Steady growth in Saudi Arabia will benefit all

01 January 2010

The danger is that high levels of spending could create a Dubai-style boom, followed by a similar bust

Saudi Arabiaovertook the UAE to become the region’s busiest construction market in 2009, but it is unlikely to repeat the mistakes made by its near neighbour.

According to regional projects tracker MEED Projects, $31bn worth of contract awards have been made in the kingdom over the past year, as the government ploughs ahead with infrastructure and construction projects, compared with just $19.4bn worth of awards in the UAE.

And since Riyadh is planning to increase spending on projects by 16 per cent to SR260bn ($69bn) over the next 12 months, according to the budget released in December, 2010 should be even better for contractors.

Some projects have already been tendered, including the second package on the Mecca-Medina high-speed rail project, estimated to be worth $6bn, the $5bn expansion of King Abdulaziz International airport in Jeddah, and the $400m King Abdulaziz Centre for Knowledge & Culture in the Eastern Province.

The danger is that such high levels of spending could create another Dubai-style construction boom, followed by a similar bust, but this time on a national scale.

However, the Saudi government is well aware of the problems Dubai has faced this year and is planning a far more steady approach to development. Although the scale of investment is large, the Saudi market is also relatively large and should be able to absorb far more spending than Dubai’s.

The authorities are also unlikely to focus their efforts on a narrow range of activities – a trap Dubai fell into when it became overly dependent on real estate.

This approach may mean the boom that some contractors are hoping for will never happen, but it should bring long-term, sustainable growth, which will benefit everyone.

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