Saudi Auger and Aldar Properties: on the lookout for Canadian suppliers for massive GCC developments
Despite tough economic times two key regional players are pursuing major construction and infrastructure projects that could provide opportunities for Canadian suppliers.
Late last year, Export Development Canada announced that it would provide USD 100 million worth of financing to Abu Dhabi based Aldar Properties PJSC. A small ceremony was conducted at the company’s offices to mark the deal, which generated press coverage in both Canada and Abu Dhabi.
In many respects the Aldar initiative, which was later backed-up by an EDC-backed trade mission to the United Arab Emirates and the Kingdom of Saudi Arabia, was a typical one for the organization, which puts considerable effort into identifying key international players that have a strong potential demand for Canadian goods and services.
“We’re delighted that the mission met participants’ expectations and resulted in concrete business opportunities,” said EDC’s president and CEO Eric Siegel, at the time. “It’s a validation of the investment that EDC has been making in its international contacts and footprint, particularly through in-country representation.”
Andrew Ferrier, head of central procurement at Aldar agreed. “We hosted the 40 Canadian companies that came over on the trade mission, including several serious potential suppliers,” says Ferrier. “These included a range of construction services companies, consultants and other vendors. We provided them with a briefing on who we are and what we do, conducted a Q&A session, as well as smaller, more targeted “break-out” meetings. We then arranged a visit to one of our major sites.”
By all definitions, Aldar Properties, which has seen meteoric success, since its launch in 2005, and Saudi Arabia-based construction giant Saudi Auger, are significant potential customers for many of the goods and services provided by Canadian infrastructure and construction sector suppliers. As a result, despite the fact that they are based in different countries and have distinct corporate cultures, both provide excellent case studies for Canadian exporters seeking to do business in the Gulf Cooperation Council area.
GCC economies: slowing, but not as much as elsewhere
The Gulf Cooperation Council has recently taken on increased importance as a potential market for Canadian exporters, in part because the global credit crisis and worsening global economy are dampening opportunities in many traditional markets such as the United States and Europe.
“The timing of the recent EDC mission was good,” said Ferrier. “Unlike construction sector activities elsewhere, things are not slowing down here in Abu Dhabi. There thus remain significant opportunities available for Canadian companies able to add value. We are working on are several large projects. For example in one case, we are building a complete city. That means we will need a complete range of goods and services during coming years, including almost everything you might expect in a city such as building management systems, traffic control systems, smart homes. We are also building at least 15 hotels between now and 2020 as well as several schools.”
That is of course not to say that the GCC has been exempt from challenges – far from it. Many major construction initiatives there too have been cancelled or delayed. Yet despite this, both the United Arab Emirates (where Aldar Properties is based) and the Kingdom of Saudi Arabia (home to Saudi Auger) continue to have significant short-term infrastructure and construction needs.
Data compiled by the United Arab Emirates and the Kingdom of Saudi Arabia show that between $214 billion and $411 billion worth of construction projects are underway in the region. Furthermore, according an assessment provided by EDC officials, the strategic projects identified in those regions’ respective 2030 master plans are expected to go ahead, despite the tough economic times.
Aldar Properties goal: turning Abu Dhabi into the UAE’s most dynamic real estate market
One of the largest players in GCC regional development is in fact Aldar Properties, a public company controlled by leading Abu Dhabi institutions. The company specializes in property development, but also has strong management and investment capabilities. Aldar’s goal is to turn Abu Dhabi into the United Arab Emirate’s most dynamic and forward-thinking real estate market. It is doing this by creating unique developments which mesh well with its cultural and natural heritage.
Aldar isn’t just talking. The company, which controls the jurisdiction’s largest land bank, also puts its money where its mouth is. These land holdings include 54 million square meters, almost all of which are earmarked for specific developments. A staggering USD 72 billion worth of projects have already been announced including the Al Raha Beach Developement, the Yas Island SAS Hotel Project and many others.
