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MARKET OPPORTUNITIES AND CHALLENGES IN THE CONSTRUCTION INDUSTRY
KINGDOM OF SAUDI ARABIA
SAMER MOBAYED9 March 2011
Introduction
Construction Sector Overview
Construction Opportunities in KSA
XYZ’s Construction Industry
Market Challenges & Possible Overcomes
Agenda
S. MOBAYED / March 2011
• Saudi Arabia represents one of the largest construction market in the Middle East and one of the fastest growing markets in the world.
Introduction
S. MOBAYED / March 2011
• Saudi Arabia represents the largest construction market in the Middle East and one of the fastest growing markets in the world.
• In recent years, record high oil prices and large oil revenues have made it possible for the construction industry to employ extra liquidity for its development.
• King Abdullah announced a $ 430b financial stimulus to guarantee finance for development projects for the next five years.
• This growth will be further supported by the 2011 Saudi budget of $ 154.7b, the largest ever in the history of the country.
Introduction
S. MOBAYED / March 2011
• Saudi Arabia represents the largest construction market in the Middle East and one of the fastest growing markets in the world.
• In recent years, record high oil prices and large oil revenues have made it possible for the construction industry to employ extra liquidity for its development.
• King Abdullah announced a $ 430b financial stimulus to guarantee finance for development projects for the next five years.
• This growth will be further supported by the 2011 Saudi budget of $ 154.7b, the largest ever in the history of the country.
• A large portion of this budget includes investments to improve infrastructure, transport, education and real estate, all of which will require construction related activity.
Introduction
S. MOBAYED / March 2011
Construction Sector Overview
S. MOBAYED / March 2011
• 2011 biggest value of projects signed & planned• 2010– 2015 maintain highest values of projects
• Second’s largest value after UAE • Around 27% from total Gulf Total Projects
Construction Sector Overview
Building Construction sector is the largest between 2010-2015
S. MOBAYED / March 2011
Construction Opportunities in KSA
1- Economic Cities Project
S. MOBAYED / March 2011
2 - Industrial Cities
Jubail Industrial City announces $30b industrial mega projects
Ras Az Zawr Minerals Industrial City – more than $15b contracts signed
Yanbu Industrial City – estimated $10b new refinery
Construction Opportunities in KSA
S. MOBAYED / March 2011
S. MOBAYED / March 2011
3 – Major Economic sectors
Construction Opportunities in KSA
Power & Water :
$40b budget from 2010 – 2015 for IWPPs.
Oil, Gas & Petrochemical :
Saudi Aramco to spend more than $ 124b (2009-2014)
SABIC budgeted $ 21b program to 2015
Tourism :
King Abdulaziz Cultural Center Eastern Province –$ 4b investment
Transportation :
Railway –$ 25b investment
Roads – $ 6.5b budget
Airports & Ports - $ 6.7b budget
4 – Major cities
Jeddah:- Jeddah Mile High Tower - $13.6b- Jeddah Hills Community- $11.2b- Jeddah Gate Development – $ 1.6b
S. MOBAYED / March 2011
Construction Opportunities in KSA
Riyadh:- Sudair City Development – $ 40b- Princess Noura bint AbdulRahman
University for Women – $ 11.5b
Dammam:- Al Khobar Lakes Project – $ 1.2b- Al Marina Project – $ 1b
• Structural Engineering
• Engineering Consultancy
• Quantity Surveying
• Master Planning
• Project & Construction Management
• Design – Urban & Green
• Creative Architecture
• Concrete / Cement
• Steel
• Tiles
• Timber
• Hardware Products
S. MOBAYED / March 2011
5 – Construction Supplies 6 – Areas of Construction
Construction Opportunities in KSA
XYZ MISSION
The mission of XYZ is to accelerate the development of world-class ….. companies to achieve strong positions in global markets resulting in increased national and regional prosperity.
S. MOBAYED / March 2011
XYZ’s Construction Industry
• XYZ’s construction industry is one of the key drivers in the growth of the ……..economy over the last decade.
• The business opportunities for XYZ firms in the construction sector in Saudi Arabia are very strong.
• Athlone-based company XYZ wins €1.5m Saudi deal - As an XYZ client, XYZ initiated a successful joint venture with XYZ.
• X Company Limited and XYZ announced a new joint venture in Saudi Arabia with the XYZ Group, a large Saudi Company.
Possible Overcomes Challenge
- Alliances and collaboration between local and Irish companies
- Regular contact between Irish and Saudi’s to build a “trust” relationship
- Targeting non-government sector Contracts
Challenge 1- Saudi individuals and
establishments are given preference over all other suppliers for Government contracts
- Secure a good JV Saudi partner who can secure visas
- Engage a good local employee or consultancy who has experience of the regional practises
- Be aware of the challenges and be prepared to meet them
Challenge 2Cultural/Regional Differences- Visa restrictions and expatriate
recruitment regulations- Legal and contractual differences- Timeline in securing & completing
projects
S. MOBAYED / March 2011
Major Market Challenges
Possible Overcomes Challenge
- Recruiting & Training Saudi Youth in ……. companies
Challenge 3- Saudization – only few Saudis want
to work in the construction sector due to the tough and unpredictable nature of the job
- Realistic profit margin expectation- Target “niche” markets where
margins can be greater- Appropriate bank facilities to
service the contract- Look at alternative procurement
models
Challenge 4- Tendering for contracts in a very
competitive market
S. MOBAYED / March 2011
Major Market Challenges
Research
Market
Think
Plan Ahead
Act
THANK YOU
SAMER MOBAYEDKingdom of Saudi Arabia
Mobile: +966 55 357 8485Email: samermobayed@hotmail.com