[Reprinted with permission of SUSTG.org]
Deloitte’s recently released report, “GCC powers of construction 2012: Five lessons to learn” assesses the current prospects of Saudi Arabia’s construction sector. Deloitte paints a very optimistic picture noting Saudi Arabia’s leading position in the GCC with regard to population and GDP. It also highlights the ambitious spending plans established in the latest 5-year development plan announced in 2010.
In 2010, the Government approved a ﬁve-year SAR 1.44 trillion (USD384 bn) development plan to develop human resources, education, housing and transportation infrastructure as the kingdom seeks faster economic growth, continued diversiﬁcation of its economy away from hydrocarbons, and to create jobs and social development. It is the biggest investment package announced by any of the G20 nations as a percentage of GDP, and for many involved in the GCC construction sector, this can be a massive windfall for their continued success in the largest economy in the GCC.
The construction industry is expected to be at the forefront of the capital programs and will beneﬁt signiﬁcantly in the short term from the large scale investments. The relaxation of home ﬁnancing and economic support will also see large private sector housing initiatives.
The multiplier effect of these programs should result in stimulating growth in the wider construction materials, machineries, utilities and related services as well as retail opportunities.
The report notes that, although Saudi Arabia has a number of large contractors and sufficient bank funding is available, the extent of government investments suggests there will be significant opportunities for international contractors as well.
Saudi Arabia’s immediate challenge with regard to it’s ambitious capital investment programs is to implement them without creating excessive inflationary pressure. In the medium term, Saudi Arabia remains dependent on oil revenues while also needing to address it’s growing domestic energy demands.
Planning and funding of the ongoing operating and maintenance costs could therefore come under pressure. This will create opportunities for quality FM contractors which provide specialized and efﬁcient lifecycle maintenance solutions.
About the Saudi-US Trade Group (SUSTG)
The Saudi-US Trade Group (SUSTG) was established to expand discussion and analysis of the U.S.-Saudi Arabia relationship. SUSTG has a special interest in issues related to economy, trade, commerce, energy and finance and also provides coverage of an extraordinary range of other matters critical to the U.S.-Saudi relationship including political, social and other topics as well as key issues related to intelligence, security and defense.
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