Economic Diversification & Upcoming Megaprojects Enhances Construction Industry Prospects in Saudi Arabia


Gurgaon: Ken Research announced its latest publication on,Saudi Arabia 2016 Construction Outlook: Compare Rising Infrastructure Megaprojects Opportunities with Increasing Project Risk”,offer insights on the changing trends and key issues within the Infrastructure and Construction industry in Saudi Arabia. The publication includes an insightful analysis of recent & strategic trends, project financing, project risks & returns, leading players, opportunities and challenges within the Infrastructure and Construction industry in Saudi Arabia. The analysis of the aforementioned trends has been done across main sectors: Real Estate; Transportation; Energy, Industrial & Utilities; and Social Infrastructure,within the industry with comprehensive overview of key sectors: Power sector, Railways sector and Real estate-Mixed Use sector.

Brief Overview of the Construction Industry in Saudi Arabia

A country’s long term growth is largely determined by the pace of its Construction Industry growth. Hence having a robust construction market becomes crucial to overall socio-economic development of a country.Luckily, Saudi Arabia has a strong and huge construction market in the Middle East.Diversification of the overall economy away from oil and gas through expansion of the non-oil based sectors has greatly contributed to the growth of the construction industry in Saudi Arabia.Govt. is coming up with enormous infrastructure and construction projects.

Apart from diversification, growing population and rapid urbanization has further led to increased govt. participation in the industry. An investment budget of USD 44 billion dollars have been announced for transport, telecommunications, water, agriculture and other related infrastructure projects. Within the industry, transport and housing plans are receiving special focus. Also, with a pool of megaprojects, Saudi Arabia’s Construction market has become even more attractive. Of all the megaprojects, three most popular projects are:KA CARE Renew*able Energy Program worth USD 150 billion alone, Saudi Arabia Rail expansion program worth USD 97 billion and KACARE Nuclear Power Reactor worth USD 70 billion. Hence, as can be concluded, apart from transport and residential construction, power and renewable energy source development has become the centre of attention for the Saudi Arabia’s development policy makers. The industry is full of potential growth opportunities for its own expansion as well as to market players. This has made the Saudi Arabia’s construction market, a key market for international companies wishing to enter the Middle East Region.

Key Factors Driving Growth in the Saudi Arabia’s Construction Industry

Construction industry is one of the hugest industries in a country. It provides infrastructural base to other sectors of the economy. Hence, Govt. aim to develop the overall economy ultimately starts with the development of the construction industry. Significant role of govt. along with relevant demand-side and supply-side factors is responsible for the development of the Saudi Arabia’s construction industry.

Some of the key factors driving growth in the industry include:

· Govt. aiming to reduce the dependence of economy on oil and diversify the economic base to include non-oil sectors, acts as a big impetus to the growth of construction industry.

· Increased govt. participation and investment in sectors such as transport, healthcare, education and related infrastructure construction, plays most crucial role for the development of the industry.

· Growing population and rapid urbanization has further increased the demand for strong socio-economic infrastructure. For e.g. Government’s efforts to reduce housing shortage in the country ( White Land Tax Initiative)

· Huge number of upcoming construction projects by the govt. as well as many megaprojects greatly contributes to future growth of the industry.

· Vast opportunities in the construction market is attracting private players both domestic and international, to enter the market, hence expanding the market from suppliers’ side.

Future of Saudi Arabia’s Construction Industry

The robust performance of Saudi Arabia’s Construction Industry in the review period (2010-2015) is expected to continue with even more momentum over the forecast period (2016-2020). With Govt. commitment to diversify the economy along with increasing investment in infrastructure projects, especially a pool of megaprojects, the industry paints a promising future. Looking at sectors within the industry, residential, energy and utilities construction is expected to receive more attention in coming years. Development of renewable energy sources will be area for concern on account of huge & rapid population increase and consequent demand for power and other amenities based on resources with limited availability. With increasing influx of both domestic and foreign companies in the industry, market competitiveness is expected to increase.

However, the govt. and market players have to tackle the risks and challenges, such as, falling oil prices, large budget deficit, economic slowdown and military intervention in Yemen, in order to expand the market to its full potential owing various driving factors and to help market players reap maximum benefits out of it.

Corporate Comm India(CCI Newswire)