Construction is building up steam in the kingdom
With constant economic growth and increasing globalisation, Saudi Arabia has realised the need to invest in its infrastructure and transport facilites. Conrad Egbert takes a look at a country where construction is booming.
Saudi Arabia has around one-fifth of the world's known oil reserves and over the past few years - due to sustained high oil prices - the country's economy has doubled, leading to an increase in construction activity. A dire need for housing and residential establishments due to the country's high birth rate and young population (an estimated 70% of Saudi nationals are under the age of 30) has caused a surge in construction activity and is expected to remain strong for the next few years.
Some analysts have estimated the kingdom will need as many as 2.6 million new homes by 2020 to be able to meet the demand.
This has led Saudi Arabia to pursue a policy of economic diversification aimed at creating jobs in non-oil industries.
Emaar Middle East's US $27 billion (SAR100 billion) King Abdullah Economic City (KAEC) development on the Red Sea coast is an example of this process.
KAEC will be built at a site near Rabigh, 200km northwest of Jeddah. It is the single largest private sector-led project in the region and has six key components: the Sea Port, Industrial Zone, Central Business District (including the Financial District), Resort District, Educational Zone and Residential Communities. Work is progressing according to schedule on the various zones and both the industrial and residential areas have already opened for investors.
A number of contracts have been awarded for the project, including one worth $35 million to Saudi Binladen Group for the construction of a 13km road from the KAEC main gate to the Bay La Sun Village residential community.
Al Saad General Construction also won a $28.4 million contract to build the management and services buildings in phase one of the Industrial Zone of KAEC.
The scope of work included a three-floor administration building, a two-floor light industry building, four-floor dormitory, mosque, electric sub-station and external works such as landscaping, trenches, duct banks and other utilities.
The Industrial Zone spreads over 63 million m2. The zone will host over 2,500 industrialists and manufacturers, with the premises constructed to the highest specifications. Facilities include homes for employees and their families, integrated housing and incubators and light industrial modules to encourage start-up local entrepreneurs.
Other contractors to have been awarded contracts on KAEC since the beginning of this year are Saudi Oger and the International Centre for Commerce and Contracting.
With similar mega-projects in the pipelines, construction firms should have plenty of work and see handsome returns. Building residential and hotel developments in the holy city of Mecca has become a prime focus. Energy and water projects to cater for the expanding population and the new economic cities are also expected to generate a lot of work. Labour is still a problem in the country, and with the major labour supplying countries tightening their laws and contract clauses, sourcing is becoming tougher. And due to rising costs, it is getting difficult to find enough Saudi workers to meet the government's Saudiisation quotas.
With constant economic growth and increasing globalisation, Saudi Arabia has also realised the need to invest in its infrastructure and transport facilities which include the North South Railway project, the Saudi Landbridge project and the Makkah Madinah rail link. Several contracts for the construction of these railway links have been awarded in the past year. The Landbridge will involve construction of 950km of rails between Riyadh and Jeddah, together with the construction of around 115km of new lines between Dammam and Jubail. It will have the capability to move large quantities of cargo over long distances at competitive rates and will offer safe and comfortable overland passenger transport.
The new railway network will help the country become a regional trade hub, accentuated by the developments at the ports. The road network will also see an expansion.
The government is also working on a major privatisation programme that has seen a raft of new water and power projects take off in the kingdom. It it expected to invest around $10 billion in more than 1,000 water projects, including production, transportation, ditribution and ground water treatment.