Issue October 2018
after a successful EIC Autumn Conference, this newsletter issue offers you a short recap of the Workshop held in Izmir. Further, EIC has published its 2017 International Contracts Statistics and the Working Group “Poland” will be proceeding with its efforts for the implementation of a fair price adaptation mechanism.
You may also benefit from FIDIC’s offer of 20% off on participation at their International Contract Users’ Conference in London.
The EIC Team
EIC Autumn 2018 Conference in Izmir: Recap
Successful Conference Workshop
This year’s EIC Autumn Conference was hosted by EIC’s Turkish member, Turkish Contractors Association (TCA) in Çeşme/Izmir. The Conference Workshop revolved around the topic of Alternative Financing Options for Infrastructure Development in the Developing World with presentations by high-level experts from international, bilateral and commercial financing institutions and from leading European construction companies.
The EIC workshop analysed the opportunities for Infrastructure PPP schemes in the developing world, with a specific focus on Africa’s urgent infrastructure development needs. Given the huge potential of Islamic Finance to support infrastructure development in emerging and developing countries, the experts on the panel in Çeşme discussed how to deploy Islamic project finance in a PPP context and how to amend regulatory frameworks to expand Islamic financing for such development.
EIC International Contracts Statistics
Berlin. At its Autumn Conference in Çeşme/Izmir, EIC presented its annual International Contracts Statistics. The table lists international turnover and new contracts of the internationally active European contractors associated with EIC’s Member Federations for the year 2017.
International Turnover amounted to more than €175 billion
In 2017, international turnover of European contractors affiliated to EIC’s Member Federations amounted to more than €176 billion. International turnover within Europe, including Russia, amounted to €76 billion, representing more than 40% of the total. Around one third of the international turnover, i.e. €53 billion, was generated outside of the OECD countries. Revenues in the Middle East amounted to €18 billion, those in Africa to €14 billion, those in Asia to €10 billion and those in Latin America to €9 billion. Finally, turnover in North America added up to €31 billion and in Australia to €16 billion.
In 2017, French contractors continued to lead the field with a total international turnover of more than €37 billion, followed by Turkish and German contractors with each around €28 billion. When looking at business outside of the OECD countries, Turkish international contractors contributed the largest share of turnover with €22 billion, followed by French contractors with €9 billion and Italian contractors with €5 billion.
Please find the Statistics on the EIC Website.
EBRD Conference on FIDIC Forms of Contract
London. On 27 September, EBRD held an Industry Conference titled “Changes to the FIDIC Forms of Contract – Red and Yellow Books” in London. EIC participated in the event with a delegation led by EIC President Philippe Dessoy.
Mr. Dessoy was joined by Members of the EIC Working Group “Contract Conditions”: The Working Group’s Chairman, Mathias Fabich from Porr, Nabeel Khokhar from Strabag, François Doré from Bouygues and Stefan Ciufu-Hayward from Colas.
FIDIC 2017 suite more “prescriptive”
”Golden Principles” welcomed by EIC
EIC welcomed the introduction of new “Golden Principles” which have been developed by FIDIC in order to address the bad habit that, in practice, modifications to the General Conditions are so extensive that the modified contract no longer reflects the FIDIC risk-sharing philosophy. However, concerns were raised as to their enforceability and EIC therefore called on the EBRD to make the “Golden Principles” a condition precedent in its Lending Agreements with Borrowers. Participants also noted the subjectivity of any assessment as to whether a number of the principles have been breached in the first place.
The general conclusion at the EBRD Conference was that it is not yet clear whether the market will embrace the new Editions. Many FIDIC users who are familiar with the 1999 form might not observe a need to switch entirely to the new edition but might propose adding the good ideas to the 1999 forms.
Please find a detailed summary of the Conference insights on the EIC Websit
Joint Working Group “Poland” calls for fair price adaptation mechanism
Warsaw. The FIEC/EIC Working Group “Poland” will meet again on 26 October 2018 in Warsaw to discuss the problem of an unrealistically low price indexation in Polish construction contracts.
FIEC/EIC letter to the European Commission
In reaction to the resistance of the Polish government, FIEC and EIC submitted a joint letter to EU Commissioners Bulc, Bienkowska and Cretu calling on the European Commission to encourage the Polish government to develop a price adjustment mechanism that represents the real market developments. The Commission should also clarify with the Polish government that the current EU public procurement directives specifically allow for price revision clauses under certain conditions (see Directive 2014/24, Art.72).
The FIEC/EIC Working Group “Poland” will convene by the end of this month in order to discuss available options for a pragmatic solution which is fair for both clients and contractors.
Construction 2020 – Update on FTA negotiations
Brussels. As part of ongoing negotiations for free trade agreements, the international trade division at DG GROW require input from various sectors and industries.
Call for input from the Construction Sector
The Construction 2020 Secretariat was tasked to prepare and quarterly update an overview over ongoing FTA negotiations and flag issues of concern to the construction sector.
For this, European Research and Consultancy Agency Ecoris are gathering information, available position papers and other sources by the construction industry. Specifically information on market access issues with a focus on the countries the EU is currently negotiating with is very welcome as there seems to be only little attention paid to these negotiations by the construction sector.
Annual IMF/World Bank Meeting discusses BRI
Bali. On the sidelines of the Annual IMF and World Bank Meetings in Bali, Indonesia, Chinese Finance Vice-Minister Zou Jiayi promised in a panel on 13 October 2018 that China will take care of debt issues in its ambitious Belt and Road foreign investment push.
BRI to diversify finance portfolio
Ms. Zou emphasised that essentially the BRI is not an aid programme but one driven by market forces. China could diversify its Belt and Road loans with more foreign direct investment, public-private partnership and equity investment instead of commercial lending. As Belt and Road projects were financed in a decentralised and in most cases in a commercial way, the Chinese government was encouraging lenders to develop their debt sustainability analytical frameworks.
However, a study published in March by the Centre for Global Development, a Washington-based non-profit think tank, found that the Belt and Road initiative elevates debt risks in several countries, including Pakistan, Djibouti, the Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan.
World Bank study on BRI risks
The World Bank’s director of trade, regional integration and investment climate, Caroline Freund, commented that these countries were the exception and that for most countries the Belt and Road initiative could fill important gaps in infrastructure. At the same time, she noted that there were environmental and social risks as well issues related to procurement and debt that needed to be addressed. The World Bank is currently preparing a study on the Belt and Road initiative’s risks and opportunities scheduled to be released next spring.
FIDIC’s International Contract Users’ Conference 2018
London. FIDIC’s International Contract Users’ Conference 2018 will take place on 04-05 December in London with Contractor & Claims Workshops taking place on 03 December and Modified Contracts & Dispute Resolution Workshops on 06 December.
FIDIC offers 20% off on participation at the conference for EIC newsletter readers. If you are interested in the discount, please follow this link: https://goo.gl/wycKGU
ECV Consultancy presents International Contracts Training Courses
Several Contracts Training Courses are offered by ECV Consultancy. The first course will take place on 22-23 October in Amsterdam on “Comparison of 2017 2nd Edition FIDIC Contracts with 1999 Edition Contracts concentrating on the “Red & Yellow Books”. The second course will take place on 26-27 November in Brussels on “The Practical Application of the 2017 FIDIC “Red, Yellow & Silver Books”.
If you are intrested, please visit this website.