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Australian Contractors’ Issues in the Emirates Thesis


Hilton (10) says that Australian contractors have been engaged in carrying out projects in Emirates. However, there are many challenges that they face in this country in the process of carrying out their work. The contractors have also come up with ways to address such challenges so that they can be successful in their activities. In this paper, analysis of the factors that affect the Australian contractors have been done and more specifically in the Emirates. The emirate is a major city in The United Arabs Emirates. In the process of carrying out their business, the contractors are faced with many challenges in this country. However, they have to come up with appropriate strategies to cope with such challenges for their continued survival in this business. This project analyzed the different factors and their levels of influence. To achieve this data was collected from different sources and analyzed and the ranking of such factors was also done. From the ranking, conclusions have also been derived and appropriate remedy measures postulated. This project is important to contractors as they can use it to cope with such challenges or help them develop ways of improving against such issues. Considering these two countries are geographically apart it may seem like a challenge to such foreign. In addition, the two countries seem different in many aspects. From this project analysis, the main question that one will be able to answer is whether the contractors have successes or failures?

Executive summary

The paper looks into details the major challenges that Australian contractors face while undertaking construction projects in the Emirates. One of the major challenges notable is the economic disruptions as a result of the exaggeration of the business cycle. High-interest rates and economic fluctuations affect the direct cost of the materials of these contractors. Terrorism is noted as another challenge as well as the foreign policies regulating the foreigners working in this country. The region is known for insecurity issues and this is another key challenge. The global economic meltdown of the year 2008 is noted as another challenge facing these contractors. Operating environment in Emirates is a bit challenging to the contractors and this makes them takes sometimes before they familiarize themselves. Recruitment of the employees pose another key challenge to the contractors as well as the political up heals faced in that country. Cultural differences between those two countries are a major challenge as well the high cost of living in Emirates. Relationship, health issues and some government decisions which cannot be appealed also negatively affect the contractors. Another issue that could be affected by the diverse cultural background is the level of trusting each other. It has been postulated that trust is one of the key ingredients that can enhance the operations of the contractor. As such, the contractor faces the challenge of creating a harmonious relationship that can be instrumental in forging that trust because it is highly unlikely that people from the diverse background can trust each other unless effort is taken to cultivate it.

The contractors have come up with the methods to deal with such challenges. The contractors request the payments to be done in their home currencies. Security has also been beefed up as well as ensuring they comply with the laid down rules and regulations on migration issues. These companies have embraced the construction of high-quality products to remain competitive in the market

This paper gives details of the indicators for the construction industry from the Australian contractors’ perspective. It also goes further to analyze the ranking of these indicators and gives explanations on why the contractors rank such factors in that order. Traditionally the measurement of the Key indicators had focused on the outcome sided. A good example which was a key focus was the lost time by the employees due to injuries. However, the construction industry has in the modern days broadened the net to consider other indicators. This paper, therefore, outlines all the indicators of the construction industry as well as having good recruitment policies. Other methods that have been used to deal with some of these challenges by the contractors include: abiding by the laid down rules and regulations and informing themselves about the culture of this country. The financial cost challenges have been dealt with by the contractor coming up with ways of planning their finances. This has enabled them to reduce their costs and plan themselves financially. There are other major issues discussed in this project. These are the performance indicators to measure preparedness for the major challenges. Under this analysis of the survey and research the foreigner do before they engages in emirates have been critically analyzed. Ranking of these factors is done through collection of the data and its analysis. The explanation of the rankings is also given. Some of these factors notable include religion, education, Politics and economics. Detailed explanations of these factors have been given and reasons for its ranking done. A conclusion of this project is also availed. This part summarizes the whole paper and gives a few objective views of these Australian contractors doing projects in emirates.

Indicators in the construction industry

Hilton (10) says there are many indicators in the performance in the construction industry. Primary data were collected using questionnaire. Initially the pilot test was done to determine whether the process will be successful. The respondents were required to determine and give responses on the indicators in construction industry. Some other questions were also included with the responses of yes or no. The questionnaires were distributed and the respondents were expected to give their answers. The data is then analyzed using different statistical tools and the inferences obtained from them. Secondary source of data has also been used. Researchers which have been done previously were critically studied and the results. Some of the information obtained from such research was used to come up with our data (Bailey 24). The previous researches also an important reference for our research. Good example of the secondary sources of data used included the published sources containing any information on indicators about Australian contractors working in Emirates. These published sources included compiled reports by international bodies, publications, newspapers and other publications. It is worth noting that, there were some few challenges that were faced in the process of data collection. Secondary sources of data were not readily available and the some of the information obtained was sketchy. According to Bailey (24), another key challenge the expensive source of some books which were to be read and the information in them internalized. Some secondary sources of data used were expensive since they had to be purchased online. These materials were all necessary for my research and therefore they had to be obtained.

