Modernisation critical for Iran’s construction industry

“Whoever can help Iran modernise its construction sector will be in a good position to develop business in Iran.” said Dr Bijan Khajehpour, managing partner at Austrian based consultant Atieh International when I interviewed him for MEED’s “Opportunities Iran” insight report.

The report offers an extensive overview of the business needs across all key business sectors. My research focussed on construction and I was fortunate enough to talk to leading engineers and consultants who shared their view on the needs of the country. Below is a brief summary, but for the full report and for information on other important sectors follow the link to MEED.

Construction difficulties

Iran’s construction industry has had a challenging few years. Not only has the country, and the sector, come through a recession but economic pressures including the removal of energy subsidies and the effect of sanctions forced up the price of construction commodities and made materials and equipment more difficult to obtain. The property market, traditionally a key investment option for Iranians, was hit hard by the devaluation of the Riyal and a disastrous social housing programme which absorbed liquidity that would otherwise have financed other real estate investments.

Despite this construction’s contribution to GDP remained stable at around 9 per cent over the past five years contributing 863,908 billion Riyals in 1392 (2013/2014), equivalent to around $35bn. But in real terms the sector shrank along with national GDP. The World Bank reports that productivity in construction declined by 3.6 per cent in 2012 and 3.1 per cent in 2013 as imports of construction materials dropped and inward investment dwindled.

The sector then is ready for some good news and the lifting of sanctions which will bring increased revenues from unfrozen assets and increased oil production, has come at a welcome time. “Both in terms of transfer of technology and access to better financial solutions, the lifting of sanctions will be very good news for the construction sector,” said Dr Khajehpour, managing partner at Austrian based consultant Atieh International, who was talking to me ahead of sanctions being raised. His firm has been advising investors in Iran for over 20 years. “Once sanctions are lifted Iranian banks will have better access to international banks and funds, and can extend better and smarter facilities to constructors,” he says.

Government spending may dominate social infrastructure but in the real estate sector small private investors prevail and renewed activity is expected here too. “Now we are going to see a phase of new investment and higher demand for housing units because now the feeling is that sanctions will be lifted, construction materials will be more easily available and potentially a bit cheaper. There will be demand and a flow of both Iranian diaspora going back and international companies going to Iran.”

Housing shortage

Housing and residential development in particular has experienced a turbulent decade and today there remains a mismatch between supply and demand with an estimated shortage of 1.3 million residential units. In an effort to solve this the Ahmadinejad government created the Mehr social housing scheme. Launched in 2007 the aim was to bring 2 million homes to low income families over a five year period – a scheme so huge that private investors stepped away from the low income market. The model saw the government give land to developers and contractors to build on with finance provided by the state’s housing bank, Maskan Bank. Buyers had to raise 100 million Riyals as a deposit, the housing bank then paid the contractors to build the units. When completed the property and the debt were transferred over to the new owners who would pay back the loan and make a monthly rental payment to government for the 99 year land lease. “Initially citizens in need of social housing believed in it. Some families used all of their savings to participate. They really believed that the government would deliver but when news started coming in that they were not delivered on time or the quality was not good a lot of people stopped signing up,” says Khajehpour.

Financially the scheme encountered many issues. Bank Maskan relied on credit lines and other financing facilities from Iran’s Central Bank and this demand quickly accelerated from 50 trillion Riyals in 2008, which at the exchange rate of the time would have been around $5.1bn; to 150 trillion Riyals or around $14.5bn in 2010. This rose again to 450 trillion Riyals or $36.6bn by the end of 2012 by which time electricity subsidies had been removed significantly increasing construction costs (see chart). According to the IMF the housing bank was absorbing around 40 per cent of Iran’s base money.

Looking to the future Mehr can offer many lessons for the new schemes which must be built if local demand is to be met. “Mass production was a good idea and necessary,” says Mohammad Mehdi Banaei, a systems dynamics and public policy specialist at the Ifsahan University of Technology, who has written several papers on the scheme. “When you do something in a hurry it is possible that you don’t consider all aspects of it and Mehr was like that.”

Future opportunity

As the government grapples with the low income housing shortage investors are expected to turn to more lucrative markets such as high rise offices, hotels and hospitality related developments. International hotel chains are understood to be exploring major cities already.

