A top contractor boss has called on GCC governments to step in and assist the construction industry by implementing an anti-dumping mechanism covering the oil sector.

Khalid Al Zamil, KSA-based Zamil Group managing director strategic planning, said Gulf countries should unite over the issue.

“The governments of the GCC should be nationalistic on a GCC basis,” Al Zamil said during the Arabian World Construction Summit in Abu Dhabi last week. “Such support would be appreciated by all sections of the industry.”

The practice of “dumping” involves the production and sale of large amounts of cut-price oil below market rate. The proposed mechanism would restrict GCC oil exporting nations from “dumping” oil on importing nations.

Supporters of the free-market practice say that dumping provides faltering economies with a quick financial stimulus when required, for example, during recessionary periods, along with a potentially larger market share over the medium-term.

But, not all contractors agreed with Al Zamil’s remarks, with some saying it would restrain trade in the region.

Johan Beerlandt, Besix Group CEO, said: “That’s the way we get into protectionism. The Middle East has become more and more open. I would not like the Middle East to become protectionist.”

Opponents of the practice say it offers only a short-term solution, can threaten domestic markets in importing countries, and can have a negative impact on the short- to mid-term stability of oil prices.

Such a move could provide additional capital for GCC governments to plough into public infrastructural projects. Many contractors are looking to such projects to stay afloat as the private sector grapples with a paralysing lack of liquidity in the banking system.

The price of oil reached a record high of US $147 per barrel in July last year on the back of souring relations between the US and Iran. It has since slumped to around the $43 mark amid plummeting demand.

“There would be no particular benefit at all from dumping,” Samuel Ciszuk, IHS Global Insight MENA energy analyst, told Construction Week. “The current slump has far wider causes then oversupply.

“A deep global recession is lowering demand significantly and on top of this it seems that the rocketing prices in the first half of 2008 caused significant destruction to demand.”

Ciszuk added that the complex nature of world oil markets would mean the potential benefits of dumping were questionable.

He said: “The argument against dumping is that it does not guarantee you a bigger market share at all, because of how the world markets work and because of the relatively inelastic demand of oil.”

by Jamie Stewart
Feb 12, 2009

Source: www.constructionweekonline.com