OPPORTUNITIES IN THE CONSTRUCTION INDUSTRY KINGDOM OF SAUDI ARABIA & THE UNITED ARAB EMIRATES

1. OPPORTUNITIES IN THE CONSTRUCTION INDUSTRYKINGDOM OF SAUDI ARABIA & THE UNITED ARAB EMIRATES March, 2009

2. Agenda • Introduction • Overview of the Gulf Cooperation Council (GCC) market • Construction Opportunities • Kingdom of Saudi Arabia (KSA) • United Arab Emirates (UAE)

3. Business Environment - GCC • The GCC, a trade bloc involving the six Arab states of the Arabic Gulf, has some of the fastest growing economies in the world, mostly due to booms in oil and natural gas revenues coupled with building and investment booms backed by decades of saved petroleum revenues • The GCC has a desire to establish the region as a financial and tourism centre and to provide job opportunities to the growing young population by establishing new industries • If a Canadian company is established in Saudi Arabia, they will benefit from the government’s membership with the Gulf Co-operation Council (GCC); which will allow them to take advantage of the duty-free arrangements in Bahrain, Oman, Kuwait, Qatar and the UAE • GCC corporate and financial champions are becoming international players as they have an objective to drive expansion beyond the GCC region

4. GCC –AN OVERVIEW • The 6 GCC countries are all rated “investment grades” by Moody’s • Ease of doing business in the GCC ranks better than India, China and Russia (IFC & World Bank ranking) • IFM outlook of 3.5% growth, down from previous forecast • Lower price of oil • Increased financial risk due to limited external access • Global recession impact on tourism and physical trade flow • Total foreign assets of the GCC region - US $1.3 trillion • Fitch Ratings recently estimated Dubai’s total non-bank external debt to be around USD69 billion, or about 85.4% of Dubai’s 2008 GDP EASE OF DOING BUSINESS

5. EDC: Facilitating Canadian Trade EDC is Canada’s official export credit agency (ECA) offering financial solutions to help Canadian exporters and investors expand their international business We work in partnership with the public and private sectors to enhance the visibility of Canadian companies abroad EDC’s financial services include financing, insurance and guarantees EDC’s combined financing and insurance volumes reached $85.8 billion in 2008 (23 % increased over 2007) while serving 8,312 Canadian companies (11% increase)

6. EDC: How We Add Value EDC PRODUCTS Accounts Receivable Insurance Protects Exporters’ accounts receivables against non-payment by their buyers Contract Insurance & Bonding Guarantee of Exporters’ bid and performance bonds or any advances (ie. Down payments) received

7. EDC: How We Add Value, Cont’d MORE EDC PRODUCTS Financing Flexible, medium- or long-term financing for buyers of Canadian capital goods and services including Structured Finance (Project Finance) Canadian foreign investment financing can also be considered Political Risk Insurance Provided for Canadian companies’ investments or assets in a foreign country, as well as protecting project loans from political risks

8. Bad News: Projects Cancelled or Postponed Estimates vary from $75 billion according to a HSBC report issued early February to up to $260 billion worth of property being delayed or cancelled according to Morgan Stanley

9. Announced Projects 2009-2011 GCC Projects by Country ($ Millions) GCC Projects by Sector ($ Millions) Industry Power MEED Projects March 2008

10. Announced Projects 2009-2011 in the UAE and the KSA UAE Projects all Sectors ($ Millions) KSA Projects all Sectors ($ Millions) MEED Project March 2008

11. Why Saudi Arabia? Saudi Arabia During the Downturn: • KSA plans to spend a trillion dollars on infrastructure investment over the next 15 years but officials say spending is contingent on oil prices of $50/barrel • Despite downturn, public infrastructure projects are largely secure and will be an important stimulus tool for the Saudi government Business Environment • Largest economy in the Middle East and North Africa (MENA) region holding 25% of the total Arab GDP. • Construction industry is the largest in the MENA region and the largest non-oil economic industry in KSA, both in residential and industrial building. • Government is attempting to promote growth in the private sector by privatizing industries such as power and telecom. • The Saudi Arabian General Investment Authority (SAGIA) is undertaking a multi-billion (US) dollar development strategy centred around the building of greenfield economic cities around the country. • The economic cities are designed to attract foreign and domestic investment into the downstream energy, transport, industry and knowledge-based sectors. GDP: $600 billion (2008) Annual growth rate: 4.2% (2008) Population: 28.1 millionPer capita GDP: $ 21,300 (2008) Inflation: 10.3% (2008) CANADA – SAUDI ARABIA TRADE (2008) Canadian Exports to Saudi Arabia $ 969 million Canadian Imports from Saudi Arabia $ 2.3 billion As a part of the GCC, KSA has approved duty exemptions covering the import of more than 400 items. The Council has also implemented a customs union which has harmonized customs tariff at 5% of an items value. Source: IMF, StatsCan