“With its current project pipeline (They are) expected to have a 45-45 percent share of the Abu Dhabi real estate market,” said Jean-Francois Croft, EDC’s Chief Representative for the Gulf Cooperation Council and Yemen at the time. “Better still, the nature of those projects is particularly well suited for Canada’s world class construction companies.”
Aldar Properties: getting a foot in the door
According to Aldar’s Ferrier, the company’s massive development projects mean that it has been spending more than USD 500 million per month, a pace that is likely to double over the coming year. However unlike smaller companies, the central procurement department at Aldar Properties, which was set up in August of last year and thus is just getting its feet wet, does not handle purchases, but acts more as an overseer of procurement policy. Specific and targeted procurement is done by individual teams at the project level.”
“Our job, which sits across various procurements, is to maximize the benefits of individual purchases. How we spend and what we spend it on will become increasingly important as projects reach critical cost decisions,” said Ferrier. “As a result, we have set up an interim team consisting of external consultants which has been asked to prioritize opportunities.”
According to Ferrier, consultants and contractors that want to do business with Aldar need to pre-qualify through a dedicated link (http://www.aldar.com/supplier_registration.en) on the corporate website. Material suppliers are welcome to use the link too, but it is almost certain that they will also need to pre-qualify with Aldar’s appointed contractor or consultant as well.
Acier AGF’s experience selling to Aldar
One Canadian company that has done a significant work on developments undertaken by Aldar Properties is Acier AGF, a Quebec-based leader in reinforcing steel, post-tensioning, wire mesh and scaffolding. According to Pierre Farah-Lajoie, vice-president (international) at the group, the scale of Aldar’s development initiatives generally means that Canadian suppliers to those projects do not always deal with the company directly, but work instead with a variety of its contractors of subcontractors. For example one of the biggest initiatives that Acier AGF is working on with Aldar, relates to reinforcing work that the company is doing on a tunnel being built by the company that will connect Abu Dhabi, with nearby Yas Island, which is expected to host a Formula One race track.
The project will involve 125 Acier AGF employees, who will install no less that 16,000 tons of reinforcing steel in to the tunnel. Yet while Aldar Properties is the ultimate client, Acier AGF is dealing with them through Al Naboodah, a sub-contractor, which is charged with doing all of the civil work.
However, according to Farah-Lajoie, Acier AGF’s days of dealing with Aldar contractors and sub-contractors, may be coming to an end. That’s because the company, which was one of the 40 that participated in the EDC backed trade mission to the Gulf Cooperation Council last fall made an interesting contact there.
“We were introduced by EDC to Aldar and we then had direct discussions with them, regarding the possibility of us setting up a cutting and bending operation here in Abu Dhabi,” said Farah-Lajoie. “In fact that mission proved to be an enormous success for us, because we also met another contractor in Dubai, for which we are quoting on rebars (reinforcement bars) on a 102-story building that is set to go up there.”
That said, working in the UAE is far from challenge-free admits Farah-Lajoie. “There has traditionally been a significant labour shortage in the GCC, so for many projects we are forced to bring in workers from other countries such as India and Thailand,” says Farah-Lajoie. “That’s not always easy, especially when timing is an issue, because you have to arrange visas for them and get all of the other paperwork done too. Then the workers need to be housed and fed. That said, we are getting used to it and the challenges are by now mostly manageable.”
Another key Gulf Cooperation Council player that exemplifies the challenges and opportunities that Canadian construction and infrastructure sector suppliers face in the region is Saudi Auger Ltd. This privately owned construction company, which has been around for more than 30 years, is headquartered in Riyadh and is at the center of a variety of complex developments both within the Kingdom of Saudi Arabia and throughout the Middle East. These include work on four new residential towers in King Abdullah Economic City, as well as on roads, parking areas and landscaping there, coupled with work on the UAE University Campus development in the city of Al Ain.
“The contracts we are executing range in value from a few millions of dollars, to one worth more than $10 billion. Furthermore, many of these are funded by the public sector, so we are not as directly influenced by the credit crisis as others are,” said Oussama El Kaed, the company’s Director (Engineering). “As a result, we have a variety of procurement needs. These range from engineering services, to inputs for construction and maintenance for private projects, mega-governmental projects as well as for health and education initiatives. We have dealt with several Canadian companies and look to have more names on board.”
