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Saudi Arabia aims to jumpstart sluggish economy

June 18, 2017
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Analysis

Saudi Arabia has a pipeline of over $250bn worth of projects under development that have not yet seen their main construction contracts awarded, according to Saudi Arabia 2017: Delivering Vision 2030, a new report from business intelligence service MEED.

According to the report, Saudi Arabia’s pipeline of unawarded projects accounts for about 39 percent of the GCC total, confirming the kingdom’s status as the region’s biggest projects market.

At nearly $82bn worth of projects, the kingdom’s energy sector has the biggest pipeline of unawarded project contracts, accounting for about 33 percent of the national total. The construction sector is the second biggest segment at 29 percent with the transport sector third at 27 percent.

Together, power, construction and transport account for about $225bn of unplaced contracts, almost 89 percent of the total value of contracts in the kingdom that are at the pre-execution stage.

After a year of uncertainty in 2016 as Riyadh formulated its response to lower oil prices, the 225-page report says that 2017 will be the year Saudi Arabia starts to deliver on its promises.

Having drawn up a blueprint for economic transformation in its Vision 2030 document, Riyadh is now setting about implementing those reforms in order to reposition the country for the low oil price era.

Private sector participation

One of the first major steps taken has been to establish the National Centre for Privatisation to plan and oversee the procurement of public-private partnerships (PPPs) and other private sector initiatives. A host of state bodies are now being prepared for part privatisation.

Four PPPs have already been awarded this year to develop airport projects at Yanbu, Taif, Qassim and Hail. Saudi Arabia wants to privatise the operations of all airports by 2020. Advisers have also been enlisted to develop plans to engage private investors in other sectors such as healthcare.

The Ministry of Health is currently seeking advisers to help it draft a framework to build about 3,000 mega and primary medical centres with the participation of the private sector.

Saudi Arabia 2017: Delivering Vision 2030 by MEED identifies new and emerging opportunities for investors and companies in the Middle East’s biggest market. It also highlights the challenges that companies need to be aware of in the kingdom.

Creating a successful partnership between private sector investors and the government will be the critical factor in achieving the targets set out in the Vision and accompanying National Transformation Programme, says the report.

“This report confirms that, despite the challenges we have seen over the past two years as a result of the fall in oil prices, Saudi Arabia continues to be the biggest and most important market in the region,” says MEED Editorial Director Richard Thompson.

“And anybody serious about growing their business in the region needs to understand the fundamental changes taking place in the kingdom,” says Thompson. “In particular, it is vital to understand how Riyadh will implement its plans to increase private sector participation in the implementation of its strategic plans,” he adds.

2017 has also seen the major progress on Saudi Arabia’s ambitious renewable energy programme. Under the National Transformation Programme, the kingdom is targeting 3.45 GW of installed capacity by 2020.

In early February, the Ministry of Energy, Industry & Mineral Resources announced it was establishing the Renewable Energy Project Development Office (Repdo) to head the National Renewable Energy Programme (NREP). The same month, Repdo issued prequalification documents for the first 700MW of solar schemes.

 

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