State drives Saudi construction market

26 January 2012

Saudi government clients award 92 per cent of contracts in 2011

Saudi Arabia retained its position as the region’s biggest construction market in 2011, with $30bn-worth of construction and infrastructure deals awarded during the calendar year. This was more than 57 per cent more than was awarded in the UAE, the region’s second-biggest construction market.

The government remains the dominant construction client in the kingdom, having awarded 91.7 per cent, or $27.5bn, of the total contract awards.

The Saudi Railways Organisation (SRO) was the biggest infrastructure client in 2011, awarding contracts worth more than $9bn for its Haramain Rail project. The largest contract was the estimated $7.9bn deal awarded to a Spanish consortium for the second phase of the rail network.

The biggest civil construction client was the Interior Ministry, having awarded $7.6bn of the construction deals awarded. The Interior Ministry also awarded one of the highest value construction contracts in 2011, the $5.3bn deal awarded for the second phase its security compounds scheme. The Education Ministry was the second-biggest civil construction client, awarding $3.3bn of deals during the year. The largest contract it awarded was the $800m deal for the construction of the medical campus for the King Khalid University in Abha, in the southern part of the kingdom.

Saudi Arabia is continuing to push ahead with plans to expand its airport infrastructure, with the General Authority of Civil Aviation (Gaca) awarding $1.7bn-worth of construction deals in 2011. Its biggest contract award was the $1.5bn construction package awarded to a consortium led by Turkey’s TAV Airports Holding to expand the Medina International airport on a public-private partnership (PPP) basis.

State oil major Saudi Aramco is becoming an increasingly important civil construction client, having awarded $1.1bn-worth of construction and infrastructure deals in 2011. Aramco is increasingly being entrusted by the state to overseen major construction projects. In February, it awarded a SR2bn ($533m) contract for the project to build the commercial buildings for the King Abdullah Petroleum Studies Research Centre (Kapsarc) in Riyadh. In September, it awarded a SR2bn contract for the construction of the 60,000-seat stadium at the King Abdullah Sports City development near Jeddah.

In response to the political unrest that spread throughout the region in 2011, the government created a Housing Ministry, which will be headed by the head of the General Housing Authority (GHA). The new ministry is set to become one of the major state clients in 2012. It has been charged with delivering 500,000 new low-cost houses by 2014 to cope with the expected demand.

The largest private-sector contract award in 2011 was the $1.2bn deal awarded to the local Saudi Binladin Group to build the world’s tallest tower on the outskirts of Jeddah. The local Kingdom Holding Company is developing the tower in partnership with Dubai-based Emaar Properties.

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