Saudi Arabia Infrastructure Report Q1 2013
Business Monitor International, November 2012, Pages: 79
BMI View:
Fuelled by a flurry of contract awards in 2012, we expect to see a buoyant 2013 and beyond.
Whilst the sheer size of the Saudi construction industry will force the growth to moderate in the longer term – largely due to base effects – we nevertheless highlight the vast opportunities within the wider construction sector. Funding – unhampered by any financial woes – is unlikely to run dry, nor lose support, as the government's vast infrastructure investment scheme aims to both diversify away from oil,
but also to keep protests at bay and stave off public discontent.
We forecast a robust 7.5% real industry growth for 2013. This reflects the significant number of contracts awarded both in 2011 (140% year-on-year (y-o-y) increase), and in H212 (50% increase y-o-y), as well as increased government spending, which was pledged in response to popular discontent and the Arab Spring. Over the medium term, we forecast healthy annual average growth of 5.6% between 2013 and 2017.
Factors Underlining Bullish Outlook:
- Electricity Revamp: One of the most dynamic sub-sectors in Saudi Arabia continues to be power plants and transmission and distribution (T&D). The US$80bn (excluding nuclear), 10-year investment plan for electricity infrastructure (2008-2018) has led to significant activity in the energy sector. According to BMI forecasts, another 30 gigawatts (GW) will be added to the current estimated capacity of 51,6000 megawatts (MW) by 2020. The exact price tag still varies from one press release to another. Yet, the trend is clear: the Saudi government is ready to pay, and has thus far been true to its word. Saudi Arabia remains the top performing market in BMI’s Middle East and North Africa (MENA) power risk/rewards ratings
(RRRs) with an overall score of 62.69, which is well above the regional average of 50.04. In September 2012, state-owned Saudi Electricity Company awarded the prestigious US$3.12bn contract for the 2.7 gigawatt (GW) power plant in southern Jeddah.
-Transport Upgrade: The transport sector is also booming, especially rail infrastructure – with projects worth US$24bn under way or in the pipeline. To support this flurry of transport contracts and to ease layers of red tape the government set up a Public Transport Commission in October 2012.
- Generous Social Spending: Huge investment into the social infrastructure sector is likewise in the pipeline, in part to appease the populace. Both the SAR1.44trn (US$385bn) Ninth Development Plan
(2010-2014), and social benefit packages worth a total of US$130bn – the latter announced in response to the protests which swept the region during 2011 – are heavy on social infrastructure spending. Healthcare and education investment are also growing, and the potential for private sector participation is increasing.
? Courting Private Partners: The government continues to promote the private sector’s participation in the construction sector. According to the Ministry of Finance’s end of year press release in 2011, around 2,600 government projects worth an estimated US$38.0bn were signed with the private sector over the course of the year. However, the courtship has yet to fully recover from the failed bellwether Saudi Landbridge PPP rail project, which was eventually approved for construction using government funds in October 2011.
- New Mortgage Law: A draft law revolutionising the mortgage market has also been approved in Saudi Arabia, presaging the formation of a more liberalised housing sector. If it goes ahead, and if accompanied by corresponding uptick in banks' willingness to lend, it would be a major development in the sector –
fundamentally changing the approach to home buying in the country, followed by a significant increase in credit growth and construction activity.
- Religious Tourism: The annual Hajj (the Muslim pilgrimage to Mecca) continues to place intense pressure on the Saudi infrastructure framework. To cater for the growing – if yet uneven – demand picture the government announced in H212 a US$16.5bn transport revamp to modernise the transport system in the holy city of Mecca. The scheme is accompanied by plans to increase its current hotel capacity of 53,000 rooms (32,000 of these are in Mecca and Medina), by 60% over the next few years.
BMI Industry View 5
SWOT Analysis 7
Saudi Arabia Infrastructure Industry SWOT 7
Market Overview 8
Competitive Landscape 8
Table: EQS Table 9
Building Materials 10
Middle East and North Africa 10
Cement Forecasts 15
Table: Saudi Arabia Cement Production and Consumption Data, 2010-2016 15
Table: Saudi Arabia Cement Production and Consumption Long Term Forecast, 2015 - 2021 15
Industry Forecast Scenario 17
Table: Saudi Arabia Construction And Infrastructure Industry Data, 2010-2016 17
Table: Saudi Arabia Construction And Infrastructure Long Term Forecast, 2015-2021 17
Construction And Infrastructure Forecast Scenario 19
Transport Infrastructure 23
Transport Infrastructure Outlook and Overview 23
Major Projects Table – Transport 27
Table: Major Projects - Transport 27
Energy And Utilities Infrastructure 34
Energy And Utilities Infrastructure Outlook and Overview 34
Major Projects Table – Energy And Utilities 37
Table: Major Projects – Energy And Utilities 37
Residential/Non-Residential Construction and Social Infrastructure 45
Residential/Non-Residential Building Outlook and Overview 45
Major Projects Table – Residential/Non-Residential Construction and Social Infrastructure 50
Table: Major Projects – Construction And Social Infrastructure 50
Risk/Reward Ratings 55
Saudi Arabia’s Risk/Reward Ratings 55
Rewards 55
Risks 55
Regional Overview 56
Table: Regional Infrastructure Risk/Reward Ratings 60
Company Monitor 61
Al Rajhi Construction Group 61
Saudi Binladin Group (SBG) 62
Global Overview 66
Methodology 73
Industry Forecasts 73
Construction Industry 74
Data Methodology 74
New Infrastructure Data Sub-sectors 74
Construction 75
Capital Investment 76
Construction Sector Employment 77
Infrastructure Risk/Reward Ratings 77
Table: Infrastructure Business Environment Indicators 78
Company Monitor
Al Rajhi Construction Group
Saudi Binladin Group (SBG)
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