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Sat 6 Mar 2010 04:00 AM

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KSA project update

Billions of dollars are being spent on development around Saudi Arabia.

KSA project update
The Haramain high-speed rail Project is expected to cost $6 billion.
KSA project update
KAFD at the early stages of construction.
KSA project update
KAEC tops the list of ongoing projects by dollar value.
KSA project update
A model of Princess Nourah Bint Abdulrahman University for Women.

Billions of dollars are being spent on development around Saudi Arabia.

With the Gulf remaining in an economic crisis that has led to numerous projects being frozen or cancelled, Saudi Arabia continues to push ahead with an expansionary fiscal policy, to spend its way out of trouble.

The kingdom's 2010 budget dispelled any lingering doubts about its ambitions, by providing a major boost to the projects sector, with SR260 billion (US $69 billion) of investment in new and existing projects, an increase of 16% on the previous year.

Overall, the 2010 budget includes a 14% increase in spending compared to the 2009 budget, with total expenditure expected to exceed SR540 billion. This included greater funds for infrastructure and double-digit spending increases in key areas of the economy include health, transport, telecoms and water sectors.

Billions of dollars are being spent on development around Saudi Arabia.

Of this figure, SR135 billion (US $36.7 billion) - a quarter of public funds, the largest proportion of the 2010 budget - is allocated to education and training, which represents an increase of 13% over 2009.

The figures only add credence to the view held by a number of contractors in the kingdom that, contrary to the market of the UAE, Saudi Arabia represents a very fertile market for firms.

Joseph Daher, executive vice-president with Jeddah-based Almabani General Contractor said: "This year we will see a continuation of the construction boom we have witnessed in the kingdom in 2008 and 2009.

"Supported by good oil prices and strategy of the Saudi government to expand its infrastructure, airports, universities and colleges, it continues to be a very good market. I do not see any interruption of this boom in 2010 and in fact can see it continuing in 2011 barring circumstances as yet unseen," he said.

Manuel La Guardia - chief estimator with Jeddah-based Saudi Freyssinet echoed Daher's view on the market - although the firm is not as heavily involved with public sector work - and said the market in general is looking better in 2010. "It is getting better certainly, I think it's fair to say it's quite good. We have a number of projects we are looking to submit bids for currently."

Education

This greater emphasis on education has manifested itself in a surge of university schemes aimed at transforming the educational landscape of the kingdom.

Most significant is the massive Princess Nourah bint Abdulrahman University for Women in Riyadh. Covering three square-kilometres, it will include a 700-bed teaching hospital, central library and conference centre together with at least 15 academic faculties. It is one of the largest schemes tendered in the kingdom in 2009.

In a statement, Princess al-Jowhara bint Fahd, the university's president said: "It would double the admission capacity of women students. The university would have 13 colleges, including those for medicine, dentistry, nursing, languages and pharmacy." The university is expected to accommodate 40,000 students when completed.

Construction is pushing ahead, with the kingdom's primary contractors all involved on various aspects of the work. Saudi Oger was awarded the first package in mid-January 2009 worth SR12.5 billion, with Saudi Binladin Group and El-Seif Engineering & Contracting winning subsequent packages valued at SR10 billion and SR8 billion respectively. The contracts cover the majority of construction on site, including low-rise faculty buildings, infrastructure and associated works.

Despite Saudi Arabia's strong financial showing, it has not been immune to the impact on the slowdown on construction. The value of the contracts was subject to a significant reduction as the client, the Finance Ministry demanded re-tendered bids in light of decreasing raw material prices. This lower profit margin remains a concern for contractors moving forward.

A fourth package, valued at SR1.5 billion covering a 11-km monorail network to link the facilities, was awarded to a consortium led by Saudi Binladin Group and Ansaldo STS and AnsaldoBreda, part of Italy's Finmeccanica Group.

The firms will be part of a three-year deal that involves building the monorail - elevated 10 metres above the ground - and supplying the trains. Beirut-based Dar al-Handasah (Shair & Partners) is the consultant on the project.

While these facilities in Riyadh point to a new direction for education in the kingdom, they are following in the footsteps of the massive King Abdullah University of Science & Technology (KAUST).

Stalled projects

Despite the plethora of projects underway, the kingdom has not entirely escaped the damage wrought by the global slowdown. A number of ambitious projects have been delayed or scaled back, in line with a slowdown in investment and more cautious lending from financial institutions.

In 2009, the $20 billion 23 km2 Jeddah Kingdom City project north of Jeddah on the Red Sea coast was forced to delay its Kingdom Tower, which is expected to reach approximately 1km in height.

