kut, Baghdad, Baquba, Kirkuk, Erbil, Mosul and Zakho, and then connecting with the Turkish railway to pass through Turkey to Europe,” says Al-Quraishi.

In 2011, French government officials touted plans to assist in the creation of a high-speed rail line linking Basra and Baghdad, a line stretching 650km, with France’s Alstom chosen to play a key role in the $10bn scheme. The cities of Mussayeb, Karbala, Najaf, Samawa and Nasiriya will eventually link with Umm Qasr port. Alstom signed a memorandum of understanding on the project in June 2011, with the objective of signing a turnkey contract.

A separate western axis would link Basra, Nassiriya, Samawa, Najaf, Karbala and Mussaib with Baghdad. This line will focus on passenger traffic.    

In the meantime, rehabilitation of existing rail lines will be a priority for IRR. “We are now involved in a project for the rehabilitation and transformation of the link between Baghdad and Basra and Baghdad-Mosul to double-track, with speeds of 120km/h,” says Al-Quraishi.

The new north-south routes will cover 1,200km and cost $20bn to develop, says
Al-Quraishi. IRR is trying to finance this project under deferred payment terms, meaning the main contractor would only be paid four or five years after completion of the rail links, which would be 2020 at the earliest. The developers will be paid after the assets are operational, either as a single payment or in installments.

Raising finance is the biggest challenge facing Iraq’s rail strategy. According to a senior Gulf-based lawyer specialising in rail projects, the Iraqi schemes could struggle to secure significant interest from financiers given the current economic climate.

“In Iraq, the sovereign risk is a different proposition from other Middle Eastern countries,” he says. “For a big capital requirement such as this, it would be difficult to see banks responding right now. The main issue is whether anyone is prepared to take a risk on Iraq’s government for 10-15 years. I don’t think there are enough [lenders] out there who are.”

The Transport Ministry has talked of wanting to interest private investors in its rail projects, but public-private partnerships (PPPs) are in their infancy in the region’s infrastructure sector and the sovereign risk issue is likely to prove a challenge in the country. Nonetheless, Al-Quraishi says he has encountered interest from firms based in Brazil, China and Turkey for the financing of the rail schemes.  

The large cross-country rail projects envisaged by IRR are not the only rail schemes under way in Iraq. Urban transport development is also making headway, with two separate projects planned for Baghdad and monorail systems for Najaf and Karbala.

In January 2011, Alstom signed an agreement with Baghdad Municipality to discuss a project to build an elevated rail system in the capital, costing an estimated $600m. The scheme involves building a line running for 25km on a viaduct, which is aimed at reducing traffic congestion.

France’s government has committed to finance 50-60 per cent of the total project cost, with the remainder funded through a low-interest loan from a French state-run bank, which will be repaid over 20 years. 

The first line of the monorail will start from Mustansiriya and run to the central station in Alawi al-Hilla in central Baghdad via Waziriya, Shaab, the Al-Sarafiya bridge, Buratha mosque, Abdulmohsin al-Kazimi Square, Eden Square and Muthanna airport. The second line will run from Baya to the Dora highway and Oqba Square, and will end at the Masbah metro station. The line will take about two years to build.

French company Systra is undertaking the preliminary engineering design for the $3bn Baghdad metro project, which will involve two lines – the first measuring about 22km and a second about 18km. Both lines will have passenger stations located every 1km. Bids for engineering, procurement and construction deals are expected in early 2013. Unlike with its other rail schemes, Baghdad Municipality intends to fund the scheme from its balance sheet. 

There is some confusion over the planned monorails at Najaf and Karbala. In the former city, Canada’s Transglobim International won a contract in 2010 to build a 37km monorail system to link the three holy Shiite mosques of Imam Ali, Kufa and Sahla. However, Iraqi officials have said that the project has been halted due to unspecified financial issues. 