That said, “construction companies that want to do work here will need to partner with a local firm,” said Al Kaed. “Approaching Saudi Auger directly will not work. It cannot be done. Furthermore as a result, of slowing work in other GCC countries, many suppliers are trying to penetrate Saudi Arabia, so competition here has been tough. Suppliers that want to do business with us should offer a strong value proposition, which includes either exceptional value or a high degree of knowledge contribution.”
Nienkamper’s experience with Auger/EDC
Anne-Marie Snook, vice-president (operations) at Nienkamper Furniture and Associates, like many people that we spoke to for this article, was also quick to note how fortunate suppliers to large GCC players are, due to their relative stability in these tough economic times.
Nienkamper, which manufactures high-end furniture, recently inked a $12 million deal to supply 4,600 of the company’s Aya and Neinkamper Now chairs, as well as 1,400 Vox Flip-top tables to Saudi Auger, for installations it is building at Saudi Arabia’s King Abdullah University of Science and Technology (KAUST).
According to Snook, Saudi Auger issued a letter of intent regarding the custom-made end-user specified and designed furniture last October, after conducting a rigorous pre-selection process through its coordination office in Paris France, which it also uses to recruit expatriate and technical staff.
In fact Saudi Auger’s Paris offices were a big plus for Snook, because they eased the challenges many Western women have noted that they face in dealing with businesses based in the Middle East. “You have to be prepared to respect cultural differences,” said Snook with a smile. “Everyone was extremely gracious with me at all times. However, whenever I would be in meetings with them with my male counterpart, as is the case in Saudi Arabian business meetings, all of the questions were routinely directed toward him. It was their way of being polite.”
Shipments for the new furniture are scheduled to be made during March and April. Final installations are expected to be competed by July 2nd. “Demand in the United States, which has long been our primary export market has slacked somewhat recently,” says Snook. “So the fact that we picked up some work with Saudi Auger could not have come at a better time for us.”
Snook was also eager to point out the key role played by EDC in facilitating the Saudi Auger contract. “Their support is very important for us in this deal, because we only got a relatively small deposit considering the scale of the work that we will be doing, as well as the amount of money that we will have to spend on production,” said Snook. “In fact, has we been unable to get the pre-shipment financing that EDC provided, it would have been very hard for us to execute this order.”
Closing the deal
While Aldar Properties and Saudi Auger are two clear examples of companies that Canadian construction and infrastructure sectors exporters that offer attractive value propositions, would do well to take a look at, the question remains how representative are they of the opportunities that are offered in the region? Well, according to an EDC study released earlier this year, probably quite a bit.
“Obviously, there are many projects underway and planned in the UAE and Saudi Arabia which Canadian companies can tap into,” read the EDC report. “However companies are advised to first find out what edge they might have and to keep their focus on projects in which they might have more experience.” The EDC study also echoed comments by Al Kaed at Saudi Auger, by recommending that Canadian companies find local partners or agents, familiarize themselves with local markets and pay particular attention to local differences.”
Marie-Claude Erian, EDC’s sector advisor (infrastructure & environment, business development group) agreed. “The construction sector is one of Canada’s largest industries, representing about 12 percent of gross domestic product, and is renowned for its superior operational methods, particularly in the increasingly important area of sustainable development.
Furthermore, over time Canadian firms have a good reputation in the region and have been involved in major UAE developments at various stages, from urban planning to design engineering and project management.” says Erian. “However there is no better time to exploit those advantages than now. Because during tough times, firms cannot afford to be too selective regarding who they sell to. They need to go where the opportunities are. ”
EDC, Marie-Claude Erian, firstname.lastname@example.org
Aldar Properties, Andrew Ferrier, email@example.com
Saudi Auger, Oussama Al Kaed, firstname.lastname@example.org
Peter Diekmeyer (email@example.com) is a Montreal based business and economics writer.
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