Saudi Arabia's much-vaunted economic city programme has also come under scrutiny since they were launched by the Saudi Arabian General Investment Authority (Sagia) back in 2005. Riyadh's plans to develop a series of economic cities, to stimulate investment away from oil, highlights its desire to diversify.

While there is no doubt the flagship King Abdullah Economic City (KAEC) will continue to progress - not least the fact it bares the king's name, although it may get a re-tailored masterplan - the fate of the remaining five continues to look precarious.

Freyssinet is also involved with King Abdullah Economic City but LaGuardia said after 12 months of relative inactivity, it is anticipated work will increase this year. "I think they are going to really push on with KAEC this year. Last year there seemed to be a real slowdown. But I heard 2010 things will pick up. Although, it is the end of February and we haven't heard anything just yet."

Of particular concern is Prince Abdulaziz bin Mosaed Economic City, at Hail, which has not progressed as planned. In late 2008, the local developer Rakisa Holdings was replaced by Kuwait's Al-Mal Investment Company - the investment arm of Kuwait's Mohammed Abdulmohsin al-Kharafi Group. The company signed an agreement with Sagia and set up a firm with SR5 billion in capital to develop the city. Little activity has been seen since. Similar doubts are being raised over the future of the remaining four cities at Jizan, Tabuk, Medina and Ras al-Zour.

Situated 80km to the north of Jeddah, KAUST was officially opened by King Abdulaziz al-Saud on 23 September 2009 and represents a major centre of scientific and technological research, which has sprung up from the desert in just three years. To get a scale of the size of construction, at its peak, up to 40,000 workers were on-site.

Unusually for an education-themed real-estate project, the client is the oil-giant Saudi Aramco. Designed by US-based architect HOK, the fast-track project is one of the most significant in the region. With its links to local and international private industry and government institutions, it is at the very centre of the kingdom's strategy to diversify its oil-based economy to a knowledge-based economy.

Rail

Away from education, a number of key infrastructure projects are also progressing. These include the US $6 billion Haramain high-speed rail linking the holy cities of Mecca and Medina. The first construction contract (US $1.8 billion) was awarded to the Al-Rahji alliance in March, and civil works are currently underway.

In February, the Council of Ministers announced it was looking to speed up construction of the 444 km line by forcing the state-owned Public Investment Fund (PIF) to provide funding, by supplying interest-free loans.

The project is geared towards providing an infrastructure capable of coping with the growing influx of religious tourists during the annual Hajj and Umrah pilgrimages. The high-speed line will enable trains to reach speeds of up to 300kph.

The project also has a UK-presence with a joint venture of Foster & Partners and Buro Happold working on the design of four of the five stations on route: at King Abdullah Economic City (KAEC), Jeddah Central Station, Mecca and Medina. The railway will also connect Jeddah International airport.

Security

Equally significant, though more sensitive, is the security fence that is currently under construction, which is designed to circulate the kingdom and detect incursions along the kingdom's border with Iraq, Jordan, Kuwait, Qatar, the UAE, Oman and Yemen, as well as the Gulf and Red Sea coasts.

In 2009, a joint venture of the local Al-Rashid Trading & Contracting Company and the European Aeronautic Defence & Space Company (EADS) won a SR3.4 billion contract to build a 900km security fence along Saudi Arabia's northern border with Iraq. It formed part of a multi-billion dollar project by the Interior Ministry to protect its 6,500km border using radar-based technology.

The same consortium secured the follow-up SR2bn contract for the second phase in July 2009. Other bidders for the project were the local Al-Arab Contracting Company (ACC), El-Seif Engineering & Contracting with the US' DRS Technologies, US' Raytheon and local Madaf Trading & Contracting with France's Thales.

Construction in Saudi Arabia is not solely focusing on education and infrastructure, however. Underway in Riyadh is King Abdullah Financial District (KAFD). One of the most prominent projects in the kingdom, the SR36 billion project is being developed Al-Rayadah Investments- the development arm of the Public Pensions Agency (PPA).

Featuring two 300-metre plus towers, the 1.6km2 site in the Al-Khozama district of the city, the development aims to become the Middle East's financial centre and forms a crucial part of the city's regeneration plan. It will be home to the Saudi stock exchange (Tadawul) and Saudi business institutions such as the Al-Rajhi Group, Public Investment Fund (PIF) and Capital Markets Authority (CMA), which regulates the stock markets.

List of top projects: US$

KAEC:35 billion

PrincessNourah Bint Abdulrahman Universityfor Women:11.5 billion

KAFD:10 billion

Haramain high-speed rail:6 billion

Arabian Business: why we're going behind a paywall

MOHAMMED SIRAJUDDIN QURAISHI 9 years ago

EXCELLENT AND USEFUL AND INFORMATIVE NEWS.