Such developments could also see larger development firms enter the market, which has traditionally been dominated by smaller investors. Khajehpour says this is less to do with the size of development and more to do with new energy efficiency requirements. “Since energy and fuel subsidies were partially lifted, there is a focus on energy efficiency. There are hundreds of new regulations on what materials you have to use, what windows you have to use, what kind of energy efficiency standards have to be observed in larger cities. Urban construction projects have become too complex for the average small scale investor and that is why I see the necessity to move towards larger companies,” he says.

The requirements for buildings are covered in chapter 19 of the Iranian building code. “It has become mandatory in the past few years and it is anticipated to have a large effect on the energy consumption of the buildings in Iran,” says Nader Shokoufi, a structural engineer at Iran’s Tavon Consulting Engineers and a former chairman of the Young Managers Group of the Iranian Society of Consulting Engineers. He explains that many of Iran’s buildings lack proper insulation but rising energy prices and the new regulations mean a new focus on efficiency. Added to this are several government initiatives that are also stimulating activity. A clause in the annual budget allows the Ministry of Petroleum to invest in energy saving measures with a view to boosting exports. This year $2bn is expected to be invested. “Through this clause, the government insures the investment and promises to repay the investment by paying back the export price of the energy saved, so the facility that does an energy saving can get double savings, one through saving on the energy bill and one through getting back the money saved based on the export price of the energy,” explains Shokoufi. To verify the work the Ministry is looking for at least 500 measurement and verification companies to validate the work of the newly emerging energy saving companies (ESCOs). “A good market is opening up in this field,” says Shokoufi.

At the same time a new organisation for new energies is working on new forms of contract for renewable energy focussing on wind and solar. Further clauses to help investment in solar heating and PV panels are also being developed.

Such developments then are bringing new investors and companies to Iran. “You have completely new dynamics in energy efficiency and environmental solutions which is actually welcome news,” said Khajehpour.

Get the full MEED Insight Iran report here: “Opportunities Iran”

Rail
Transport infrastructure such as railway projects and airports are seeking investment for modernisation and expansion

 

 

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New Year: New Features

 

Jeddah Mosque relocation
Mammoet help Nesma Trading Company move an entire mosque to make way for a new hospital project in Jeddah

Happy new year one and all. My research this week is dominated by the GCC construction market for MEED which ties in nicely with a feature that I am writing on the demand for cranes in the Middle East region for Cranes Today. The low oil price is of course affecting all markets but the impacts vary greatly. Government spending is expected to fall but there are some commitments, such as social infrastructure and event related building that will continue and grow.

As ever in the Middle East there are exciting examples of technically ambitious and challenging work. In Jeddah Mammoet came to support local contractor Nesma Trading by moving this mosque – yes a whole mosque. In one piece. To make way for a new hospital project.

The clever engineering team jacked up the 2400t mosque and slid it 120m out of the construction site thus saving the 30 year old building from being demolished.

More to come on this in February issue of Cranes Today.

MEED executive education report 2015

CovereducationOne of the recent reports that I have worked on for Middle East Economic Digest (MEED) is all about executive education in the GCC. Despite the low oil price business schools and universities are continuing to report strong demand for their courses. Bespoke corporate training courses are particularly sought after as companies take advantage of the growing number of regional providers and a willingness to adapt content to suit the corporate customers.

For the overview of the executive education guide I spoke to many of the region’s business schools to find out how they were adapting to the regional dynamics. I found that although the sector remains one of growth and much activity, issues remain. Programmes have been put on hold by some clients, particularly those in the energy sector who have felt the impact of falling oil revenues most keenly. And some schools report a drop in corporate financing for their MBAs with fees paid privately instead. But rather than dropping off it seems that opportunities in executive education are evolving with companies becoming more discerning about the kind of training that they want for their employees. Creating and delivering this invariably requires the support of business schools, universities or professional service firms and will ultimately add to the depth and number of options available, which can only be a good thing for the region’s expanding economies.

The full article will appear on meed.com soon.

