Infrastructure in focus: Pushing past challenges, the sector moves toward developments beyond housing

Signs of improvement are beginning to be seen in Jor-dan’s construction sector. Much like other sectors in the country, investment in construction projects has slowed due to geopolitical conditions within the region. Local construction companies, however, are adjusting well to the current climate, and a range of projects are still moving ahead. Jordanian firms are working to secure projects in promising markets nearby, such as Qatar. “With Jordan’s high level of security, the country is well positioned to cater to foreign companies looking to cap-italise on the reconstruction needs,” Hani Hakki, pres-ident of SIGMA Consulting Engineers, told OBG.

BY THE NUMBERS: The construction sector contributed an estimated 4.3% of the kingdom’s total GDP in 2011, according to recent figures provided by the Housing and Urban Development Corporation (HUDC), a gov-ernment body focused on providing affordable hous-ing. While the sector’s added value fell in 2011 from about JD896m ($1.26bn) in 2010 to an estimated JD888m ($1.25bn) a year later, the longer-term trajec-tory for the sector is positive. Indeed, the HUDC notes that the added value of the construction industry jumped by more than 27% between 2008 and 2011.

A total of 6717 building licences were issued in Jor-dan in 2012, representing an area of nearly 39,000 sq metres, according to recent Department of Statistics data. The vast majority of licences were issued to the private sector. New buildings accounted for the greater part of these, with residential dwellings being the most common. Around 70% of new residential buildings that had been granted licences in 2012 were being built in municipalities outside of the greater capital area.

Obtaining a construction permit is easier in Jordan than in a number of nearby countries in the region, including Turkey, Lebanon and Egypt, according to the “Doing Business 2012” report by the World Bank and the International Finance Corporation, the bank’s pri-vate sector arm. The report noted that it took roughly 70 days to procure a permit in Jordan in 2012, which represented a decrease of 22 days when compared to the report’s 2009 estimate. Similarly, the cost to obtain a permit (in terms of the percentage of income per capi-ta) fell by nearly 37% between 2009 and 2012. The num-ber of procedures required to secure a building licence decreased from 20 steps in 2009 to 17 steps in 2012.

BEYOND HOUSING: The energy and utilities sectors are two promising avenues for Jordan’s construction sec-tor. For example, in June 2012 plans to begin construc-tion on a solar cooling project were announced.

The first of its kind in the kingdom, the project will use concentrated sunlight as a means of powering air conditioning and is being implemented through an agreement between the Ministry of Environment and the German Agency for International Cooperation, a gov-ernmental organisation. Funding for the project will be provided by Germany’s Federal Environment Ministry. A growing number of projects in Jordan focus on renew-able energy, in particular solar and wind power, and are mandated through the Renewable Energy and Energy Efficiency Law. Indeed, as many as 34 memoranda of understanding have been signed over since the law’s passage in April 2012 (see Energy chapter).

In the utilities sector, construction is set to begin on the kingdom’s first decentralised wastewater treat-ment plant (DWWTP) at some point in 2013. The pilot project will be built in the north-western town of Salt and will be developed via a joint partnership between the Ministry of Water and Irrigation (MoWI) and the Helmholtz Centre for Environmental Research, a research institute based in Germany. The project will also include the construction of DWWTPs in other parts of the kingdom as well. All of the facilities will be rela-tively small and will serve remote communities.

AL SAMRA: Another water-related construction proj-ect involves the expansion of the country’s largest wastewater treatment plant (WWTP). Initial construc-tion on the Al Samra WWTP was finished in 2008, and expansion work on the facility began in 2012, with a completion date set for 2016. Funding for the project is being provided by a range of bodies, including the Millennium Challenge Corporation, a US government foreign aid organisation; the Amman-based Arab Bank; and a consortium made up of the US-headquartered Morganti Group, France’s Suez Environment and one of Suez Environment’s subsidiaries, Infilco Degremont.

The Al Samra WWTP project involves a number of upgrades including the construction of more treat-ment lines, the addition of a new mechanical dewater-ing system and the expansion of the facility’s sludge line. According to Chadbourne & Parke, a New York-based law firm representing several of the project’s sponsors, the WWTP expansion project should cost about $225m.

