In Mumbai corporate circles two topics dominate the conversation - India's growth story and how this year will be the "making of the country". The mood is definitely bullish
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But despite all the optimism, experts warn the country's much-lauded growth could be in danger because there are not enough people who can build India Inc.
For the construction sector, the New Year brings grim news. It is already burdened with a shortage of unskilled labour across the country but now the sector is predicted to be further hit by a serious shortfall of skilled workers.
Federation of Indian Chambers of Commerce and Industry (Ficci) and Royal Institution of Chartered Surveyors (Rics) have both warned that the sector is severely starved of proper staff.
By 2020, the construction industry will need 5 million civil engineers, architects and planners but the country is expected to produce fewer than 1 million of these professionals, says Rics.
"The industry has seen a massive increase in the last few years, especially the real estate segment due to the swelling housing needs," said Pooja Gianchandani, the director of skills development at Ficci. "Whether it is the ambitious low-cost housing schemes and programmes of the government or the demand for modern homes, each of these require a pool of specialised and trained manpower that cuts across professionals like engineers, architects, designers and so on."
The construction industry is one of the most critical drivers of growth in India with a compound annual growth rate of 12 per cent.
There is big money at stake. The Indian government is planning to invest US$100 billion (Dh367.31bn) in infrastructure over the next three years, which means huge deals for construction companies.
The experts say companies in the construction and property sector are flooded with orders that should nearly triple their annual sales. But the completion of housing projects within budget and on deadline has become a major issue because of staff shortages across the board.
"The industry needs support service staff, too, to ensure timely completion of projects, which includes skilled workers from transport, logistics, cement, shipping and other industries," Mr Gianchandani says.
Industry watchers say a shortage of skilled resources has been responsible for slowing down construction activity by an average of six months to a year. As a result of this shortage, development firms have been compelled to import architects, designers and planners from countries such as Singapore, Thailand, Australia and New Zealand on handsome salaries, thereby pushing up project costs and affecting profitability. The sector is also suffering from image problems, according to Sachin Sandhir, the managing director of Rics South Asia.
"The lack of quality talent has affected the image of the sector to a fairly large extent," he says. "There is a pressing need to adapt and learn new ways to do business, which in turn will aid all practitioners involved throughout the real estate development process to stay abreast of the knowledge curve and strengthen their ability to survive the paradigm shift taking place in global realty markets."
Lack of staff affects all aspects of construction, not just the housing sector.
The World Bank said in its recent report India had about 110,000 highway engineers. China, by comparison, had five times that number when it started to modernise its road infrastructure in the 1990s.
"As it competes for skilled manpower with other booming sectors, the road industry faces increasing turnover of its experienced staff, dwindling appeal to fresh talent, and several other constraints in the investment climate that inhibit its operations and attractiveness to firms, both domestic and foreign," the bank said in its report.
So why don't people want to work in construction?
Firstly, it's about money.
"India's engineering graduates are frequently lured into better-paid jobs in computer science, information technology and financial services," says Ravi Kant Gupta, a director at MyPropertiesClub.com. "Many fail to find suitable jobs among India's handful of big construction companies and even the medium-sized family owned businesses are unable to offer competitive packages."
Secondly, the industry's needs are not matched by the educational institutions.
"India has too orthodox academic structures with limited room to adapt to innovation and market needs," Mr Gupta says. "Our curriculum does not explicitly capture emerging specialised skill-set requirements and there is a lack of adequately trained faculty that is aware of latest and emerging technologies."
Thirdly, infrastructure projects are too slow-moving for hungry young graduates.
"Another marked reason is the government's failure towards quick implementation of infrastructure projects has affected the job generation and retention in this sector," says E Balaji, the chief executive of Ma Foi Randstad, a recruitment consultancy.
Fourthly, it's about lack of cooperation between people who have different skill sets.
"At present, most of the stakeholders across the built environment operate within their respective domains with limited inter-linkages among themselves," says Mr Sandhir. "This has created different silos of knowledge base for different domains, with little understanding or sharing of knowledge across various facets of the built environment."
But companies are fighting back. Bluechip construction companies such as L&T, Gammon and Godrej have set up their own inhouse training schools to meet the industry demands for quality labour.
And many organisations in the construction sector have begun to partner academic institutions to either train staff for plumbing and masonry work, or to set up inhouse training programmes.
"Although efforts are being made by institutions such as the Construction Industry Development Council and National Skills Development Corporation to train and upgrade the skills of the workers across companies," says Mr Balaji.
But there is much more that can be done.
"The skills gap has to be bridged by improving the skills of the potentially employable class of workers and render them fully employable," Mr Balaji says.
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Company profile
Company: Verity
Date started: May 2021
Founders: Kamal Al-Samarrai, Dina Shoman and Omar Al Sharif
Based: Dubai
Sector: FinTech
Size: four team members
Stage: Intially bootstrapped but recently closed its first pre-seed round of $800,000
Investors: Wamda, VentureSouq, Beyond Capital and regional angel investors
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The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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