Data analysis

Data has been collected from the field during interview where representative samples have been taken. Other sources of data used during this research include government archives, and other secondary sources. Where samples have been taken n has been taken as 25 for the construction companies. In this analysis, employees have been taken as a target group. Contributions of these industries to the Gross Domestic Product, and the employment level have been taken as macro variables measuring the performance of these industries. However, during the analysis of these performance indicators, some variables have not been accounted for. For example the environmental impact, damages and number of accidents are some indicators not analyzed. It should be noted that due to high temperatures, labor laws stipulates that there should be a break in the afternoon. This kind of legislative law affects the performance of this industry. A strong assumption is made that there is labor mobility and no barriers such as discriminatory tariffs are in existence. Tabulation of data and graphical representation has been adopted due to the nature of data.

In the year 2007, an unprecedented expansion was witnessed, with diverse projects resulting to extensive growth. Over the years, a remarkable growth in the construction industry is witnessed. In the year 2010, a growth of US$ 18.3 billion was recorded from a low of US$ 14.8 billion in 2008. Contribution to the GDP was 8% in 2007 and there has always been an increase to date. A constant growth of 7% was recorded in 2008 and 2009. Year 2010 had a slight increase by 1%. This trend shows the steady performance of construction industry which absorbs a high number of skilled and unskilled employees.

In the Arabs emirates the demand for affordable homesteads is increasing significantly in the long run. This has forced the construction companies’ construction emphasis more on the affordable houses segments. All the countries under the GCC have expanded their own new building regulations via their councils and are very active in reviewing and accommodating these regulations in the new building legal framework. The Arabs emirate region is probably eye witness of increasing green buildings number registered in the future. This is likely to change the construction sector in the whole region and will increase the creation of health care buildings (Retana Summo Connel 46).

Foreign construction companies, having potential of contracting large and relative hard projects entered in the GCC construction area in partnership or alliance with developed local constructors. The partnership or the alliance model prevents the companies’ risk of both the partners due to large scales of economies (Petechuk 14).

Petechuk (20) describes that in their effort of expanding their top rank and geographical locations, the developed construction and companies that deal in real estate are looking to expand both organically and inorganically through merger and acquisition means.

The United Arab Emirates residential and business sector market is still finding for equilibrium as financing has been prevent, projects measured back and the contractor resources reduced. The houses and construction firm developers in the United Arabs Emirate continue to take a careful approach in the short-run at a look of existing high supply in the region.

Lidderberg (32) further explains that it is expected that both, the residential and commercial office construction sector of Saudi Arabia will show positive growth line in the coming five years. This is because of the rising population and the growing economy. The United Arabs Emirates has a positive outlook on the Qatar residential and commercial offices for construction market on the support of proper growth in population and expansion in economic activities. It is also expected that, Bahrain’s residential market to have undersupply in the affordable homesteads section as the developers continue to streamline on the premium section of the market. This will continue to encounter uncertainty because of political instability. The Omani residential property market is expected to stabilize in the near future.

In Kuwait, the demands for private houses are particularly strong in the long run because of undersupply but the commercial area will encounter over supply.

The causes of good performance of Australia construction companies in United Arab Emirates

Lidderberg (20) says that United Arab Emirates countries have stable economic principles and healthy economic growth predictions. The governments of these United Arabs Emirates countries are increasingly focusing on developing their non-oil business like construction sector and real estate business. With the expectation of oil prices stabilize; further increases in government expenditure will cater investment and consumer expenditure. This will lead to a positive effect on Gross Domestic Product growth, which will bide well for the whole economy and particularly construction markets. The increasing population and urbanization is likely to transform into higher demand of residential houses and commercial office property all over the Gulf Countries Council region.

The UAE countries which offers homes to more than sixteen million experts from all over the world with strong aspirations and preferences for their own houses. This is likely to drive the housing demand across these countries.

Lidderberg (29) says that the other factor is the change in regulatory rules is likely to increase foreign investment in the construction market. It is expected that manageable inflation indexes and property low cost is likely to act as a demand driver for residential houses and commercial construction sector across the Gulf Countries Council region. United Arabs Emirate and Qatar are attracting the developing market situation from MSCI will promote the growth of the environment in these countries, thus attracting more allocation of finance in the real estate companies and construction markets.

