Saudi Arabia has enjoyed four years of strong growth driven by rising oil revenues, and these revenues have stimulated massive project spending. In addition, the Saudi Arabian government has taken important steps to improve the business environment. With further reform anticipated and oil prices expected to remain high, it’s believed that the Kingdom is set for a continued strong period of growth, especially in the construction and infrastructure sectors.
The construction sector in Saudi Arabia is the largest and fastest growing market in the Gulf region (GCC). Ongoing construction projects in the Gulf are valued at $2 trillion, and one-quarter of the developments are located in Saudi Arabia. A number of positive economic, demographic, and geographic factors have combined to produce robust growth in the sector. Aggressive building and construction programs under the 8th Development Plan will further accelerate growth, and are expected to solve the housing shortage in the country. Under this plan, the government expects to build more than 3.2 million housing units with extensive participation by the private sector. The Saudi government has commissioned numerous mega-projects to accelerate the development of its non-oil sector. At the heart of the Saudi government’s economic development plans and initiatives, six mega-economic cities are planned to be built across the Kingdom, near the areas of Tabouk, Medina, Rabigh, Jazan and the Eastern Province. These economic cities are expected to create 1.5 million jobs and accommodate a population of 5.8 million, contributing $250 billion to the GDP and raising Saudi Arabia’s per-capita GDP from $15,000 in 2006 to $35,000 by 2020.
The Kingdom of Saudi Arabia is witnessing a real estate boom; in the first half of the year 2008, several analysts estimated that real estate prices increased by 40%-90% from 2007. The Saudi Arabian government allows foreign ownership of real estate, which increased the demand for houses in the whole country, especially in the big cities. And liberalization of laws regulating the practice of foreign business activities, and property ownership has helped boost local and international investors’ confidence in the real estate market in Saudi Arabia.
Further, the Saudi Arabian government has channeled a significant portion of its oil windfall towards upgrading and building new infrastructure in recent years, increasing the region’s attractiveness to both local and foreign investors. Large-scale infrastructure investments have been made in various fundamental sectors, including energy, utilities, transportation, education and health care.
To improve infrastructure services in the Kingdom, an investment of $800 million has been envisaged to increase the capacity of the Jeddah Islamic Port by 45%. Airports in Riyadh, Jeddah, Medina, Nijran, and Tabuk will be expanded at a cost of $10 billion in order to meet the growing number of passengers, and the requirements of two new domestic airlines. The Civil Aviation Authority has already launched a $1.8 billion upgrade of Jeddah’s King Abdulaziz International Airport (KAIA), which is designed to accommodate the world’s largest aircrafts, and will increase the airport’s annual capacity to 21 million passengers. The Kingdom of Saudi Arabia has also set ambitious plans for additional rail links in the country, and has earmarked $8 billion for new rail expansion projects that will contribute to the rise in private investment in infrastructure, particularly in the transport sector. Finally, the forthcoming $3.5 billion Saudi-Egyptian Causeway, which will provide a road link between Saudi Arabia and Egypt across the Red Sea, is expected to raise Saudi Arabia’s attractiveness to Islamic and non-Islamic visitors.
The Saudi government is gearing up to meet the residential, health, and education needs of its rapidly growing population. Over 3.2 million new housing units will be needed, with over 800,000 for Riyadh alone, as well as hospitals, schools, universities and leisure centers. The country’s electricity sector is to be expanded by 300% over the next two decades. More than 800 new factories are being built, the telecoms sector is being developed, and the water sector is being upgraded, to include more desalination plants, better drinking water networks, and broadened pipeline networks. Hundreds of projects in all are creating unprecedented demand for the latest construction industry machinery, technology and tools, from the world’s leading companies.
The construction element related to power supply development alone is estimated at nearly $1.2 billion. In total, current infrastructure and public sector building programs are valued at some $40 billion. Plans include building 800 new factories, schools, doubling desalination capacity, and increasing electrical generation and distribution. The Ministry of Education has outlined a $4.5 billion plan to build another 4,000 schools.
Most of Saudi Arabia’s mineral wealth still remains unexplored. In the next four years, some $20 billion will be invested in mining projects in the Kingdom of Saudi Arabia, much of it by the state-run Saudi Arabian Company (Ma’aden). The main minerals are gold, phosphates and bauxite. While aluminum smelter and fertilizer plants add value, perhaps the largest value will come with the new freight rail network designed to carry minerals to the coast for export.
