Singapore's "Straits Times" reports that Dubai owes Japanese general contracting, trading, and equipment manufacturing companies the equivalent of US$7.5 billion.
US$1 billion of this amount is overdue. Some for over one year.
The disturbing element is that some of the projects are for government works which could mean that the Emirate itself is having cash flow problems.
You'll recall there was an earlier uncharacteristic complaint by Japanese companies and diplomats about unpaid bills. You know when that happens that serious amounts are at stake and are well past due.
Riding the trade (failing to pay suppliers on time) is a "time-honored" (though not necessarily honorable) tactic of the company without money. As is then pushing the trade for haircuts on their invoices. While these tactics don't work well with banks, they have been successfully used with non financial firms.
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which could mean that the Emirate itself is having cash flow problems.
So you reckon? I know for a fact that this is the case, and anyone else working in the construction industry on government projects e(even infrastructure)will be able to confirm that there is a cashflow problem. Not getting paid for a year? Only a year, you say? I wish.
Nick
Thanks for your comment.
Not being on the scene, I don't have any direct knowledge. And I try though not always successfully to distinguish between fact --what I know or think I know -- and opinion.
There are certainly signs of cashflow problems besides delays on supplier payments. About AED13 billion was funneled upstream by Nakheel to its parent. Etc.
A couple of questions for you:
(1) Are you in the construction industry? Or in other words what's the source for your knowledge?
(2) Do you have any sense of the scope of the delay - amounts and time frames? That would be a useful bit of info.
Abu Arqala,
1) Yes, I 'live' in the construction industry...but
2) It is difficult to get exact figures and vetted information in this country (until after the fact)- not just for delayed payments. The media doesn't help - Zawya Dow Jones newswire is notorious for lazy background research.
[Example: You may remember the figures sloshing around in the UK media earlier this year about 200 million pounds being owed to "British contractors" - as per 'ACE', an 'association of consultancy and engineering'. Firstly, ACE represents some (but not all) consultancy and engineering firms in the UK, but NOT contractors (i.e. builders / constructions firms). That's a big difference. I was actually interviewed once by a BBC journalist who did not know the difference between a consultant and a contractor. (Perhaps because in the UK anyone offering a service as a self-employed entity is deemed a 'contractor'. or because the words both start with a 'C'. Coming from today's BBC this wouldn't surprise me). As a result the figures of outstanding payments to consultants (fees) and contractors (progress payments fr work, minus retention etc.) were completely muddled up. Of course, it could only be outstanding fees and not payments to contractors-$300m buys you maybe five 20storey buildings..hardly worth reporting!]
Noone in the industry knows anything for sure, Abu Arqala. It's all hearsay from the majlises.
There are too many consultants and contractors out there who cannot or will not talk frankly - unless they actually wanted to destroy their name in this country. Remember, most companies in this industry here are family owned businesses. They are here for the long term. They have personal associations. They have been licking sandals for too long to risk being seen as detractors.
We in the industry are often paid 'in kind' (both consultants /contractors). Outstanding payments are delayed for years and then "suddenly" you get awarded a new job without much trying! How do you put that on a balance sheet?
Ergo, the only figures you hear about are from the newcomers who wanted to ride the wave and are now stranded on a sandbank (often literally).
Generally, it seems the only people who burnt their fingers in Dubai are those who arrived during the boom years to make a fast buck but without any knowledge about the country and its mores...
Nick
Many thanks.
I think I'll highlight your response with a separate post.
Best
Nick
And you may consider this one of your letters to the editor which not only actually got published but was also featured as a column.
Best
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