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Economy of scale

The scale of works in the Kingdom of Saudi Arabia is just bigger

Stuart Matthews, Senior Group Editor.
Stuart Matthews, Senior Group Editor.

The scale of works in the Kingdom of Saudi Arabia is just bigger.

It starts with ambition. If you are going to diversify the world’s biggest oil economy you have to do it on a grand scale. Whether seen as a starting point, a symbol, or a catalyst, nothing has a grander scale than the ambition behind the development of Saudi Arabia’s economic cities.

However, the reality of their coming to fruition is mixed. Since the plan was first revealed in 2005, King Abdullah Economic City (KAEC) has made progress, but others among the first six planned cities have stumbled.

A desire to rely on private equity may be one reason, with potential investors playing a wait-and-see game on what would be very long-term projects.

Some international developers have committed to the process, going in with the aim of attracting more regional and international investment, as well as providing the technical know-how. Notably Dubai’s Emaar Properties established its subsidiary, Emaar The Economic City to develop KAEC, while Malaysia’s MMC Corporation was brought in to work with the colossus of KSA construction, the Saudi Binladin Group.

This brings us to another issue of scale; the size of the competition. International hesitation may be partly down to getting a look in when it comes to contracts. Saudi Binladin Group and the ever so slightly less massive Saudi Oger both dominate the Saudi construction industry, while a dozen or so billion dollar titans vie for anything the big two don’t win.

It’s a situation often bemoaned by the smaller players and one that has deterred some contractors from attempting to enter the market. Perhaps the answer lies in partnership rather than competition. Like the old saying goes, if you can’t beat them, join them.

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