There are good opportunities for U.S. companies in the following areas: earth-moving machinery and equipment; construction tools; construction equipment; bathrooms; asphalt machinery; architectural finishes; anti-corrosion products; asphalt plants; architectural services; aluminum products; wall coverings; building automation; ceiling materials; carpentry equipment; cement mixers; cement additives; ceramics; floor coverings; excavation and earth drilling equipment; construction chemicals; safety & security equipment; tools & hardware equipment; rock tools and systems; drill rigs and rock drills; load and haul equipment; continuous mining and tunneling machines; crushers and screens; conveyors and conveyor components; bulk materials handling equipment; breakers and demolition tools; mine automation systems; safety and environmental products; engineering & contracting services; project management services; training services for skilled workers such as electrical and mechanical engineers.
The following are the top 11 Saudi major construction projects: Jeddah Gate Development: Jeddah Gate is a big development in the heart of Jeddah, located on two sites. The first is spread over 413,000m2 and is located along King Abdullah Street and the second is spread over 140,000m2 along Abdullah Al-Suleiman Street close to the main railroad linking the cities of Makkah and Madina to Jeddah. The project will comprise 6,000 residential units, 230,000m2 of commercial space and 75,000m2 of gross rentable area for retailers. Estimated value: US$2 billion.
Haramain High Speed Rail Project: Haramain High Speed Rail Project (HHR) is a rail link project connecting Makkah and Madina via Jeddah. The railway will be a high-speed electrified passenger double line between Makkah, Jeddah, and Madina. The speed of the train is projected at around 360km/h. The design, construction, operation and maintenance of HHR will be executed in two phases. Estimated value: US$2 billion.
Jizan Economic City (JEC): The project calls for construction of the Jizan Economic City located 725 km south of Jeddah by the Red Sea. The city comprises residential, commercial and industrial zones. Estimated value: US$30 billion.
North-South Railway: The North-South Railway is a 2,400km-long railway project. The primary objective of the railway will be to connect bauxite and phosphate mines at Az-Zubairah and Al-Jalamid to processing facilities located at Ras Azur port. The railway will be used for the transportation of minerals and passengers in Saudi Arabia. Estimated value: US $6 billion.
Knowledge Economic City (KEC): The project calls for construction of a Knowledge Economic City (KEC) in Madina, Saudi Arabia. The project’s land area is around 5 million m2 and the total built up area is 9 million m2. The city is designed to help establish a catalyst for knowledge-based industries in Madina; the developer claims it will generate 20,000 new job opportunities. Estimated value: US$8 billion.
Prince Abdulaziz bin Mousaed Economic City: The project calls for construction of Prince Abdulaziz bin Mousaed Economic City in Hail. The city will cover 156 million m2 and will have 12 distinct components for trade and services in sectors such as agriculture and food processing, mining, education, housing, and entertainment. The developers aim to use the strategic location of Hail to build transportation infrastructure consisting of an international airport, a dry port, a supply chain centre and a multi-modal passenger station. Estimated value: US$8 billion.
Landbridge Project: The Landbridge is a 950km-long railway network connecting Jeddah on the Red Sea with Dammam on the Gulf. The project will also include a 115km railway to connect King Fahd Industrial Port with Jubail Industrial City. Estimated value: US$10 billion.
Princess Noura bint Abdulrahman University (PNU): The project calls for construction of a new university for women. The university is expected to cover 8 million m2 and will be located on King Khalid International Airport Road north of Riyadh. The total built up area is around 3 million m2. The university will include administration buildings, 13 faculties, a 700-bed student hospital, laboratories, research centers and a residential area that includes accommodation for students and staff. The capacity of the university is around 26,000 students. Estimated value: US $11.5 billion.
Sudair City Development: Schedule: Modon, Saudi Arabia’s industrial development agency has short listed 10 developers for Sudair City. The winning bidder will be responsible for hiring sub-contractors for the project. Sudair City is a mixed use development that includes residential, commercial, entertainment and educational facilities. Sudair City will span an area of 258 million m2 north of Riyadh. Estimated value: US $40 billion.
King Abdullah Economic City (KAEC): KAEC is a massive development located in Rabigh, Saudi Arabia. The master plan of the city shows the city will be divided into an Industrial Zone, a Residential Zone, a Sea Resort, and a Sea Port. The industrial zone covers an area of 63 million m2. The zone will include facilities to operate and build plants and factories. The residential zone covers an area of 51 million m2 and will include low, mid- and high-rise structures. The sea resort provides a built-up area exceeding 3.5 million m2 for hotels, residential apartments, golf resorts, spas and water sports facilities. The sea port provides 14 million m2 to build a world-class port on Saudi Arabia’s west coast. The port will include 30 berths to serve global trade routes between Asia, Europe and Africa. Estimated value: US $50 billion.
King Abdullah Financial District (KAFD): The King Abdullah Financial District will house the large community of professionals working within the financial sector and related industries, hosting the head quarters of the Capital Market Authority (CMA), the Stock Exchange, banks, financial institutions and other service providers such as accountants, auditors, lawyers, analysts, rating agencies, consultants, and IT providers. Estimated value: US$ 32 billion.