Qatar’s unpaid World Cup 2022 contract in spotlight amid anger over Carillion collapse

A Carillion sign is defaced with the word 'bust' on a hoarding at the collapsed company's construction site at the Royal Liverpool University Hospital, UK. (AFP)
Updated 17 January 2018

Qatar’s unpaid World Cup 2022 contract in spotlight amid anger over Carillion collapse

LONDON: Qatar’s refusal to settle a £200 million bill is said to have been one of the final nails in the coffin for UK construction giant Carillion, which went into liquidation on Monday.
Carillion claims payment is outstanding for work on a £500 million ($692 million) development deal related to the 2022 World Cup.
Rudi Klein, chief executive of the Specialist Engineering Contractors’ (SEC) Group, said the Qatar contract was among a small number of “big infrastructure projects that meant the end was nigh for Carillion.”
“The Qatari government will be now looking very urgently for alternative contractors to do this work and they may have to pay rather a lot more to do that,” Klein told Arab News.
The unsettled debt is the latest shadow to engulf preparations for the World Cup in 2022.
Controversy was initially cast over Qatar’s 2022 World Cup bid when allegations of corruption emerged followed by reports of exploitation from the construction sites, where workers complained of inhumane conditions and unpaid wages.
Contractors then warned of delays to World Cup projects in June 2017 when Gulf countries began the ongoing boycott of Qatar.
The Qatari government now faces further complications with the collapse of Carillon, which was involved in the $5.5 billion Msheireb redevelopment of Doha’s Downtown ahead of the World Cup.
In October 2017, City A.M. reported that top Carillion executives were making monthly trips to Doha to persuade Msheireb, backed by the Qatar Foundation, to settle the outstanding bill.
Msheireb, however, says it is owed a significant sum for contractural obligations it claims Carillon has failed to fulfil.
Carillion is one of the largest contractors operating in the Middle East, with projects including the Dubai Canal and the Royal Opera House in Oman, mostly through joint ventures.
The fall in oil prices contributed to a slow down in construction spending across the region, prompting Carillion to start pulling out of Middle East markets.
Commentators criticizing Carillion’s construction delivery model in the wake of its downfall emphasized the danger inherent in its practice of outsourcing on a large scale, particularly when operating in overseas markets.
“In the Middle East, where construction works are delivered very site-labor intensively and with high proportions of unskilled transient migrant labor, the delivery failure risks in terms of cost overruns, delays and quality problems can be magnified,” said Mark Farmer, CEO of Cast, a real estate and construction consultancy.
“This undoubtedly creates heightened risk for those contractors that are not able to adequately supervise or control and manage the construction process.”
Klein said Carillion’s role as a “middleman” left the company ill-equipped to supervise projects, which could be more efficiently managed by smaller, regional contractors. Klein added, “95 percent of what Carillion did was outsourced; they never did a thing.
“Now is time to get rid of the middleman and to look at how we engage directly with the people actually doing the work.”
The collapse of Carillion was a dramatic unraveling of the UK’s second-largest construction firm, which employs 43,000 people worldwide, including 19,000 workers in the Gulf.
British Prime Minister Theresa May on Wednesday defended the government’s decision to sign major deals with the company after it issued its first profit warning in July. Carillion has public sector and private partnership contracts worth £1.7 billion in the UK, including for services in the NHS and Ministry of Defense.
“We’re making sure in this case that public services continue to be provided, that workers in those public services are supported and taxpayers are protected,” May told MPs.
Labour leader Jeremy Corbyn accused the British government of “negligence” over Carillon and called on May to “end the costly racket of private companies running services for the public.”
Carillion’s demise is being compared to the impact of the Lehman Brothers’ collapse on the banking sector as the reverberations reach further down the supply chain.
Brian Berry chief executive of the Federation of Master Builders warned that the “domino effect” is already underway.
“This is the biggest thing that’s hit the construction industry since I can remember; it’s got the potential to be a disaster.”
Thousands of suppliers are owed money by Carillion, many of which are having to lay off workers as banks call in their debts. Shareholders are also among those suffering severe losses.
Along with the Qatar contract, three UK joint public and private contracts are also being blamed for the collapse. Two were for new hospitals and another for a road project in Scotland.


Saudi energy giant to invest $3bn in Bangladesh’s power sector

Updated 22 October 2019

Saudi energy giant to invest $3bn in Bangladesh’s power sector

  • Experts say deal will usher in more economic and development opportunities for the country

DHAKA: Saudi Arabia’s energy giant, ACWA power, will set up an LNG-based 3,600 MW plant in Bangladesh after an agreement was signed in Dhaka on Thursday.

The MoU was signed by ACWA Chairman Mohammed Abunayyan and officials from the Bangladesh Power Development Board (BPDB), officials told Arab News on Monday.

According to the agreement, ACWA will invest $3 billion in Bangladesh’s energy development sector, of which $2.5 billion will be used to build the power plant while the rest will be spent on an LNG terminal to facilitate fuel supply to the plant. Under the deal, ACWA will also set up a 2 MW solar power plant.

In recent months, both countries have engaged in a series of discussions for investment opportunities in Bangladesh’s industry and energy sectors. 

During the Saudi-Bangladesh investment cooperation meeting in March this year, Dhaka proposed a $35 billion investment plan to a high-powered Saudi delegation led by Majed bin Abdullah Al-Qasabi, the Saudi commerce and investment minister, and Mohammed bin Mezyed Al-Tuwaijri, the Saudi economy and planning minister.

However, officials in Dhaka said that this was the first investment deal to be signed between the two countries.

“We have just inked the MoU for building the LNG-based power plant. Now, ACWA will conduct a feasibility study regarding the location of the plant, which is expected to be completed in the next six months,” Khaled Mahmood, chairman of BPDB, told Arab News.

He added that there are several locations in Moheshkhali, Chottogram and the Mongla port area for the proposed power plant.

“We need to find a suitable location where the drift of the river will be suitable for establishing the LNG plant and we need to also consider the suitability of establishing the transmission lines,” Mahmood said.

“It will be either a JV (Joint Venture) or an IPP (Independent Power Producer) mode of investment, which is yet to be determined. But, we are expecting that in next year the investment will start coming here,” Mahmood said.

BPDB expects to complete the set-up process of the power plant within 36 to 42 months.

“We are in close contact with ACWA and focusing on the successful completion of the project within the shortest possible time,” he said.

Abunayyan said that he was optimistic about the new investment deal.

“Bangladesh has been a model for the Muslim world in economic progress. This is our beginning, and our journey and our relationship will last for a long time,” Abunayyan told a gathering after the MoU signing ceremony.

Economists and experts in Bangladesh also welcomed the ACWA investment in the energy development sector.

“This sort of huge and long-term capital investment will create a lot of employment opportunities. On the other hand, it will facilitate other trade negotiations with the Middle Eastern countries, too,” Dr. Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies (BIDS), told Arab News.

She added that Bangladesh needs to weigh the pros and cons before finalizing such contracts so that the country can earn the “maximum benefits” from the investment.

“It will also expedite other big investments in Bangladesh from different countries,” she said.

Another energy economist, Dr. Asadujjaman, said that Bangladesh needs to exercise caution while conducting the feasibility study for such a huge investment.

“We need to address the environmental aspects, opportunity costs and other economic perspectives while working with this type of big investment. Considering the present situation, the country also needs to focus on producing more solar energy,” Dr. Asadujjaman told Arab News.