NEW SAUDI PROJECTS SPARK CONSTRUCTION DEAL SPREE

The signing of projects and programmes worth USD 15 billion at the Future Investment Initiative (FII) in Riyadh will lead to more construction activity in Saudi Arabia.

Some of the newly signed projects include the USD 700 million investment deal between Saudi Arabian General Investment Authority (SAGIA) and Modular Middle East, a prefabricated building solutions company, aimed at localising supply chain and developing manufacturing facilities in the kingdom, according to the Saudi Press Agency.

SAGIA also signed a USD 300 million agreement with ForDeal, a China-based online shopping platform, to establish a regional distribution hub and localise operations in Saudi Arabia. Also, SAGIA concluded a USD 200 million deal with London-based Shiloh Minerals to develop its local production capacity, as well as invest in potential upstream mining opportunities in the kingdom.

In addition, a USD 110 million investment deal was signed between SAGIA and KME, one of the world’s largest copper producers, to expand its manufacturing capacity into Saudi Arabia.

A number of industrial projects were also undertaken, including a memorandum of understanding between Industrial Clusters and Aeris GmbH to conduct a feasibility study with the aim of investing up to USD 100 million in developing sustainable wind energy capabilities in the country.

Another MoU was signed between Air Products and Chemicals Inc. and ACWA Power to develop the USD 11.45 billion Air Product Qudra project. A USD 110 million agreement between Saudi Aramco and AKER SAS, a Norwegian holding company engaged in offshore fishing, construction and engineering, was also completed.

Boosting its manufacturing capabilities, Saudi Aramco signed a USD 1 billion deal with Tubacex Group, aimed at investing in CRA pipe threading and weld overlay, and cladding manufacturing facilities in the kingdom, according to the Saudi Press Agency.

Research and Markets forecasts Saudi Arabia’s construction sector to register a compounded annual growth rate of 6% over the forecast period 2019-2024.

The research firm estimates more than 5,200 construction projects are currently ongoing in Saudi Arabia at a value of USD 819 billion, which make up around 35% of the total value of active projects across the Gulf region.

“The urban construction sector is the largest contributor to the construction sector expansion, with 3,727 active projects valued at USD 386.4 billion. The utility sector is the second largest contributor with 733 projects worth USD 95.6 billion, followed by transportation with 500 projects valued at USD 156.2 billion,” Research and Markets said.

Construction-related activities accounted for 41 out of 251 new foreign investment licenses issued by the Saudi government, according to a new Invest Saudi report. As many as 31 foreign construction licenses were issued during the same period last year.

Some of the major developments, such as the USD 500 billion NEOM luxury tourism and smart city project, are making rapid progress.

The development of three residential areas housing 30,000 workers has commenced following the awarding of a 10-year finance, build and operate partnership to Al Tamimi Group and Saudi Arabian Trading & Construction Company (SATCO). With this deal, the two national companies become the first private investors in NEOM.

After the announcement of Qiddiya’s Master Plan in June of this year, Six Flags Qiddiya revealed its cutting-edge park design and plans for an exclusive new ride – The Falcon Flight — which will be the longest, tallest, and fastest roller coaster in the world. Qiddiya and Samsung also signed an agreement to collaborate on a broad range of areas from engaging Samsung C&T for the design, engineering and construction of Qiddiya’s sports complex.

The Red Sea Development Company recently announced the start of ground work on Coastal Village, which will offer housing, offices, and high-end facilities to more than 14,000 employees of The Red Sea Project community.

Saudconsult, a local business consultancy firm that specialises in company formation, was tapped to provide consultancy services, apart from supervision and monitoring. The project began in September and is expected to be completed in February 2020.

A new Government Tenders and Procurement Law should also usher in a robust market environment for international contractors and consultants seeking to be appointed on government projects.

The new law will ensure equality between Saudi and foreign contractors as long as appropriate local content requirements are met. The law will also set out a clear mechanism to amend the price of contractors in case of variations in the cost of raw materials, duties, taxes, or other unforeseen circumstances

The government is given the right to pay sub-contractors and sub-suppliers directly.

Finally, authorities have stipulated that special committees will be formed to evaluate grievances submitted by contractors against decisions by the contracting government body.