A consortium led by Japan's Mitsubishi Heavy Industries has put the brakes on construction work on the Dubai Metro due to a disagreement over payments, one of the firms said Thursday. “We are slowing the pace of the construction for the purpose of negotiating the terms of contracts,” said Toshitaka Kawahara, a spokesman for Obayashi Corp., which is one of the constructors. The consortium also comprises Mitsubishi Corp., Kajima Corp., and Turkey's Yapi Merkezi. A source close to one of the companies said that the construction work appeared to have been temporarily halted. “It seems that the work has stopped on site,” said the source, who declined to be named. A spokesman for Mitsubishi Heavy Industries said the work had “slowed down.” Dubai's Road and Transport Authority however denied Thursday that there has been a slowdown in construction or any delay in payments. “Construction in the project is ongoing as per the timetable. Work is progressing normally in various sites of the project,” the Authority said in a statement issued in Dubai. It also reiterated its commitment to “contractual payment obligations in accordance with progress in construction.” It said that one of the metro stations near Khalifa Tower, the tallest structure on earth, was opened only four days ago. Dubai said in September that the cost of building the metro had nearly doubled to $7.6 billion, adding to the financial troubles of the Gulf emirate, which is battling a serious debt crisis. The Japanese Nikkei business daily reported earlier Thursday that the consortium would suspend construction on the metro as early as Thursday due to a delay in payment from the Dubai government. The consortium members decided to halt the work for the time being to secure back payments from the Dubai government, it said. The global financial crisis has hit the construction sector in Dubai, delaying many projects due to the credit crunch. The emirate narrowly escaped financial catastrophe last month as Abu Dhabi threw it a last-minute lifeline worth $10 billion to pay imminent debt owed by Dubai World. Dubai inaugurated its metro network in September in a bid to cut dependency on cars and ease congestion, becoming the first city in the Gulf to introduce rail as a commuting option. Meanwhile, the UAE has been added to a list of countries most at risk of suffering a sovereign debt crisis this year, a business journal said. The Royal Bank of Scotland Group Plc (RBS) has issued a report to “try and predict sovereign debt crises” and look at areas such as a country's liquidity, solvency, GDP growth, inflation and exchange rate volatility, Arabian Business said. “The inclusion of some credits in the Middle East (Bahrain, Qatar and the UAE) as potentially at risk does perhaps come as something of a surprise, albeit perhaps less so after recent developments in Dubai,” Timothy Ash, head of Europe, Middle East and Africa research at the RBS, was quoted as saying in the report. Some of the new countries added to the “crisis prone” list for 2010 include Bahrain, Iceland, Lebanon and the UAE. The report said the UAE's situation is more complex as Dubai still remains “vulnerable,” but it added that “the UAE central bank, with the support of Abu Dhabi, still has ample resources to back the UAE dirham exchange rate regime.” However, Ash pointed out that “recent large scale external borrowing by quasi-sovereign entities” was the reason for the nation being added to the list of countries that may potentially face debt problems this year. In November, Dubai jittered world markets and media after announcing that it would ask the state-owned conglomerate Dubai World's creditors to agree to a debt moratorium of at least six months as a first step towards restructuring. The RBS, the largest British government-controlled bank, has arranged $2.3 billion, or 17 percent, of Dubai World loans since January 2007, JPMorgan said.
