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Sat 19 Apr 2008 04:00 AM

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Building Saudi

Hugo Berger reports on the current challenges facing the booming construction market in Saudi Arabia.

Hugo Berger reports on the current challenges facing the booming construction market in Saudi Arabia.

Saudi Arabia's construction sector is already so huge that it is even dwarfing that of the UAE.

With a quarter of the world's proven oil reserves, the vast wealth of the region is stimulating private and public sector investment in new construction projects.

The main issue is the safety of crane operators. We provide a lot of training, especially for the large clients, like the Bin Laden Group.

The landmark Kingdom Centre and Al-Faisaliah Tower in Riyadh are both symbols of the country's attempts to be a world leader in futuristic construction.

Jeddah's corniche is undergoing huge development, and soon tenders are expected to go in for the world's tallest tower, which is rumoured to be a mile (1.6km) in height.

And coinciding with the launch of new buildings, the government is planning an expansion of infrastructure.

There are plans for new schools, factories, desalination plants, ports and electrical power stations.

Elsewhere, US $86.6 billion (SAR324.8 billion) has been earmarked to build six new economic cities.

These include plans for an industrial city at Sudair, north of Riyadh, which will be at least 70% bigger than Emaar's King Abdullah Economic City.

The emerging sector of tourism is also starting to provide substantial construction work. A $1 billion seafront project spread over more than 3 million m2 of reclaimed land between Al-Khobar and Dammam is planned to provide hotels, apartments, a marina and a man-made lagoon.

And road projects of a massive scale are on the drawing board.

These include discussions between Egyptian and Saudi authorities on a $3 billion project for a causeway across the Red Sea between Dibah and Sharm Al-Sheikh.

Also in the pipeline is a major expansion of the rail network, with projects such as the $2 billion 2,400km North-South Railway.

Air travellers will also benefit from the boom with the $1.5 billion expansion of King Abdul Aziz International Airport in Jeddah.

The project will increase capacity from 13 to 30 million to cope with the huge number of pilgrims who visit the nearby Holy Cities of Mecca and Medina.

The high price of oil has clearly led to an unprecedented expansion.

But the boom has been coupled with ever-increasing inflation, which hit a 25-year high in February at 8.7%.

This, as well as issues which are common to other countries in the GCC such as skills and material shortages, may hamper the construction boom, some experts predict.

Also, serious concerns have been raised about safety standards in Saudi, with reports showing there are a high number of accidents.

Husain Al Omani, project manager for Al Tamimi, surveyed worker welfare by visiting sites across the country in 2005 and 2006.

His subsequent report, Improving Safety Performance at Construction Sites in Saudi Arabia, found that 25% of contractors did not give new workers orientation; 25% did not provide personal protective equipment and 38% had no trained safety personnel.

He found that in the UK in 2005, there were 3,760 injuries to workers and 28 deaths. In the same year in Saudi there were 102,259 injuries and 493 deaths.

He told Construction Week: "There is very poor safety education, and education about how it will affect the performance of the project or the operations.

"I know that the number of accidents in Saudi Arabia is a lot higher than other countries in the GCC, even though most of them are not perfect."

Elfatih Idris is the general sales manager of Saudi Liebherr, one of the largest crane providers in the country.

He agrees that there were serious safety issues which needed addressing.

He says: "The main issue is the safety of crane operators. We provide a lot of training, especially for the large clients, like the Bin Laden Group.
"We train project managers, operators and the like to explain how to maintain and run the cranes.

"The big companies are very interested in this, but some of the smaller crane operators are not so interested.

Every type of project is moving so fast. There are big expansions of port authorites, new cities, airports and sea ports. It is very, very exciting.

"The small companies are into an economically cheap solution which means they are less interested in training, with some of them allowing untrained people to operate cranes."

A project manager on a major project, who asked not to be named, agreed that more regulations were needed.

He says: "I have been here for about five years, and before I came here there was very little health and safety training going on.

"We have all tried to improve things since then by rationalising and bringing the contractors up to speed, because until recently they had no knowledge whatsoever.

He adds there are technical courses run by the municipality, but few of these include safety training.