The causes of poor performance of Australia construction companies in United Arab Emirates

In the United Arabs Emirate the Australia construction companies sometime performs poorly. This is contributed by the oversupply that has been the biggest problem for the construction sector and real estate sector within the Gulf Countries Council. This has contributed to cancellation of many projects for the recent past period. Moreover, it has lead to decline in prices as well as rent of residential and commercial office property in most of the Gulf Countries Council member countries. Another factor leading to poor performance is the investor sentiment. It is expected that investors in construction industries sentiment will be weak in the short run because of the tough credit conditional ties imposed by the creditors. In the year 2010 and 2011 several projects were cancelled across United Arabs Emirates. This was contributed by fact that the weak investors and inadequate funds to finance the construction project. There is expectation that lack of strong investors will act as a stumbling block to the growth of the residential and commercial property market across United Arabs Emirates.

Another factor for Australian construction companies to perform poorly is because of competitive forces in the market. The residential and commercial construction market is very competitive and disintegrated, marked by existence of numerous big and small construction companies all over the chain. The increased competition in this construction markets is probably due to competitive forces from the constructors which is expected to cut down the gap of construction firms further. The margins of the constructors in the construction markets are very sensitive to the cost of raw materials for building houses.

The other challenge facing Australia construction companies in the United Arabs Emirates construction sectors is lack transparency compared to their world wide peers, thereby having an unfavorable effect on foreign direct investments inflows into other market.

In addition, very high attrition rates amongst experts human power remains a challenge for the Australia construction companies. The Gulf Countries Council construction sector, as the skilled experts workers are taken towards their home countries because of better job chances. This is brain drain which probably is a significant barrier for the Australian construction companies to have labor intensive construction industries.

The data to be used in this research has been derived from the qualitative techniques. This means that from the information provided, it is clear that there are some factors which impacts heavily on the ability of the contractor to perform the project satisfactorily. The data has been collected and analysis done based on the qualitative aspect of the information provided by the different sources. A number of the positive performance indicators identified in this data analysis and the different reports given relates to the management systems, communication, consultation training. The Australian companies working in Emirates have put in place measures and systems to ensure their continued. The analysis of data has been done indicating that one of the major indicators is the close consultation and the agreement with the workers.

Fitch (40) says that consultative approach has helped improve the processes and allow high level of performance. In this analysis more than 22 performance indicators have been identified related to the construction industry in Emirates by the Australian contractors.

In May 1999, the Australian construction companies working in the Emirates employed more 64730 workers. The majority of workers were male (87.4%) and were employed full-time (94.6%). About 5% of full-time construction workers were female, with more female workers employed part-time than males (59.3%) This can be seen from the respondents in the questions asked as well as the data from the secondary source.

Activity of the construction companies in Emirates by the construction company has been on the increase over the years as shown in the gender and employment status table. The male employees have increased as the same case with the females. A larger percentage of these employees are made up of the full time employees (William and Kate 9).

From the analysis of the different factors that were noted to have at the literature review part, data was collected from different secondary sources to determine the different percentages in which they the affected the construction firms. The data was obtained from sources which had interviewed a total of 700 respondents. The analysis was done in a table and the different percentages tabulated. The greatest factor percentage was noted to be politics. The government of any country affects the Australian companies operating in the Emirates. Most of the respondents with a percentage of 35.7% felts that they are greatly affected by the current political situation in that country.

Politics was greatly mentioned in this data analysis. Politics relates to the manner in which a country is governed. It also involves the structures that have been put in place in order to help in governing the country. For instance, the emirate has a monarchical system which is dictatorial, whereas in Australia it is a mixture of monarchical and democratic set up. This affects the business environment. Operating environment affects the effective performance and the completion of the project. From the information provided by the research, a higher percentage indicated that there is likelihood for late completion of projects by the contractors. The secondly ranked factor was economics. Economics shape the general lives of many people in any country. It helps to determine the general financial and living standard conditions in any country. After the data collection, the data indicated that, economic factors control 21.4% of the issues that affects the business of the Australian contractor working in the emirates. Whether the living conditions in emirates are low or high depend with the prevailing economic conditions. The economic conditions are shaped by government policies, the interest rate and the prevailing financial institutions in Emirates (Gorgenlander 8).

Ranked third was education. This is way knowledge and information is transmitted from one party to another as well as the communication process. Due to the cultural differences the means of transmission of the information can be vastly different. This can even impact on the way the workers at the construction sites follow the instructions given. Due to the differences in the education process, the workers may respond differently when the instructions are given. Additionally, the level of education of the workers is a very great determinant of the level of skills and expertise. A larger percentage indicated of 25.7% indicated that education was a key factor which determines the performance of these companies. The two countries have different systems of education and therefore employees from Australia will even need sometimes to familiarize themselves with some education terms. For instance some terms used in the financial statements of the contractors may be different to those being used in Australia. To improve on this the contractors have come up with ways to adapt themselves to the new education systems in Emirates. Religion was ranked last from the data analyzed. 96% of the entire population in emirates is Muslim. The foreign population in this country includes Sunni and Shia Muslims, Hindus, and Christians. This is contrary case for the contractors in emirates. Even if Australia is considered a Christian country, there are a variety of religions that can be found here. Other religions have also been found in this country. The differences in the religion of these countries clearly explain why it is a factor in determining the financial position of the Australian contractors living in this country. These foreigners have to come and acclimatize themselves with the religious issues of this country.