Faster progress is expected on the Karbala monorail, which will link the holy shrines in that city with the Hussein bridge. The monorail will be 18km long and will connect 20 stations. It will be able to transport 5,000 people an hour in each direction when complete.

Iraq’s National Investment Commission (NIC), which has received three bids to build the Karbala monorail, has been seeking a private finance option, but so far, interest has been scant. A project source says that the NIC may have to obtain assistance from the state or some form of multilateral funding for the scheme.

The latter projects are important for the southern cities’ religious tourism market, but the main priority in Iraq is to reinvigorate the national rail system.

With rail transport estimated at just one-eighth of the overall cost of truck haulage, there is logic behind spending massively on rail. The challenge for Al-Quraishi and his team is to discover the financing structures that will find favour with international partners, who understandably still view Iraq largely with a mixture of trepidation and anticipation.

Iraq’s transport officials clearly view the country’s rail network as an integral part of a wider trans-regional nexus that will connect Europe and Asia. In the interim, small steps are being made to link it with neighbouring railway systems. Earlier this year, the first train left Mosul to the Turkish city of Gaziantep, highlighting the potential of extending rail beyond Iraq’s borders.

Building up cross-border rail links is a clear aim of government policy. Plans include linking Iran and Syria, building on existing links with the Syrian city of Deir el-Zour, and links with Iran.

Iraq Republic Railways (IRR) signed an agreement in March 2012 with Syrian Railways to build the remaining line needed to reach the Iraq border at Al-Qaim. According to IRR director Helal al-Quraishi, there will be two connections to Iran – one through Basra and on to Kermanshah, and another between Baghdad and Tehran.

“Through Syria we have an existing connection between Mosul and Rabia Qamishli,” says Al-Quraishi. “We have another connection between Al-Qaim and Deir el-Zour. There is a stretch of about 120 kilometres inside Syria near the Iraqi border at Al-Qaim that is being built and that we can eventually connect to.”

Iraqi officials have also discussed building a 1,120km rail link to the Jordanian port of Aqaba, as well as extending connections to Kuwait and other Gulf states. 

Industrial production grew 8.9% in August from a year earlier, the weakest pace since May 2009

With more than 100 very tall cranes on the skyline, this large metropolis in Sichuan Province looks vibrant at first glance, despite China’s sharp economic slowdown.

But only a few cranes — those that are building projects backed by the national government, including a high-speed rail line — are floodlighted and busy far into the night. Far more numerous are the cranes above skeletons of high-rise buildings; they move less often by day, and are dark and deserted by night.

The pattern among the cranes of Chengdu’s construction sites is evident across China. As summer fades into autumn, Beijing is stepping up investment in a bid to rescue the economy, but consumers, businesses and debt-burdened local governments across the country are showing little interest in spending.

A welter of economic data released Sunday by the National Bureau of Statistics showed the extent of the problems. Investment in new buildings and other fixed assets is in the doldrums. Manufacturers are retreating from ambitious production targets as they struggle with bloated inventories of unsold goods. Even the service sector, still underdeveloped and widely seen by economists as full of potential, is showing signs of distress.

“Business is slow these days — just look around this shopping center, there are so few people walking around,” Zhong Yongping, a beautician in central Chengdu, said Thursday as she woke from an afternoon nap taken while waiting for a customer to show up.

Industrial production grew 8.9 per cent in August from a year earlier. That was even slower than economists had expected and was the weakest pace since May 2009, when the global economic downturn was in full swing.

But the real problem, as signaled by the slow-moving cranes at high-rise buildings in Chengdu, lies in fixed-asset investment, previously the mainstay of the Chinese economy.

“Construction is slowing down,” said Zhao Chenzhen, a young electrical worker, as he and others in hard hats left a darkened high-rise construction site in Chengdu early Friday evening.