MORE WATER: Additional construction work is planned for the southern port city of Aqaba, which is undergo-ing rapid growth and faces increasing water demand.

Indeed, Aqaba Water Company has reported a rise of approximately 127% in its customer base since 2004. As water demand in the city is expected to go up in the coming years, authorities aim to construct a large water desalination plant, known as the Jordan Red Sea Proj-ect (JRSP). The project will be led by JRSP Company, with bids to complete the master planning submitted by several firms in 2012. Although construction was set to commence on the JRSP in early 2013, the project has been delayed for a variety of reasons.

Construction is also under way to further increase water supply to the capital. The Disi-Mudawarra to Amman Water Conveyance System project aims to pro-vide the capital with an average of 100m cu metres of water per year over the next 25 years.

Expected to begin operations at some point in 2013, the project involves building a pipeline from a 12, 000-cu-metre reservoir in southern Jordan to the capital. The pipeline will measure 1600 mm in diameter and stretch as far as 325 km, according to Sweco, the Swedish firm responsible for supervising the project’s construction. The service contract includes assistance in finding a financial solution to implement the proj-ect as well as technical assistance in tender evaluation and preparation of contract.

The project also includes drilling numerous wells, in addition to constructing treatment facilities, service roads, pumping stations and electrical supplies. Part-ners involved in the project include the MoWI and the Disi Water Company, a subsidiary of the Turkish con-struction firm GAMA Energy, which is responsible for the construction of the project. One recent entrant to the project is WellJet, a California-based firm special-ising in well development and rehabilitation.

DAM BUILDING: Water supply capacity in the kingdom is expected to further rise with the addition of two new dams. Construction on the Kufranjah Dam in the north-western governorate of Ajloun is already under way and is expected to be finished in 2014. Meanwhile, designs for the Ibn Hammad Dam in the western Karak governorate have been finalised and the Jordan Valley Authority, a government body within the MoWI set up in the 1970s, was in talks with the Amman-headquar-tered Arab Potash Company over the implementation of the project in late 2012. One further project, announced in April 2013, is the $141m initiative to connect the entire sewer network of East Amman. The project will seek to redress the environmental issues created by the current lack of sewage infrastructure in that part of the capital, and the network’s construc-tion is set to cover a 10-month period.

OTHER UTILITIES: Jordan’s utilities-related construc-tion projects are not entirely focused on water. A con-sortium of companies recently scored an engineering, procurement and construction (EPC) contract to build a new 573-MW power plant in the country. Set to be located around 30 km outside of Amman in Al Man-akher, the facility will be the largest tri-fuel plant in the world, with the capacity to use heavy fuel, light fuel and natural gas as primary energy sources. The consortium awarded the EPC bid is composed of Wärtsilä, a Finnish power source manufacturer and services provider, and South Korea’s Lotte Engineering and Construction. According to Wärtsilä, the overall EPC contract is worth $552m, with its share totalling $334m.

The tender was floated by the Amman Asia Electric Power Company (AAEPCO), which is under the owner-ship of the Mitsubishi Corporation, the Korea Electric Power Corporation and Wärtsilä. The new plant will deliver electricity to Jordan’s National Electric Power Company (NEPCO), which will then send the power via Jordan’s national grid. AAEPCO signed a power pur-chase agreement for 25 years with NEPCO in Septem-ber 2012, and Wärtsilä reported in October 2012 that the power plant’s first phase should be ready in early 2014. The entire facility is set to be on-line by late 2014.

BUILT-UP AREA: One of Jordan’s most significant ongo-ing construction projects is a mixed-use development known as Abdali. Located in the capital, the project is the largest mixed-use development ever built in cen-tral Amman and the biggest project currently under con-struction in the city. The Abdali development covers around 384,000 sq metres and will be composed of res-idential apartments, serviced apartments, retail units, office property, hotels and entertainment spaces. With an estimated investment value of more than $5bn, Abdali will provide a total built-up area (BUA) of over 1.8m sq metres when completed, according to Abdali Investment and Development (Abdali Investments), the project’s developer. Abdali Investments was launched in 2004 as a joint venture between the National Resources and Development Corporation, a govern-ment-owned property developer based in Amman, and Horizon International for Development, an internation-al construction conglomerate (see Real Estate overview).

