KUALA LUMPUR: Malaysian construction players which had sought refuge in the high-growth markets of the Middle East may now no longer regard the region as a safe haven in the face of the global credit crunch.

Analysts said the local construction companies looking to replenish their order books with jobs particularly from the Middle East were likely to find the road to that region bumpier than it used to be, primarily due to funding issues there.

It was reported recently that the United Arab Emirates’ (UAE) central bank had to set up an emergency funding of 50 billion dirhams (RM48.8 billion) to shore up the liquidity in its domestic money market.

In a research note, ECM Libra said there seemed to be concerns that the lack of liquidity in the money market might affect the funding for many property and construction projects in the UAE, which is currently experiencing an unprecedented construction boom.

“The sense of Middle Eastern states being immune to the global credit crunch seems to be a thing of the past.

“While we believe the Middle Eastern construction market will remain buoyant in the short term, we are now turning cautious over its longer-term prospect as the global financial turmoil continue to unfold while price of crude oil continue to slide,” it said.

AmResearch said bellweather construction and property stocks based in the UAE such as Emaar Properties PJSC, Aldar Properties PJSC and Arabtec Construction LLC had each corrected between 45% and 57% over the last three months.

Although margin pressures might be easing in view of the softening steel prices, construction firms might now face a tightening credit environment that would inevitably hamper their ability to raise capital to spur order book growth.

According to AmResearch, spending on infrastructures, both home and abroad, was expected to slow down significantly as access to financing becomes increasingly difficult.

ECM Libra Research said it was somewhat comforted by the recent RM1.8 billion job secured by Sunway Holdings Bhd in Abu Dhabi amid concerns on whether the construction order flow from the Middle East would continue.

Sunway’s unit Sunway Innopave Sdn Bhd recently secured banking facilities amounting to 225 million dirhams from First Gulf Bank to finance the proposed Arzanah Development-Rihan Heights project in Abu Dhabi.

As the situation might not look rosy in the Middle East, Aseambankers Research said signs were pointing towards a slightly better year for local construction players in 2009 as the pace of new contract awards was expected to pick up on the Ninth Malaysian Plan (9MP) and regional development corridors implementation.

The research house said new jobs creation by both the government and private sectors was estimated to total RM69 billion in 2008, but expectations for 2009 were to top RM73.3 billon.

This will be supported by a higher allocation of RM51.7 billion for government development spending in 2009 versus RM46.3 billion in 2008.

Moreover, Aseambankers Research said of the revised RM230 billion allocation for development spending under the 9MP, only RM90.6 billion or 39% had been spent as at mid-2008, which implied another RM56 billion spending annually until the end of 2010.

Commenting on the cost aspect, the research house said the environment was turning more “accommodative” after an uphill ride, with crude oil prices trending down since July 2008 and steel prices heading south.

“This is a relief as steel can comprise up to 25% of construction costs for selected infrastructure projects,” it said.