 

 

Northern Powerhouse, energy fears and Tomorrow’s Engineers Week

Some of the more interesting news stories I’ve written in the last couple of weeks include claims that the Northern Powerhouse needs £50bn in infrastructure investment if the plans are to be realised; ICE Scotland revealed its concerns over the dwindling energy generation capability and called for a more robust debate on policy; draft regulations for the Flood Re insurance scheme were approved by the House of Lords and Tomorrow’s Engineers week was celebrated for the third time with new research underpinning activities.

  • Investment in northern infrastructure must rise to £50bn if Northern Powerhouse ambition is to be realised says new IPPR North State of the North report.
  • ICE Scotland’s comprehensive review of infrastructure has highlighted critical energy issues and a £2bn road maintenance backlog. With an excess supply of just 1.2% in 2015/2016 from 4.1% today Scotland is facing major issues in its energy sector said the ICE Scotland State of the Nation report. At the same time a third of Scotland’s roads are considered to be in an “unacceptable” condition with the maintenance backlog standing at £2bn.
  • Two draft statutory instruments that will outline technical aspects of the flood reinsurance scheme and designate Flood Re as the scheme administrator, were approved by the House of Lords following debate of the regulations last week.
  • New research by EngineeringUK published to coincide with Tomorrow’s Engineers Week has found that online imagery is reinforcing outdated gender stereotypes in engineering.

This week I’m looking at sustainable building design, climate change issues and the steel crisis – and I’ll also be looking at a feature on a new kind of crane that is set to rival the all terrain machine.

Oman Rail

Oman’s transport sector is on the brink of a massive $15bn project to build its first ever railway. Middle East Economic Digest asked me to update readers on its progress.

By the end of 2015 construction is scheduled to commence on Oman’s first railway line which will ultimately see the Sultanate’s three deepwater ports at Sohar, Duqm and Salalah connected with each other and the rest of the GCC. In its first phase the new 2,135km network is designed to link in to the GCC network at Al Ain at the Abu Dhabi border with a second link in the north connecting Sohar Port to Khatmat on the border with Fujairah – but this is a more long term proposal.

Oman Rail is progressing its multi staged, dual track, passenger and freight rail project with contracts for the first major 207km section put out to tender in September 2014. Technical bids followed in January 2015 with commercial bids submitted by March. Known as segment one the first package of works includes three elements: a 135km link running east to west between the Port of Sohar and the UAE border in Al Ain; a 34km link running north to Al Buraimi and a further 38km spur to a new railway yard north of Sohar.

Segment 1

The full article will appear in MEED next week

Telling my son about the refugee crisis

Syrian Kurdish refugees cross into Turkey from Syria, near the town of Kobani. This is where the Kurdi family are understood to have come from. UNHCR / I. Prickett
Syrian Kurdish refugees cross into Turkey from Syria, near the town of Kobani. This is where the Kurdi family are understood to have come from.
Photo Credit: UNHCR / I. Prickett

My six year old saw me looking at the heartbreaking image of the three year old boy who drowned during a perilous voyage to Europe. “Is that boy dead?” he asked. For a split second I thought about making up a lie that would be easier for him to process. But I decided that sometimes life’s lessons are better taught reactively. “Yes,” I said.

“What happened to him, did he drown?” he said. I sat him on my knee and took a deep breath. “He did drown. He was trying to get to Europe to find a safe place to live but his boat capsized.”

“Where are his Mum and Dad?” he asked. I told him that I didn’t know. He looked away then. I told him that the boy lived in a place where there was a war, where people were fighting and he and his family were trying to get away. I told my son that he is lucky to live somewhere that is at peace and that the little boy in the photo wanted to come and live somewhere like this. ”Did he have swimming lessons?” asked my six year old. I told him that I didn’t know but that the boy was only three and even if he did have swimming lessons the sea was too cold and the waves too strong for children to be able to stay afloat for very long. The boy wasn’t wearing a life jacket – which tells us so much about the human traffickers that are not only exploiting the tragedy of the displaced people but are multiplying it many, many times over.