President Hu Jintao said in a speech on Saturday at the Asia-Pacific Economic Cooperation forum in Vladivostok, Russia, that the Chinese economy suffered from a “lack of balance, coordination and sustainability.” He strongly hinted at further economic stimulus, saying, “We will boost domestic demand and maintain steady and robust growth as well as basic price stability.”

Bankers and executives say that, across China, builders and real estate developers have decelerated construction to the slowest, most cash-conserving pace possible without setting off default clauses on their loans by stopping work entirely and sending away the cranes. That slow pace, done in single shifts instead of three shifts around the clock as in the past, also showed up in national data on Sunday.

Fixed-asset investment grew 20.2 per cent in the first eight months of this year, compared with the same period last year. It was the second-lowest pace since December 2002 — only May 2012 was lower, and marginally so.

While even 20.2 per cent might sound high by international standards, it overstates actual growth by including the replacement of existing factory equipment and buildings that may have worn out, in addition to new investment. The monthly data also include extensive double-counting, which Chinese statisticians eliminate only in more comprehensive annual data.

The August figure for investment growth was weaker than expected even though the central government agencies in Beijing have started spending more money again. Their investment spending rose last month from year-ago levels for the first time in 15 months, the details of official data from Sunday showed, as Beijing started trying to revive the economy.

Central government investment spending had fallen late last year and early this year as the economic stimulus put in place in 2009 wound down. It is the rest of investment spending that has been weak this summer and that remained so in August. Local government investment spending, for example, grew last month at the slowest pace since December 2001 — and local government investment spending in China is 18 times as large as central government investment spending.

Chinese cities borrowed and spent huge sums over the past few years and now find themselves financially stretched. To make matters more difficult, the real estate slowdown has hurt sales of government-owned land, a crucial source of their revenue, as falling prices have made developers reluctant to buy more land and build more buildings.

He Yong, a saleswoman at a luxurious apartment complex slowly being built in Chengdu, sat alone this week in a spacious sales office empty of customers. The apartments sell for $120 to $165 per square foot, or $1,292 to $1,776 per square meter, He said, but she quickly volunteered that “We are now offering a 10 per cent discount, and if you would like further special discounts, you can contact our sales manager.”

Li Hongzhi, a Chengdu real estate broker, said prices had dropped 5 per cent from a year ago. But the number of apartments changing hands has fallen much more steeply, often a sign that sellers are wary of accepting even lower offers from buyers.

Li said the number of completed transactions in the city for already completed apartments had slumped 30 per cent in July compared with the previous month, after the national and local government tightened restrictions on real estate speculation in a bid to improve the affordability of housing.

Anecdotal evidence from brokers is often the best guide to real estate prices in China, where the government releases very little data on transactions.

The national government’s own index of real estate prices attracts skepticism from analysts. Beijing statisticians allow local governments to measure prices based on a few old neighborhoods in each city where few transactions take place, so the national index shows fairly stable prices year after year in a wildly gyrating market.

Private surveys of real estate developers tend to reflect price increases accurately during good times, but few developers have been willing to admit their heavy discounting in the past year. Other economic statistics released Sunday also did not paint a very cheerful picture. Retail sales were up 13.2 per cent in August from a year earlier, maintaining the slower pace they have shown through the summer.

Producer prices plunged 3.5 per cent in August from a year earlier, an even faster decline than expected, as companies accepted ever-lower prices for their goods in the hope of clearing overstuffed warehouses.

Producer prices plunged 3.5 per cent in August from a year earlier, an even faster decline than expected, as companies accepted ever-lower prices for their goods in the hope of clearing overstuffed warehouses.

Yet for consumers, inflation actually picked up slightly in August, creeping up to 2 per cent from 1.8 per cent in July, as food prices kept rising. Inflation makes it harder for the government to stimulate the economy without risking a further increase in prices.

Even before the release of the numbers Sunday, some economists were marking down their forecasts for Chinese growth this year and next. Tao Wang, a China economist at UBS, did so on Friday, lowering her forecasts for the third quarter of this year to 7.3 per cent and for the fourth quarter to 7 per cent — both figures below the government’s target of 7.5 per cent for this year.

