The Kingdom of Saudi Arabia will continue to attract contractors with major construction projects in the near as well as long term, according to Deloitte GCC Powers of Construction report and MEED projects, which analyse the major projects which have been tendered as well as in the pipeline. Among all the six countries in the Gulf Cooperation Council (GCC), Saudi will lead the investments in construction sector providing ample opportunities to contractors.
Of the over $173bn worth of projects under tender in the GCC, $80bn are in Saudi Arabia. This indicates a very healthy short-term pipeline as projects where tenders have been issued are typically expected to be awarded in the next six months. This also reflects the large backlog of contracts delayed by the pandemic and suggests the next 12 months could witness a substantial pick-up in activity levels as the market continues its recovery.
In the long term there are currently more than $2.3 trillion of known planned and un-awarded projects in the pipeline in the GCC. Saudi Arabia has the largest share of this at $1.18 trillion worth of projects. The kingdom is followed by the UAE, with just under $650bn and then Kuwait, Oman and Qatar each with between $125bn and $170bn of future projects.
Looking ahead, it has been projected that Saudi’s construction industry is forecasted to recover in 2021, growing by 2.9% in 2021, having contracted in 2020 due to the global pandemic. The industry is projected to continue to recover over the remainder of the forecast period, growing by four percent between 2022-20256. The construction industry’s output is anticipated to be supported by the government’s focus on the development of overall infrastructure, as well as energy and utilities construction projects, in a bid to diversify the economy.
In supporting this and more recently, Saudi Arabia has launched the National Infrastructure Fund (NIF), to support up to $53 billion (SAR 200 billion) in projects over the next decade7 . There is a robust pipeline of projects which will support the long-term plans as set out in Vision 2030. This commitment was further fortified by the Crown Prince’s announcement in January this year, that announced that the Public Investment Fund (PIF) will invest SAR3 trillion (US $800 billion) on projects in the country over the next decade.
Given the developments in the Kingdom of Saudi Arabia, the cities of the future are truly being built in the Kingdom, whilst embedding sustainable practices. In driving and building the cities of the future, the construction and infrastructure industry will be key which will naturally evolve in meeting the demand and needs of the future, that will continue to transform not only the Kingdom but the construction industry too, leading to change across the wider sector, which will not only help build the future cities of Saudi Arabia but cement further transformation across the construction industry.
Slow recovery in 2021
After the 2020 annus horribilis, the market’s expectation for this year was high. But while it has performed better, the recovery has arguably not been as quick or as strong than might have been hoped. Contract awards for the first nine months of the year were $58bn compared with $69bn for 2020 as a whole. The market is therefore likely to outperform last year but is still going to fall far behind the 2019 number as the region continues to shake off the pandemic’s lingering impact.
There have been some bright spots, however. Qatar is likely to outdo 2019 and 2020 combined thanks to some $15bn of contract awards this year on its massive LNG program. A final push on projects to be completed in time for next years FIFA World Cup has also helped. Similarly, Kuwait, Bahrain and Oman could well match or even exceed the 2019 and 2020 totals. The UAE remains the most disappointing market having awarded just $9.6bn of contracts in the first three quarters of the year. The continuing dearth of new projects in Dubai and ongoing delays in several major oil and gas projects in Abu Dhabi have contributed to the slump.
That said, the recent rise in property prices and the successful launch of a handful of notable villa projects suggest that the emirate may have turned the corner. The opening of the 2020 Expo is also likely to provide a boost to its short-term fortunes. But it is Saudi Arabia where most eyes are currently fixed. The region’s largest economy has in recent months begun to ramp up tendering on its Public Investment Fund (PIF) ‘giga projects’ program, particularly on the Neom, Red Sea, Diriyah Gate and Qiddiya developments as it seeks to turn its ambitious tourism and real estate plans into action on the ground. Since June more than a dozen major contract packages have been released on Neom alone as the estimated $500bn development enters full-scale construction.
(compiled and edited by A. Harikumar)
