Saudi Arabia's projects market slows in 2012

Speaking recently at the Saudi Mega Infrastructure Projects Summit in Riyadh, Edward James, head of MEED Insight, said he expects $50bn worth of contracts to be awarded in the kingdom this year, down from $70bn in 2011.

He pointed out that while Saudi Arabia has many projects in the bidding stage, it is struggling to process them into contract awards due to a combination of factors that include slow decision-making by government ministries, logistical issues, and contractor constraints.

However, James believes the kingdom's projects market will rebound in the future due to rising oil prices and an inherent need for capital investment. "The long-term prognosis is good, and we expect a return to activity of about $70bn a year from 2013 onward," he said.

Region's largest projects market

Although it has slowed, the kingdom's project market is by far the largest in the region, with more than half of all projects awarded in 2011 and more than $300bn worth of projects planned.

The main factors that are driving demand in the kingdom are the need to provide more housing for the country's rapidly growing population and to improve its relatively undeveloped infrastructure, especially with respect to its transportation and utilities sectors.

The Arab Spring has also served as an impetus to spur Riyadh to increase spending on social infrastructure schemes, and now that high oil prices are enabling the government to increase its capital projects outlay, James said the kingdom has the perfect project market configuration, namely 'a need and the financial ability to meet the need'.

James said that in contrast to some other countries in the Gulf, Saudi Arabia's project market is more diversified and the scale of projects is far larger. "The size of the market means it is for many companies the number one target in the region. However, it should be noted that it remains a difficult market for international contractors, with local firms dominant in many sectors," he noted.

For more information on the Saudi projects market, Meed Insight has prepared an exclusive 100-page report that provides comprehensive data, research and analysis of all key project sectors.
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