Construction of the development is being carried out in two phases. The BUA of the first phase will total 1m sq metres, with 36%, or 368,000 sq metres, of BUA as office space. At 290,000 sq metres, residential units will make up the next largest portion (29%) of BUA in the first phase. Retail shops will measure 246,000 sq metres, or 24% of total BUA, and hotel space will cover 111,000 sq metres of BUA. Most of the first phase is scheduled to open by mid-2013, while The Boulevard, a serviced apartment, commercial and retail space providing a BUA of 121,000 sq metres, is set to open by late 2013. Also part of Phase 1, the Abdali Mall, with over 84,000 sq metres of retail BUA, should be completed in 2014.

Launched in 2008, Abdali’s second phase was put on hold following the global financial downturn. Notwith-standing, Abdali has received considerable investment from Kuwait Projects Company, which is the third investor for the project. While Abdali Investments is currently looking to adapt its development model for this stage to better fit current economic conditions, the phase will not be launched again until the first stage is com-plete. When finished, phase 2 will cover 30,000 sq metres of land and supply a total 800,000 sq metres of BUA, as per figures provided by Abdali Investments. Most of the phase will be allocated to residential units, while hotel and commercial space will also be con-structed. Pedestrian and landscaped areas will account for over 42,000 sq metres of BUA in the second phase.

Several construction firms are working on the Abdali development. For example, the Dubai Construction Company, an Amman-headquartered firm and sub-sidiary of the Dubai Contracting Company, was recent-ly awarded the contract to build the W Amman Hotel. A 26-storey tower set to open in 2016, the hotel will be located on the Abdali development and include 280 rooms and 42 serviced apartments, according to Saraya Holdings, the parent company of the project’s devel-oper, Saraya Abdali Real Estate Investment Company. Another Amman-based firm, MID Contracting Compa-ny, has been awarded part of The Boulevard project, and the Jordanian Habash Deir Contracting Company won the contract for the second construction phase of the Abdali Mall in December 2011.

AQABA: Construction is also under way on several large mixed-use projects in the Red Sea city of Aqaba, which is home to many tourism-related projects.

“There are many touristic attributes, but Aqaba has a serious dearth in hotel rooms so the surface of Aqa-ba has barely been scratched,” Emad Kilani, CEO of Al Maabar, an Abu Dhabi-headquartered development company and the developer of Marsa Zayed, told OBG. “In order to realistically attract large tour operators, the city will need at least 7000 hotel rooms.”

The Marsa Zayed project, for example, includes eight hotels with 3000 rooms and a cruise terminal, in addi-tion to about 30,000 residential units and retail, office and recreational space. Building has begun on the development’s first phase, which involves the construc-tion of a residential and retail area (Al Raha Village), a mosque (Sheikh Zayed Masjid) and 200,000 sq metres of infrastructure development. When all phases are completed, Marsa Zayed will provide a BUA of more than 6.4m sq metres, according to Al Maabar. Amman-based Arabtech Jardaneh, an engineering and architecture design firm, was responsible for designing the first phase’s infrastructure, and the contracting firm Hus-sein Atieh & Sons Company – also Amman-based – was awarded a contract to complete the construction of the primary infrastructure. As of the first quarter of 2013 key infrastructure was set to be built by the end of August 2013. The US-based Hill International was awarded a four-year contract to manage the develop-ment of the first phase, which is expected to be com-pleted in 2015. The project management contract is valued at an estimated $3.2m, according to Hill. In November 2012 Jordan’s Central Contracting won a bid to build the Sheikh Zayed Masjid, and a major devel-oper in Aqaba, the Aqaba Development Corporation (ADC), recently indicated that the investment value of the entire Marsa Zayed project stood at roughly $10bn.

Building efforts are also progressing on Aqaba’s Ayla Oasis project. Covering 4300 dunums (equal to 430 ha), construction was recently completed on four man-made seawater lagoons, which have expanded the port city’s shoreline by 17 km, according to the Ayla Oasis Development Company (OASIS), the project’s devel-oper. Construction has also been finished on all major infrastructure – including roads stretching 25 km and utilities networks. Building efforts are now concentrat-ing on the project’s second phase which comprises a Hyatt Regency Hotel with 300 rooms, the 18-hole Greg Norman Golf Course, residential units, a floating mari-na with over 300 berths, and retail space including entertainment centres, restaurants, shops and cafes.