12. The Economic Cities – Saudi Arabia

13. King Abdullah Economic City Project comprises: • Sea Port • Capacity of 10 million twenty-foot equivalent Unit (TEU) of containers per year. • Industrial district • Will cover 63 million m². Will consist of industrial and light industries, research and development, business office, services, hospitality, education and community services. • Waterside resort • The number of hotel rooms and suites are proposed to be 25,000 hotel rooms in more than 120 hotels. • Financial island • The Central Business District will offer 3.8 million m² of office space, hotels and mixed-use commercial space. • Residential district • Will include 260,000 apartments and 56,000 villas. This area include residential, commercial and recreational areas. • Education and health zone • Location: 100km north of Jeddah • Size: 168 km² • Cost: 100 billion SAR (US$ 26.6 Billion) • Sponsor: EMAAR • Jobs: 500,000 • Status: Phase 1 completed – Industrial Zone • Phase 2 is next • Completion: estimated between 2025-2030

14. King Abdullah Economic City List of Companies Awarded Contracts in Phase 1 • Aseer – Trading, Tourism and Manufacturing and Contracting Sectors • Al-Fozan Co. – Manufacturing of construction material • Al-Muhaidib – Wholesaling of Building Material • Dallah Al-Baraka – Cleaning and Maintenance – Construction • Khayyat Group – Construction of a cement project • Bin Laden Group – Construction conglomerate awarded the construction of the residential towers • Orascom – Construction, cement plant • AlBabtain – Power and Telecommunications • Saudi Oger – Construction, Printing, Telecommunication, Real Estate Development, Utilities, IT Services

15. EDC Business in KSA • In 2008, EDC’s business volume in Saudi Arabia equated to $ 323 million in support of 102 Canadian companies

16. Why United Arab Emirates? UAE During the Downturn: • Dubai has been hit particularly badly with a floundering real estate market and no oil revenues to fall back on but the federal government is stepping in to aid the emirate • Major government investment will continue to serve as a stimulus tool, with talks of mega-projects particularly in Abu Dhabi Business Environment • Oil windfalls are financing mega infrastructure and development projects; UAE government pushing economic diversification such that non-oil revenuesrepresent 35% of total GDP in 2007. • The construction industry, which as full UAE government backing, has contributed strongly to the UAE’s economic boom,accounting for roughly 7.5% of total GDP in 2007. • Political will to turn Dubai into the region’s main trade centre, including establishment of commercial ‘free zones’ such as Dubai International Financial Centre, Dubai Internet City, and Dubai Media City. • Abu Dhabi is the centre of the construction boom, with huge potential for growth in the coming five years as the nation’s capital is severely underdeveloped and the government has clear intentions to maximise investment in construction as a part of the Abu Dhabi 2030 Plan GDP: $187 billion (2008) Annual growth rate: 8.5% (2008) Population: 4.6 million (2008)Per capita GDP: $40,400 (2008) Inflation: 14.4% (2008) CANADA – UAE TRADE (2008) Canadian Exports to UAE $ 1.3 billion Canadian Imports from UAE $ 330 million As a part of the GCC, UAE has approved duty exemptions covering the import of more than 400 items. The Council has also implemented a customs union which has harmonized customs tariff at 5% of an items value. Source: IMF, StatsCan

17. Abu Dhabi Emirate Top Contribution to UAE GDP 2008

18. Abu Dhabi Master Plan 2030 • Master Plan wouldquadrupling its size, spreading out extensively to both the mainland and neighboring islands, including Saadiyat Island and Al Reem Island • Reduced reliance on the oil sector as a source of economic activity over time • Focus on knowledge-based industries • Sustainable development • Larry Beasley (retired Director of Planning for the City of Vancouver) Special Advisor on City Planning to the government of Abu Dhabi • Pearl Building Rating system – aimed to cut the use of water by 30% and energy by 20%* (substitute to LEED in N.A.) • http://business.abudhabi.ae *Buildings with a sustainability level of 35 per cent will receive one pearl, 45 per cent will earn two pearls, 55 per cent will get three pearls, 65 per cent will receive four pearls and 75 per cent will earn five pearls.

19. Abu Dhabi Growth Chart (2007-2030) Courtesy : Abu Dhabi Government

20. Key Players for Master Plan • The Mubadala Development Company (Mubadala) is a wholly owned investment vehicle of the Government of the Emirate of Abu Dhabi • Mandate to move the Emirate from a single-sector economy into a multi-sector global (healthcare, technology, aerospace, energy, infrastructure and real estate) • Abu Dhabi Future Energy Company (ADFEC) is the government-owned organization mandated to develop and execute Masda Initiative – a zero-waste, zero-carbon, car-less city in the desert • Aldar Properties (Aldar) was established in October 2004 as a real estate developer of retail, residential, commercial, entertainment and hospitality properties. Carries a number of strategic project of the Emirate • Yas Island project, Al Raha Beach development • Other developers: Sorough, Al Quadra, Burooj, Tameer,

21. EDC Business in UAE • In 2008, EDC’s business volume in the UAE equated to $ 737 million supporting 203 Canadian companies.