Photo Credit: UNHCR Some 186 people from Nigeria, Pakistan, Nepal, Ethiopia, Sudan, Malaysia and Syria are rescued from an over-crowded smugglers’ boat and transferred from the Grecale Navy ship to the San Giusto war ship, as part of the Italian Navy’s Mare Nostrum operation. Among recent and highly visible consequences of conflicts around the world, and the suffering they have caused, has been a dramatic growth in the number of refugees seeking safety by undertaking dangerous sea journeys, including on the Mediterranean. UNHCR / Alfredo D’Amato
Some 186 people from Nigeria, Pakistan, Nepal, Ethiopia, Sudan, Malaysia and Syria are rescued from an over-crowded smugglers’ boat and transferred from the Grecale Navy ship to the San Giusto war ship, as part of the Italian Navy’s Mare Nostrum operation.
Photo credit: UNHCR / Alfredo D’Amato

This was enough sadness for my six year old who got down from my knee and went back outside to play football, which is perhaps what the boy would have done if he had made it across the sea. Media reports later explained that he, his five year old brother, his mother and his father were all heading for Canada. The boy’s aunt lived there and she was waiting for him and his family. But according to The Guardian the government had rejected the asylum application. To get to Canada the family then turned to the ruthless smugglers who took their money and then sent them to their deaths.

I don’t know if I did the right thing in explaining this to my son. But sadly this is the world we live in. I would rather show him the news and teach him compassion than let him watch reality TV and learn that fame means you can launch a perfume and call it a career.

Meanwhile pressure is mounting on the UK government to allow more refugees into the country and on the European Union to create a coordinated approach to the crisis. According to the UN Refugee Agency (UNHCR) 300,000 refugees have tried to cross the Mediterranean so far in 2015 and 2600 of them have died. “The vast majority of those arriving in Greece come from conflict zones like Syria, Iraq or Afghanistan and are simply running for their lives,” said Antonio Guterres, high commissioner for refugees at the UNHCR in a statement today (4th Sept). He called on EU states to come together and create a common response implementing a mass relocation programme with the mandatory participation of all EU member states. This would replace the current piecemeal approach which is exacerbating the situation allowing pressure to mount at crisis points such as Greece and Hungary. “Thousands of refugee parents are risking the lives of their children on unsafe smuggling boats primarily because they have no other choice. European countries – as well as governments in other regions – must make some fundamental changes to allow for larger resettlement and humanitarian admission quotas, expanded visa and sponsorship programmes, scholarships and other ways to enter Europe legally,” said Guterres. “Crucially, family reunification has to become a real, accessible option for many more people than is currently the case. If these mechanisms are expanded and made more efficient, we can reduce the number of those who are forced to risk their lives at sea for lack of alternative options.”

To donate to UNHCR click here.

To write to your local MP and give your views on the UK’s response to this crisis click here.

Things I’ve learned from raising a puppy

Looking after a puppy is not easy. From eating anything within reach, destroying my son’s favourite things and getting a horse to charge at me, here are the most important things I’ve have learned in the past 2 years of Labrador raising.

Drum Roll please……

  1. Don’t leave ANYTHING edible within his reach
Cut cake and hand out party bags - check. Go back to cake for massive Mummy reward slice. Hang on a minute....
Cut cake and hand out party bags – check.
Go back to cake for massive Mummy reward slice.
Hang on a minute….

Not one but two advent calendars were infiltrated and emptied this year, along with all of the chocolates from the Christmas tree. The pirate cake I made my son for his 5th birthday was snaffled along with a whole block of butter and several balloons. The bright side? We never need to sweep under the dining table after meal times.

  1. For the first 18 months keep EVERYTHING you care about away from puppy.

Imagine that after a decade of searching you find the holy grail of work shoes. They are just fabulous. They match all of your clothes, they lengthen your legs, they are stylish and high enough to be impractical yet still enable effortless walking. Even better they appear to be imbued with some sort of magic that both eliminates cankles and creates comfort. They are your best friends. Now imagine them punctuated with puppy teeth marks, and only have one heel. Sigh.

  1. Give puppies their own toys

Or they will play with your son’s teenage mutant ninja turtles and chew on splinter. He might also have a go on one or two of his power rangers. As he gets older male puppies may start humping some of the soft toys. We called this dancing. “Daaaaaad, Mikey is dancing with Iggle Piggle again.”

