What does Dubai 2020 mean for Qatar 2022?
With Dubai winning the bid for Expo 2020, the Gulf region is set to host another major event alongside the 2022 World Cup. This may mean sharing available resources at higher costs for Qatar, which according to EC Harris’ estimates already stands among the most expensive countries for construction.
Speaking with The Edge about the construction cost escalation, Nick Smith, EC Harris partner and head of cost and commercial for Middle East, said, “Dubai winning Expo 2020 has provided confidence to an improving United Arab Emirates (UAE) market and this may have an effect on prices in the region although we do not see this as major. From a specific Qatar point of view, we do not believe this will have a significant impact on material prices.”
Challenge 1: Attracting new workers at higher costs
While seeing no considerable impact on material costs, Smith acknowledges that Dubai Expo 2020 should intensify the struggle for human resources. “Competition for labour is going to be a major issue, not just between Dubai and Qatar, but across the whole Gulf region, as well as for Asian workers seeing strong construction activity in their home markets,” he said.
Aziz Sharif, partner Mannzili, web portal for Qatar’s properties, shared a similar sentiment, “With Dubai winning the Expo 2020, the competition for labour will also be a driver for increasing cost.”
Acknowledging the downside, Neil Hamilton, director of Qauntex Qatar, added that the occurrence of two major events in the region can lead to “a shortage of managerial and supervisory staff, and this could obviously have a direct upward pressure on the prices of all construction-related resources across the Gulf region, not just Qatar and the UAE.”
Challenge 2: Retaining the existing workforce
With ensuring the influx of new workers to meet the country’s increasing requirements, another challenge facing Qatar is the retention of existing employees amid rising rental inflation. While the UAE has also witnessed rental appreciation in the last few years, according to Sharif, it has grown at a faster pace in Qatar compared to salaries which have not risen proportionately. “The UAE has dropped its rental cap and rents are increasing in excess of 20 percent and the stated inflation rate is hovering around six to eight percent,” said Sharif, adding that, “Qatar is slowly following suit with the 20 percent plus rental appreciation. Salary increments have not risen for most past two to five percent. This discrepancy is in effect, a loss of earns annually.”
Opportunity 1: Healthy competition in the Gulf
Having two large-scale events in the Gulf around a similar time has the potential to increase prices, but this need also heralds a struggle for resources and growing opportunities for construction companies. Looking at both sides of the issue, Hamilton said, “Having another major event in a neighbouring country during a similar timescale could have a positive impact on contractors’ tender prices, availability of materials and skilled labour.”
“Competition for labour is going to be a major issue, not just between Dubai and Qatar, but across the whole Gulf region.” – Nick Smith, EC Harris.
Of late, Qatar has attracted international media attention on the mistreatment of migrant workers. Arguably, the country’s negative publicity can place Qatar at a less preferred position for expatriates. Highlighting this point, Smith said, “Labourers will be attracted to countries through a range of factors, including improved accommodation and welfare standards, health and safety, food security and prices.” The logic can potentially catalyse government’s initiatives to ameliorate working conditions for expatriates in Qatar. Addressing this point, Hamilton said, “Both Dubai and Qatar labour markets have similar dynamics, and the planned and ongoing measures to improve the quality of migrant labour welfare in Qatar will put both countries on a similar footing, as the basic wages being paid to workers are broadly comparable.”
Opportunity 2: Cost reduction
While experts have consensus that labour shortage will be a primary driver of increasing costs, Hamilton speculates that by changing designs to incorporate more off-site prefabrication systems and techniques could be used to outsource manufactured components to countries with lower cost bases. “This, in turn, could help to reduce the demand for on-site manpower requirements and overheads, and drive more cost efficiency into projects by reducing number of manhours required and overall programme durations,” he said.
Eventually, the replacement technologies can only do enough and the need for workforce still remains considerable for the Gulf states. “The only solution would be unpopular, the UAE and Qatar would have to enforce caps on price rises on basic foods and housing,” said Sharif. Retaining the migrant workers and avoiding high expatriate turnover, hence, has to come with the government’s role to enforce rental caps to keep Qatar a competitive location for expatriates, backing the country’s economy.