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Saudi construction boom to maintain momentum
Published in The Saudi Gazette on 07 - 05 - 2012

The construction sector will continue its significant contribution to Saudi Arabia's economy and the flow of awarded construction contracts will remain undisturbed in 2012 as the demand for improved infrastructure still remains a priority, the National Commercial Bank (NCB) said in its "Construction Contracts Index (CCI)" for the first quarter of 2012.
The performance of the sector during Q1'12 showed that 2012 "will continue to sustain the construction boom." The plethora of public funding of projects toward infrastructure related construction is aimed at alleviating most of the shortfalls in basic services while accommodating the future needs of a rapidly growing population, the study noted.
The Q1 Index said the value of awarded contracts during the first quarter of 2012 continued unperturbed, signaling a strong start in awarded contracts for the year, the report said, reflecting a significant shift away from the typical lull that occurs during the first half of the year.
The education, roads, healthcare and urban development sectors which were sectors that were highlighted in the Kingdom's 2012 budget, contributed to the fast start as a result of considerable injections by the government to deploy its capital expenditures.
Those sectors alone accounted for more than SR15 billion or 30 percent of the total value of awarded contracts. Anchor sectors, such as the petrochemical, power and industrial sectors accounted for more than SR23 billion or 44 percent of the total value of awarded con-tracts.
Given the government's plan to increase capital expenditures for 2012, the study said the Kingdom's strategic goals to develop its non-oil sector will likely encourage heavy investments into the hospitality, healthcare and education sectors for years to come.
In addition to the significant spending in the areas high-lighted in the 2012 budget, "we expect the petrochemical and power sectors to continue to carry the heavy load of awarded contracts throughout the year," NCB said in the study.
Moreover, the recent approval of six mega industrial expansion projects by the Royal Commission for Jubail and Yanbu in the amount of SR21.6 billion will initiate numerous contract awards in the short-term, it noted.
The SR52.2 billion in awarded contracts during Q1'12 reflects a slight increase compared to Q1'11 where approximately SR49.7 billion in construction contracts were awarded.
The CCI rebounded from January's 312.45 points by gradually increasing to 329.07 and 349.03 during February and March, respectively. The CCI was sustained by the first quarter's strong performance coupled with an impressive run of numerous mega projects that were awarded at the conclusion of 2011. Furthermore, the CCI recorded a 86 percent boost during Q1'12 compared to Q1'11.
The geographic breakdown of awarded contracts revealed that the Eastern Province commanded the largest share with an overwhelming 36 percent of the total value of awards. Mega projects in the petrochemical and industrial sectors contributed to Eastern Province's commanding share, the Q1 Index noted.
The Makkah region's 22 percent share was mainly attributed to the government's emphasis on urban development in Jeddah as well as the continued focus on developing affordable housing options for its citizens.
The Riyadh region benefited from increased infrastructure related improvements lending to numerous awarded contracts in the power and road sectors. Those contracts allowed the Riyadh region to capture an 15 percent share.


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