Saudi Arabia continues to shelve non-essential projects

12 March 2017

The chairman of the Saudi Association for Contractors says up to 6,000 projects have been scrapped

Despite the promise that 2017 was going to be the year of recovery for Saudi construction, non-essential projects continue to be shelved as the kingdom adjusts to its new economic realities.

The number of small non-essential schemes being cancelled continues to grow across the kingdom, leaving little work for smaller contractors.

The chairman of the Saudi Association for Contractors was recently quoted saying that about 6,000 non-essential projects have been cancelled.

Many of these schemes include small retail and industrial projects that had previously been developed by government ministries and local authorities. Although this will not have a major impact on large contractors, it will, however, be more bad news for smaller firms that cannot compete for large contracts.

Despite this, looking at the kingdom’s future pipeline of schemes, there are promising signs for larger projects in 2017. This is mostly due to the kingdom’s need to build major housing and basic infrastructure schemes to manage the country’s growing population.

Transport also plays a major part of the kingdom’s development ambitions. Nonetheless, government finances are still tight, with Vision 2030 and the National Transformation Programme aiming to continue spending through increased private sector participation.

Housing and education projects have been proposed under the public-private-partnership (PPP) model, while severalnew reforms have been put in place to encourage private sector investment in real estate.

There are currently $5.8bn-worth of schemes in the main contract bidding stage, with $17bn-worth of projects having prequalified main contractors, according to data from regional projects tracker MEED Projects.

In addition to this, many schemes have been scaled back, cancelled or placed on hold, with an unclear timeframe for revival. This includes a pipeline of more than $20bn-worth of schemes that were expected to be awarded in 2016. 

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