With only eight years remaining until the 2030 finishing line, Saudi Arabia’s Vision 2030 gigaprojects are entering their main construction and delivery phases. Thousands of project packages are in the pipeline that will drive project spending and business opportunities for many years.
As the kingdom emerges from the Covid-19 pandemic, these projects, together with surging oil prices and increasing private sector investment, will deliver an economic boost that will provide opportunities for companies and investors in almost every area of the economy.
The political, institutional and financial reforms of the past six years are also generating prospects in new areas such as renewable energy, advanced technology, transport, shipbuilding, healthcare, food and aerospace.
Delivering such large masterplanned developments introduces huge new challenges for Saudi Arabia.
Riyadh must deliver some $1.18tn of projects by 2030 – about $147bn a year. To achieve this, it must place an estimated $569bn of construction contracts by 2025, according to projects tracker MEED Projects. This represents a 230 per cent increase on the $112bn of awards made in the previous five years.
There are abundant new opportunities for the projects industry and firms with the right skills
It is an unprecedented ramping up of activity and, unless action is taken, Saudi Arabia’s projects industry will be hit in the next 24 months by the nightmare of an overheating market – inflation, delays, disputes, bankruptcies – which could undermine Vision 2030.
Riyadh is exploring ways to increase construction capacity, including plans to develop super-contractors, or by acquiring or investing in local and regional contractors.
But the fastest way to build capacity is to attract international contractors. Riyadh must rip up its construction playbook and restructure the industry to recruit construction firms as partners rather than contractors. The move to deliver projects through partnerships between government sponsors and contractors will entice international players back into the market.
Riyadh has shown that it is ready to innovate. Legislative updates, such as limiting government contracts to Saudi-headquartered companies and the newly launched public-private partnership law, are significant changes in the market.
For more information and sample pages from MEED Insight's Saudi Arabia 2022 report, please click here
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