  1. Get a dog guard for the back of the car

You may not expect the puppy to leap from the back of the car, over the kids, and into the street but if you don’t have a dog guard then the chances are that he will. Like the time Mikey did this on the school run and refused to come back. I didn’t know whether to chase the dog and leave the kids in the car or leave the dog and take the kids to school first. Then the eldest child got out and started to chase Mikey who then darted out in front of some poor woman’s car. He then ran into several gardens, dashing through flower beds and barking. Eventually a builder caught him and I had to drag him back to the car as he still refused to come with me. The whole thing still makes me feel a bit sick. I’m not sure if this is shame over the public mayhem, fear of what might have happened or guilt for the small evil part of me that for a second wished the car had hit him so that I could relinquish the significant responsibility of being a puppy owner.

I love him really
I love him really
  1. Secure your garden

We thought that ours was secure, until he found a spot where a mound of earth lifted the ground level high enough for him to jump the fence and visit the neighbours. And then on the other side he found a gap large enough for him to contort himself through. There was also the time that he threw caution to the wind and jumped over two 4ft fences at the back so that he could visit the cows on the other side. Leaping the second fence saw him drag his belly over barbed wire leaving a nasty cut. And then a cow kicked him. Yet still he would not come home – despite me rattling his food bowl and showing him his ball and shouting fetch. In the end the cows got bored of him and ignored him and he wandered back where he stood by our fence wimpering. He was too heavy and awkward for me to lift over so I put his lead on and tied him up with some water knowing that the husband would be back shortly. My son still refers to it as “The day you tied the dog to the fence because he was naughty.”

  1. Don’t let dogs off the lead around grazing animals
One minute he was right in front of me, the next he was in front of 30 sheep.
One minute he was right in front of me, the next he was in front of 30 sheep.

One day the dog made a run for it while walking through the fields behind our house. I couldn’t see where he had gone but after about 10 minutes I started to hear him barking. I climbed over fence after fence feeling like Bear Grylls on a tracking expedition, until I eventually found him terrorising 30 sheep in the corner of a field. As I went in to grab him the sheep began scraping their hooves. Do sheep have hooves? Was I about to be crushed by a herd of Hampshire Downs? I yelled at them. I yelled at him and dragged him away. This time I had to force myself through a hedge. I had more cuts than the dog.

(To any farmers reading this I now know that sheep worrying is very serious and I am very sorry. It won’t happen again – he is staying on his bloody lead forever)

  1. Don’t slip over and drop the lead while walking past horses

Or the puppy might relish his sudden freedom and start chasing them. Until they get pissed off and turn on him. He is then likely to come running back to Mummy WITH A MASSIVE HORSE CHASING HIM. I backed into the hedge and closed my eyes praying that the horse would do the sensible thing and turn at the last minute. It did. I think I cried a bit afterwards. Husband laughed hysterically.

  1. Worm the puppy regularly, but be prepared because it is VILE

When my husband emotionally blackmailed me into getting a puppy I did not picture collecting his worm infested pooh in a bag whilst heaving. I also did not realise that my husband has a Machiavellian streak that saw him give the dog the first lot of worming tablets a few hours before he left the country. Sneaky bastard.

  1. Know that the dog will decide who is the boss and ignore everyone else
Who needs cushions?
Who needs cushions?

There is nothing more frustrating than the fact that the dog does every single thing that my husband “Norman the dog conqueror” says and nothing that I tell him. This is despite the fact that I took him to training classes, I took up running to give him better exercise, I feed him and I have treats in my pocket permanently. Norman only has to turn his gaze on Mikey and he will do a cartwheel before lying submissively at his feet. It drives me mad.

  1. He loves you more than anything in the world
Not just man's best friend
Not just man’s best friend

In the first year there were definitely more cons than pros to having a puppy. But now that he is two and he has stopped eating furniture and running away the pros have taken over. He is our protector (sleeping on the stairs when my husband is away). He is my son’s best friend and my daughter’s slave. She has nearly as much control over the dog as her Dad.  At two she was telling him to “dit” which he obeyed, and the kids regularly use him as a pillow for watching TV.

We are all healthier thanks to the walks and runs and he is a lesson to all of us in unconditional love. No matter how often we ignore him he is always waiting and grateful for our attention. But if you are planning on getting a puppy be prepared because puppies need a lot of it.