...security of our site staff and supply routes, we suspended our activities in 2004,” says Erdogan. “In order to encourage the contractors to come [to Iraq], safety and stability needs to be established.”
The Middle East’s booming market elicits varying responses from contractors. Having avoided the region for much of the last decade, Bouygues is now back with a hotel contract. Vinci plans to expand from its dredging business in Qatar, says Francioli. Dubai already is being well served, but in Qatar “there is still space for us,” he adds.
While many think of the Middle East as an oil and gas market, it is offering plentiful opportunities in a broad variety of market sectors. Saudi Arabia, Qatar and the U.A.E. “offer a lot of opportunities in the many sectors of the economy that are growing; such as housing, health, education, and industry,” says Samer Arafa, executive vice president of Saudi-based Al-Arrab Contracting Co. Al-Arrab has been acquiring firms to serve these varied markets, he says. It is constructing seven high-rise luxury residential towers on the huge man-made island, The Pearl, in Qatar, says Arafa.
The frenetic market in the region has come with a price. On the Arabian Peninsula, “the construction market is unstable and the inflation rates are high in construction sector due to tremendous rates of investments,” says Erdogan. The governments in the region have had to step in to try to provide a healthy business environment, he says.
Eastern Europe Begins to Stir
While Western Europe continues to be a stable market, Eastern Europe is rebounding. “The market has been boosted by infrastructure needs...and the presence of European Union funds,” says Francioli. Vinci is expanding into civil and environmental sectors in Poland, its Hungarian operation has quadrupled in two years and it hopes to expand in the former Czechoslovakia through an acquisition, Francioli says.
Poland’s largest contractor, Budimex, is one of Spanish-based Ferrovial’s units not primarily serving toll road operations. Ferrovial bought the firm in 2000, as the Polish market fell into recession. “The Polish market is improving with the advent of the European funds,” says Nicolás Villén, Ferrovial’s chief finance officer. He sees 20% growth this year.
Bouygues is active across Eastern Europe and has acquired a $190 million-a-year Czech contractor. Bouygues also is “quite active in Russia on buildings,” says Cote. It is focusing on foreign investors and avoiding public sector work, to avoid bidding against local contractors.
AMEC is reinforcing its Moscow office to help win more oil and gas work in Russia. “Tracking multinationals is no longer enough,” says Ian Thomas, business development director. “We have to be close to national companies. They are the guys who make the decisions.”
For some firms, Russia has offered a bountiful market. “Stabilization of the economy and high demand creates favorable climate for international contractors,” says E. Cihat Bilgic, deputy general manager of Renaissance Construction, Turkey. Russia needs the modern technologies, materials and experience that international contractors bring, he says. Renaissance also is a developer-contractor of shopping malls in the global market, with 290,000 square meters of malls under construction, including in Russia.
After a long recession, the German market “seems to have reached the bottom,” says Francioli. However, there is still excess capacity, he adds. In the U.K. “we are looking at possible concentration of the players...which is likely to begin soon,” Francioli says.
If consolidation in the U.K. is a trend, AMEC is bucking it. It announced on July 27 it had completed the sale of its Spie unit to PAI Partners, a Paris-based equity investment group. SPIE provides electrical engineering, communications services and specialty contracting, mainly in France. Spie had revenue of about $3.4 billion in 2005. AMEC now will focus on the building sector in the U.K. and internationally in energy and process sectors.
Almost unnoticed over the past few years has been the economic stability across South America that has pushed a boom in infrastructure development that is fueling several large contractors. ENR’s Top 225 enjoyed a 44% increase in revenue in Latin America, the biggest regional increase in the survey. “The more stable economies have created a growth opportunity in infrastructure across the region,” says Roberto Dias, Director of Institutional Relations at Construtora Norberto Odebrecht.
The past four years have seen Odebrecht grow almost 70%. The international component pushed a great deal of that growth with 80% of the company’s earnings coming from outside Brazil, says Dias. Today the company has a presence across South America, Central America, North America, Africa, Europe and the Middle East. In the United States alone, the company has undertaken 45 projects worth more than $2 billion.
The economic situation in the region has given another Brazilian contracting giant, Construções e Comércio Camargo Corrêa, an opportunity to expand. It is using the current prosperity as an opportunity to grow beyond Brazil’s borders to insulate the company from the extreme economic cycles of any single country, says Celso Ferreira de Oliveira, CEO.
The firm’s plan took a big step last year when the company won a pair of bids worth $450 million to construct a hydroelectric project in Colombia, Ferreira de Oliveira notes. The firm also has moved overseas with highway projects in Africa. To date, it has collected $1 billion in contracts worldwide. “We are looking for opportunities across South America and in Africa where our knowledge and capabilities can be an advantage,” he says.
In a key move last year, Camargo Corrêa invested $1.025 billion in acquiring Argentina’s largest cement producer, Loma Negra, the company’s largest ever investment. It’s a move that will help the company capitalize on the infrastructure growth at the local level pushed by the improving economy, says Ferreira de Oliveira. Argentina saw a 40% increase in construction in 2005, a trend that is continuing and mirrors the region.