22. Three Tips for Trading with KSA and UAE While complex markets with a different culture from Canada, entrepreneurs can be prepared to do business there. Experts in the region boil their advice down to three “C’s”: Commitment, Capacity and Contacts. • Commitment: • The first step to success is a triple dose of relationship building by investing a long term market development. Arab hospitality is legendary; they place a high value on loyalty and respect. • Capacity: • The scale of everything in the region is large. Canadian companies need to rethink their strategy in the context as purchase orders are large compared to what Canadians are generally exposed to in North America • Contacts: • You must have a partner or agent to navigate this country. Many people in KSA and UAE want to be an agent and many want to sign a long-term contract. The challenge is to find someone who really understands your business and your expectations.

23. Construction shows • Cityscape, Dubai, 5-8 October 2009 • Attracts regional and international investors, property developers, governmental and development authorities, leading architects, designers, consultants and all senior professionals involved in the property industry. It provides an annual forum that celebrates the very best in real estate, architecture, urban planning and design from around the world. • www.cityscape.ae • The Big 5 exhibition, Dubai, 23- 26 November 2009 • The largest trade show for the Construction industry in the Arabian Gulf. A unique event, combining five major exhibitions under one roof (Building & Construction; Water technologies; Air conditioning; Cleaning & Maintenance; Glass & Metal). Featuring more than 3,200 companies from 53 countries. 58,040 visitors the public and private sectors attended the 2008 event, including key buyers, architects, engineers and contractors. • www.thebig5exhibition.com

24. Useful Links and Contacts • Saudi Arabia • Riyadh Chamber of Commerce and Industry • www.riyadhchamber.com • Jeddah Chamber of Commerce and Industry • www.jcci.org.sa/JCCI/EN • United Arab Emirates • Abu Dhabi Chamber of Commerce and Industry • www.abudhabichamber.ae • services@adcci.gov.ae • Canadian Business Council – Dubai • www.cbc-dubai.com

25. TCS Services • The Canadian Trade Commissioner Service (TCS) helps Canadian companies and organizations do business abroad by increasing revenues and lowering the costs of global business through four key services: • 1. Prepare for International Markets • Determine if you are internationally competitive; Decide on a target market; Collect market and industry information; Improve your international business strategy • Find Qualified Contacts • Potential buyers and partners, Professionals in financial and legal institutions, Technology sources, Agents, Manufacturers' representatives, Foreign regulatory authorities, Foreign investment promotion agencies • 3. Assess Market Potential • Market intelligence; Advice on improving your market strategy • 4. Resolve Problems • Customs clearance and shipping, unfair business treatment, contract bidding, storage and warehousing, insurance coverage and claims, overdue accounts receivable, and more

26. TCS At Home and Abroad 13 regional offices across Canada Vancouver, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, Montreal, Quebec City, Halifax, Moncton, Charlottetown, St John’s Canadian Consulate in Dubai, United Arab Emirates • John Burbridge, Head of Consulate and Senior Trade Commissioner, dubai-td@international.gc.ca Canadian Embassy in Abu Dhabi, United Arab Emirates: • Michael Lazaruk, Senior Trade Commissioner • Imad Arafat, Locally-engaged Trade Commissioner • Abdbi-td@international.gc.ca Canadian Embassy in Riyadh, Saudi Arabia • Jeff Blackstock, Senior Trade Commissioner • Joe Fakhri, Locally-engaged Trade Commissioner • Ryadh-td@international.gc.ca

27. Thank You / Merci Rizwan Haider, Chief Representative – Middle East & Africa International Business Development Group Tel:(613) 598-2760/ Fax:(613) 598-2503 Email:middleeast@edc.ca Marie-Claude Erian, Sector Advisor Infrastructure & Environment Tel:(613) 598-2969/ Fax:(613) 597-8667 Email: inf-env@edc.ca Jean-Francois Croft, Chief Representative – GCC & Yemen based in Abu Dhabi, UAE Tel:(613) 597-7882 Fax:(613) 598-2503 Email: gcc@edc.ca Visit our website at www.edc.ca

28. Appendix 1 Trade Regime in UAE • Imports into UAE can only be undertaken by importers who have appropriate trade license issued by the respective Department of Economics/ Municipality of each Emirate. • The UAE practices a liberal trade policy with no protective tariff or non-tariff barriers on imports. All goods imported into the UAE are subjected to 5% import duty (only tobacco attracts 100% import duty) on c.i.f. value at any point in the UAE. C.i.f. value is normally calculated with reference to commercial invoices covering the relative shipment of the goods. However, the Customs Department of the UAE is not bound to accept the value as in the invoices. In such cases, an estimation of value by the customs will be used for calculation of import duty. At present the Federal government is discussing the possibility to drop the custom tax of 5% and to replace it by a VAT (3 to 5%). • Trade practices in Dubai are in line with normal international standards. All correspondence should be in English or Arabic. As a sophisticated market, full technical specifications should be provided with CIF Local prices with Middle East references. • Payments are normally effected by letter of credit. • There is no corporate tax in the UAE. The only exceptions are oil producing companies and branches of foreign banks. There is also no sales tax or personal tax.