With the start of PMV Live just under two weeks away, CMME presents it coverage of the special PMV Live Roundtable that took place in October.
Taking part of a lively discussion was: Putzmeister’s regional director Jens Bawidamann Martin Kirby, managing director, Wolffkran Arabia; Talal Al Mahroos, marketing manager, M H Al Mahroos (brands include: Putzmeister, Genie, Karcher, Yanmar); Abdul Qader Mohamed Al Ali, president, Al Wasit Machinery (brands include: Hyundai, Sumitomo); Nabil Al Zahlawi, managing partner, NFT Cranes (Potain, Orbit); and Nathan Waugh, event director, PMV Live.
The global recession, the Arab Spring, Qatar winning the right to host the FIFA World Cup, the rise of China as a manufacturing powerhouse, the market’s collapse, Saudi’s boom, the rehabilitation of Iraq, engine emission regulations; if the heavy equipment industry had been wearing a sandwich board over the past five years, you wouldn’t be surprised if it had written “THE END IS NIGH” on the front and “…OR IS IT?” on the back. 
Striving to make sense of it all, CMME sat with some of the region’s most experienced, knowledgeable, and, most importantly, most opinionated manufacturers and dealers to gauge what effect the unprecedented events of recent years will have on the industry. As we look forward to 2014, are they expecting doom or boom for the year ahead?
“We all pray that Qatar is moving shortly, we all pray that we get the World Expo,” begins Bawidamann. “We hope Saudi settles a little bit over the next few months as everything is a little slow. Everything was perfect until June, then we had the Holy Month, Ramadan, Eid. Normally everything picks up after Ramadan; full speed ahead.
“Unfortunately a couple of weeks before Ramadan there were new rules and regulations with regard to visa issuing which led to a drastic impact on the Saudi market. Often in the Middle East we think ‘ah! I have an idea!’, then realise we’ve made a mistake a few weeks later.”
Continuing his look at the current situation in the Saudi market he describes problems with the flow of money on the construction chain: “I don’t know how many billions are not flowing and this is the first time we have faced such a situation.”
“As a supplier,” interjects Wolffkran Arabia’s Kirby, “A lot of the main contractors have always experienced cash flow issues getting paid.”
“But not in combination with everything (else),” replies Bawidamann.
NFT first started in the Saudi market before moving across the Gulf. Al Zahlawi sums up the historic difficulties of working in the country.
“Always you’ve worked six months and you’ve slept six months,” he jokes. “Over the last three years there have been a lot of mega projects KAFD, Princess Noura University and we’ve got used to these; there a lot of changes. For example one of our customers got a medical city (project). Everything was awarded and at the last minute, ‘we have problem with the land so we cannot build’. Imagine that you spend money in preparation and suddenly you have to change the location of the project by 45km. It will take three years to move it; the project won’t start; the down payment has not been received. The company is in difficulty.”
The Saudi market has traditionally been dominated by major contractors such as Bin Laden and Saudi Oger but this is starting to change with newer, smaller companies entering the fray.
“In between Bin Laden and Saudi Oger you see a lot of small contractors coming in. There are a lot of new customers coming,” says Zahlawi. “I have seen some of these one or two man private contractors get bigger taking on billion Riyal projects.”
Abdul Qader Mohamed Al Ali, president, Al Wasit Machinery points out the almost monopoly situation is beginning to break down in the Kingdom.
“Bin Laden is full, up to here,” he gestures, “taking the money and passing on the work to sub-contractors. We are talking of tens, hundreds of sub-contractors and they are becoming contractors. I have more than 20 or 30 customers from those people and they have ten billion dirham jobs.”
Lacking the scale of say, Bin Laden, presents problems. Al Ali says that late payment is a major challenge. With finance hard to find, he has to rely on trust when selling equipment.
“In Saudi there is no compensation. He pays or he doesn’t pay you. If I don’t know him and don’t trust him, I say no. They have changed the rules and regulations where before it moved automatically to (the big contractors) now it is more open and everybody has access. Things will hopefully move.”
While Saudi is progressively more open, Waugh explains that hosting advisory panels for The Big-5 Show in Saudi has taught him that the biggest contractors still hold the biggest advantage.
“The jobs are still going to the big contractors. Smaller contractors don’t have the cash flow to cope with slower payments,” he remarks.
“That was even an issue here (the UAE) when you think about it,” says Kirby. “Tendering for huge projects can tie up a large amount of your cash. There’s the bid and then you are waiting another 12 months for it to be awarded.”
Kirby’s point is particularly pertinent in the UAE where bonds for contracts are often stipulated at 5% – ranking it one of the most expensive places to tender in the world. When losing bidders can wait up to a year to see the bond returned. Wolffkran Arabia’s status as one of the region’s biggest crane rental firms could make it especially exposed to issues with payments. However, he says, for Wolffkran Arabia it remains a market to sell into rather than rent.
“The Saudi market has been very good for the company, picking up slack when the market slowed elsewhere,” he says. “We don’t really see the big payment issues with the big contractors. In Makkah most of the cranes you see there are the Wolff. We’ve been fortunate.”
“80% of our turnover in the Middle East is in Saudi Arabia,” adds Al Zahlawi. “We did not leave the market. Every city has our cranes.
It is a huge market but it is easy to operate from the UAE. If you receive any goods in Jeddah you need two to three weeks to clear it. If I receive it in Jebel Ali, I can put it on a truck and have it there within 24 hours.”
Stayed tune for more from the PMV Live Roundtable as CMME will continues to preview this month’s big event later this month. Up next the UAE market and what the Expo 2020 could mean.