Tao also cut her forecast for next year to 7.8 per cent, from 8.3 per cent.

In addition to weak domestic demand for new apartments and big-ticket purchases like cars, the Chinese economy has suffered from slumping demand for its exports from other markets, particularly Europe. That has contributed to a large buildup in inventories of unsold goods, particularly at manufacturers.

Beijing officials are starting to send signals that they plan to help exporters unload their inventories overseas. They have allowed the renminbi to edge down 1 per cent since the end of April against the dollar, the main currency in which China conducts its trade, although the renminbi has appreciated 3.5 per cent against the euro since then.

Prime Minister Wen Jiabao said after a tour of export zones in southern China last month that measures should be taken by the end of September to help exports. Citing unidentified sources at the Commerce Ministry, the semiofficial China Daily newspaper reported over the weekend a package of initiatives would be launched in mid-September, including tax rebates, insurance, loans and other measures.

For now, demand is weak across the Chinese economy. “I would say my business is down 15 per cent this year,” said Zhong, the beautician. “Customers are tightening their belts and spending less; they are choosing fewer and cheaper treatments.”

Hilda Wang contributed reporting.

Construction rises 11% in Q1

Dilasha Seth / New Delhi Sep 10, 2012

Despite high interest rates and land acquisition woes, construction activities in the quarter ended June grew at a 19-quarter high of 10.9 per cent, against 3.5 per cent in the year-ago period.

Players and analysts attributed the rise in construction to execution of road projects awarded by the National Highways Authority of India (NHAI) last year. Analysts said real estate developers focused on completing existing projects; they did not line up for new ones.

A low base effect was also cited as one of the reasons for the growth in construction.

Analysts said any positive effect of the delayed monsoon this year on construction activities would not be seen before the next quarter.

Growth in construction, along with that in financial services, helped raise growth in gross domestic product (GDP) to 5.5 per cent for the quarter ended June, against market expectations of sub-5.3 per cent growth (growth in the quarter ended March was 5.3 per cent). With the services sector slowing below estimates, and low activity in the manufacturing segment, it was construction that raised GDP growth to levels more than expected.

In 2011-12, NHAI awarded a record number of contracts, construction for which began this year, analysts said. In 2011-12, NHAI awarded 7,957 km of road projects, the highest ever. Of the 51 projects awarded by NHAI, 31 were at a premium. “Since we saw a huge number of project sanctions last year, those would have gone into construction this year, boosting overall construction activity in the country, as there is a lag effect between the sanctioning and actual construction,” said Vishwas Udgirkar, senior director, Deloitte.

The nine per cent increase in government expenditure in the quarter ended June, against about four per cent in the year-ago period, also aided the rise, said Madan Sabnavis, chief economist, CARE Ratings. “The majority of the government’s expenditure goes into infrastructure projects,” he added.

In the first four months of 2012-13, NHAI could only award contracts for constructing 4.25 km of roads a day, lower than the government’s target of 20 km a day.

In recent months, NHAI failed to receive any bid for six projects. In the last financial year, it saw huge demand for its projects. Analysts said unlike this year, NHAI had lucrative projects on offer last year, and these promised good returns.

The real estate sector may have seen some improvement in construction, as developers were now concentrating primarily on execution, rather than new project launches, analysts said.

However, it was a mixed bag for construction companies. “The 14 construction companies covered by us recorded an average of 18 per cent revenue growth in the first quarter, against 14 per cent last year,” said Nitin Arora, infrastructure analyst, Angel Broking. However, he added the growth rally was primarily led by only a few companies—-IL&FS, IRB and L&T—-which performed better than expected.d.

The high interest rates have had a bearing on construction activity. “Raising funds for projects is another hurdle, especially for road projects at the moment,” he said, adding construction companies had piled huge debts.