"You then wonder why guest workers are run over on bridges or die of heart attacks in their camps because of stress and sunstroke during the day," he adds.

"It's all basic stuff, but we are trying to get things moving forward and have similar standards to elsewhere in the world.

John Gibbs is the health and safety manager for Saudi Arabian Bechtel Company and oversees safety on 60 contracts.

The projects range from infrastructure works, housing, schools, colleges, sea-water cooling plants and gas feed works.

He agrees that safety is one of the biggest issues affecting the country.

He says: "There is an ever-growing demand drawing on a limited supply of engineering and construction companies who typically have limited experience, knowledge and manpower.

"The industry is heavily dependent on foreign labour, who themselves lack the required competency, experience and knowledge.

"The situation locally is further convoluted by the ever-growing industrial markets of India and China actually causing a physical drain of workers and labour back to countries closer to their home and families.

The pace of construction is also an issue the industry has to deal with.

In the public sector alone, some $35 billion worth of projects have been announced.

These include new factories, schools, power stations and desalination plants.

Around 600,000 new homes are to be built in the next four years with many more planned.

The Jeddah Chamber of Commerce and Industry has said that the Kingdom requires at least one million new homes in the next five years to address population growth needs. The Ministry of Education has provided $4 billion to build 4,000 new schools.

Although some experts have predicted that nine million new homes will be needed over the next 20 years to cope with the demand.

Because of the lack of properties, rent costs have increased by 18% in the last year.

And as the number of projects increases, the country is experiencing similar shortages in labour, skills and materials as its neighbour, the UAE.

The situation has become so dire that it is thought many projects have been forced to a standstill because of the scarcity of materials.
Many contractors are thought to be arguing that the rises in price of construction materials will cause them major losses if they proceed with the agreements of their contract terms, while developers insist they stick to their original prices.

Abdulazziz Abdullah Hafini, president, Contractor Committee of the Jeddah Chamber of Commerce and Industry, recently claimed that the contract system needed to be overhauled to give contractors more protection against these price rises.

Idris believes that the pace of construction needed to be reined in to meet the demand situation.

He says: "Every type of project is moving so fast. There are big expansions of port authorities, new cities, airports and sea ports; it is very, very exciting.

"There is also the railway expansion, which we are supplying earth moving machines to.

"But is all being done on a fast-track in a very short period of time.

He says some projects were being given a schedule which was half or a third of the time of elsewhere in the world.

He says: "For example, they have just started building the new King Abdullah University of Science and Technology, and by September they'll be accepting students and it's just flat ground there.

"The projects are bigger than anywhere else in the GCC, and they are struggling to find the staff and equipment.

And he also agrees that lack of materials and machinery could slow the construction boom.

"The industry is booming so much out here that you are facing the problems of equipment supply because the suppliers are sold out for the next few years," he says.

"This is a major problem that even the larger companies cannot cope with the overall size of demand.

"There is a huge demand for mobile cranes. Every day we have inquiries and there is just not the supply there.

"We try to find solutions by supplying used cranes from other jobs.

Gibbs also believes that because of restrictions on foreign investment in real estate, the country may not prove to be as attractive an investment as the UAE.

He says: "In industry and infrastructure, the boom will continue until supply and commissioning of new facilities finally meets the needs of the country or the ceiling of investment funding.

"Unlike Dubai, tourism, its infrastructure and real estate are limited as the market is not open for foreign investors and buyers.

He also says the contract system in the country needed to be overhauled.

"We need a process that will ensure that contracts are awarded on technical competency and not on the lowest price.

But Gibbs believes the sheer wealth of the country would allow it to spend its way out of the current situation.

He says: "Infrastructure and industrial construction will continue to grow. With ever-increasing oil revenues, investment returns and the discovery of new resources, development would appear to be unlimited.

"The Saudi Arabians have a huge desire for additional industrial cities and ports, supported by means of improved communications such as roads, country-wide rail and airports.

And so although Dubai is still regarded by the world as the hub of the Middle East construction industry, as long as the issues are addressed in Saudi, this view may soon be altered.

Just as the Mile High Tower could one day transcend all other skyscrapers in the world, Saudi's construction industry could soon make other GCC countries' building sectors seem paltry by comparison.

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