Italy’s Società Italiana per Condotte d’Acqua is car-rying out the project’s infrastructure work. Applied Technology and Management, a US firm, has been con-sulting on the lagoon portion of the project, providing feasibility studies, dry stack planning and design serv-ices. The Italian-based company Grupo Ingemar is responsible for both designing and building the float-ing structures on the Ayla Oasis marina. OASIS estimates the investment value of the lagoon and infrastructure construction to be JD250m ($351.6m), while the next stage of development should cost JD200m ($281.3m).

In addition, Saraya Aqaba, a group involved in the 634,000-sq-metre development of commercial, residen-tial, tourist, recreational and infrastructure facilities in the city, recently received a boost of $632.9m in capi-tal, and will thus resume construction of its $1bn proj-ect, according to a report in The Jordan Times, a local English-language newspaper.

EXPANDING TRANSPORT: Some of the most signifi-cant construction projects in Aqaba are related to expanding transport capabilities. Perhaps most impor-tantly, measures are being taken to construct a new seaport area. The new maritime zone is set to be built in an area where the current industrial seaport oper-ates. Cargo activities at Aqaba’s existing cargo termi-nal, known as the Main Port, will be moved to the new location, and a number of additional facilities will be built there as well. Further construction is also planned for Aqaba’s container and industrial ports, which will both be expanded, and certain container and industri-al activities will be shifted to the new maritime zone.

Several tenders for the new seaport project have already been announced. In 2011, for example, the Dutch construction company BAM International and Jor-dan’s MAG Engineering & Contracting Company set up an agreement with the ADC to complete a maritime works package. The package involves a number of proj-ects including dredging, reclamation and building sev-eral berth structures. A second package focuses on constructing a new grain terminal, in addition to oth-er projects such as a bagging plant, storage silos, ship unloaders, intake and outtake equipment and truck loading facilities. A third package involves developing infrastructure, buildings, yards and sheds.

Aqaba’s airport, the King Hussein International Air-port (KHIA), is also undergoing construction upgrades. In 2012, a rehabilitation project began on the KHIA’s passenger terminal. Due to have been finished by the end of the year, the project’s cost is JD8m ($11.25m), according to the Aqaba Airports Company (AAC), the manager, operator and developer of the KHIA since 2006. In addition, projects with a combined value of JD24m ($33.76m) – such as those focused on devel-oping the airport’s drainage system, taxiways and aprons – are set to begin in 2014. Although the planned launch date is not until 2022, the AAC also intends to build a new terminal building – a project scheduled to be com-pleted in 2025 and estimated to cost JD20m ($28.13m).

BUILDING FOR STEEL: Jordan’s steel industry was launched in the mid-1960s. In its first 30 years, the sec-tor was only composed of three steel companies, accord-ing to Jordan’s Export and Finance Bank. However, one local producer, Jordan Steel (JOST) recently reported that a total of eight rolling steel mills and five melting shops are in operation in the country today. JOST, which was set up in 1993, operates a melting mill with a produc-tion capacity of roughly 300,000 tonnes per year and a rolling mill with a production capacity of about 250,000 tonnes. The firm also runs a wire mesh factory with a production capacity of around 3000 tonnes each year.

The current domestic market is characterised by an undersupply of scrap metal, which has pushed up prices, creating challenges for local melting operations. Demand for local scrap at melting shops is about 700,000 tonnes per annum, yet only around 400,000 tonnes of scrap are available on the local market each year, according to JOST data. The government has recog-nised this and is working to create a better environ-ment for domestic steel producers. For example, a 0% sales tax for scrap took effect at the beginning of 2013 – a move that will lower prices, making it easier for local companies to keep up with foreign competition.

OUTLOOK: As higher fuel costs, labour shortages and a slowdown in government-backed projects pose chal-lenges to Jordan’s construction sector, several large and medium-sized works are under way. Indeed, plans were announced to build the country’s first solar cool-ing plant, while multiple water projects also progress-ing. Despite some oversupply in the commercial real estate market, construction is moving forward on the Abdali, Marsa Zayed, Ayla Oasis and Saraya Aqaba proj-ects – all of which are large, mixed-used developments.