The housing, retail, healthcare, roads, power and transportation segments were expected to record 10-15 per cent growth in the first half of the financial year, said V Suresh, chief executive, Hirco.

Cement output in the quarter ended June rose 9.9 per cent, against just 0.1 per cent in the corresponding quarter last year.

DLF, India’s largest real estate firm by market capitalisation, delivered 2.05 million sq ft during the quarter, against 1.9 million sq ft in the corresponding period last year. “Yes, overall construction activity has surely picked up in the realty sector compared to last year,” said Mudassir Zaidi, regional director, Knight Frank.

Unitech Managing Director Ajay Chandra said the company’s focus continued to be on ramping up construction. For this, Unitech was taking several measures, he added.

The Noida Extension region (where projects were stuck for the past one year) secured the clearance to continue construction activity and developers are expected to begin work on stalled projects in about a week. “This year will be great for construction, as the Noida Extension area will see a lot of activity,” said R K Arora, whose four projects in the region were stalled due to the Supreme Court’s order that the masterplan for the area be cleared by the National Capital Region Planning Board.

Sanjay Sharma, managing director, Qubrex, however, said the pick-up in construction wasn’t dramatic enough to account for the 10.9 per cent growth. “I would say it is more of a low base effect,” he said.

Kuwait construction sector up in 2012

19 September 2012| By Andrew Roscoe

The value of construction and infrastructure contracts awarded in Kuwait for the first half of 2012 was up 20.8 per cent on the same period in 2011, as a number of large construction deals for healthcare and education projects were awarded.

In the first six months of 2012, $2.9bn-worth of construction and infrastructure contracts were awarded, compared with $2.3bn in the same period in 2011. The growth of the country’s construction sector has continued into the third quarter, with $3.1bn-worth of contracts awarded by 19 September 2012. This is almost 10 per cent higher than the $2.8bn-worth of deals awarded for the first three quarters in 2011.

The highest value contract award in 2012 to date was the $616m deal awarded to the local Alghanim International General Trading & Contracting to build the Kuwait Cancer Centre in the Sabah area of the country. The award of three other contracts for healthcare projects resulted in $1.2bn-worth of construction deals for medical projects being awarded this year.

The second largest medical award was the $430m contract awarded to the local Associated Construction Company (Asco) to build the expansion for the Al-Amiri hospital. Hospital projects will play a major role in Kuwait’s construction sector in the coming years at it seeks to cope with its rapidly growing population. In July, Kuwait’s Public Works Ministry invited contractors to submit bids for the contracts to build three new hospitals worth an estimated total of $1.5bn.

Kuwait University has emerged as one of Kuwait’s key construction clients in the past two years. It has maintained this position in 2012 with contract awards on five projects worth a total of $733m to date. The largest contract award in 2012 was the estimated $350m deal awarded to the local Copri Construction Enterprises for infrastructure packages A5 and B5 on the new multibillion-dollar campus at Shadadiyah, located 20 kilometres west of Kuwait City.

One of the largest contract awards of the year was the $312m deal awarded to the joint venture of the local First Kuwaiti Trading Company and Saudi Arabia’s Almabani General Contractors to build a new runway and related infrastructure at Kuwait International airport. The airport expansion scheme is set to provide some lucrative opportunities for the construction sector in the coming years, with an estimated $747m new terminal building also planned at the airport.

In addition to the airport project, Kuwait is moving forward with several major transport schemes. Companies are currently working on proposals for the transaction advisory contract on the planned $7bn Kuwait metro project. In June, the Public Works Ministry prequalified international companies to bid for upcoming major road projects.  

The housing sector is one component of Kuwait’s construction sector, which has fallen in 2012. The Public Authority of Housing and Welfare (PAHW) was the second biggest construction client in 2011, awarding an estimated $1.1bn-worth of deals. In 2012, the body has not awarded any contracts of significant value and has re-tendered some public buildings contracts.