Conclusion from the data analysis

It is has been proved that there are so many challenges that the Australian contractors have to face when they undertake their projects in the emirates. A lot of these challenges results from the fact that there are differences in culture as well as the political system. Impact of the culture on the performance influences problem solving techniques because different cultures advocate for a particular way of approaching issues. For this reason, there is a need to appreciate the different perspectives in order to reduce the probability that a conflict might arise during the process of problem solving. This is because culture has a very big influence in the society. It determines their work ethics, language as well as the behaviors of the people. Therefore, any contractor wishing to work in the emirates must ensure that he is well informed on the culture that he is likely to encounter in the emirates. In addition, the contractors must be well versed with the political system in that country. The political system influences many things like, the investment opportunities and the government policies affecting the foreigners.Appendices

Contribution of construction sector to GDP
Table 1: Contribution of construction sector to GDP. Source: Central bank report of respective countries, International Monetary Fund

Table 2: Number of projects on hold/cancelled (2011)

Project name Owner Location Budget (US$ Billions)
Madinat al-Hareer (City of
Government of Kuwait Kuwait 77.0
Business Bay Dubai Properties UAE 30.0
Mina Zayed Port
Aldar Properties UAE 15.0
The World Nakheel Corporation UAE 13.5
Qasr Khuzam Khuzam Real Estate
Development Company
Saudi Arabia 13.3
Urjuan Mixed Barwa Al Khor Qatar 10.0
Al-Shamiyah Mecca
Al-Shamiyah Urban
Development Company
Saudi Arabia 9.3
Prince Adbulaziz Bin
Mosaed Economic City
Al-Mal Investment
UAE 8.0
Water Garden City Albilad Real Estate
Investment Company
Bahrain 6.6
Bubiyan Island Public Works Ministry Kuwait 6.0

Source: Meed projects

Madinat al-Hareer (City of Silk)- cancelled, Qasr Khuzam- returned to design, others are on hold

Table 3: New developments

Project name Region Developer Value (US$ Billions) Status
AlFalah Abu Dhabi Aldar Properties 2,560 ongoing
Al Furjan
Development – Phase 1
Dubai Nakheel Properties 817 ongoing
Al Bateen Park Abu Dhabi Aldar Properties 800 ongoing
Abu Dhabi Capitala 550 ongoing
Rainbow Towers Ajman 463 ongoing
The Pentominium
Dubai Arabian Construction
400 ongoing
Bloom Gardens Abu Dhabi Bloom Properties 400 ongoing
Al Odaid Beach
Dubai Al Odaid/ACI 354 ongoing

Source: Zawya

Table 4: Data collected on the field from respondents during interview

Factor No. of respondents % of the total
Religion 120 17.2
Economics 150 21.4
Education 180 25.7
Politics 250 35.7
700 100
Construction industry dynamics in comparison with economic development

Table 5: Construction industry dynamics in comparison with economic developmentTable 6: Percentage of employees, both part-time and full time absorbed by Australian companies in Emirates

Number % Number % Number %
Male 53460 94.8 3410 40.7 56870 87.8
Female 2940 5.2 4960 59.3 7900 12.2
Total 56400 100 8370 100 64770 100

Source: Primary data collected from Australian companies in Emitates, a representative sample has been taken

Works Cited

Bailey, Ian. Construction law in Australia, US: Thomson Reuters Thomson limited, 2011. Print.

Bailey, Ian. Understanding Australian construction contract, US: Thomson Reuters limited, 2008. Print.

Fitch, Renard. Commercial Arbitration in the Australian construction Industry, London: Federation Press, 2011. Print.

Gorgenlander, Viktor. A strategic analysis of the construction industry in the United

Arab Emirate; opportunities and threat in construction business, UK: Diplomica verlag, 2001. Print.

Hilton, Johnson. Access Science: McGraw-Hill Encyclopedia of Science & Civil Engineering Online, Westport: Greenwood, 2007. Print.

Lidderberg, Micheal. Navies and construction industry in U.A E: the strained symbiosis, UK: Green word publisher, 2008. Print.

Petechuk, David. Australian perspective in construction. Westport: Greenwood, 2009. Print.

Retana Summo Connel. Imagined Australia reflections around the reciprocal constructions, Westport: Greenwood, 2009. Print.

William, Davis and E. Kate. An Introduction to contraction Theory: Theory and Practice, Boston: McGraw-Hill, 1999. Print.

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