Abdullah Abdul Mohsin al-Khodari and Sons blames slow issuance of visas, clients facing funding shortages
Saudi Arabian construction firm Abdullah Abdul Mohsin al-Khodari and Sons said on Tuesday that projects worth 362.2 million riyals ($97 million) had been delayed due to factors ranging from clients' funding shortages to slow visa issuance.
The pace of construction in Saudi Arabia has cooled in the past two years as lower oil prices stall project funding and slow government payments, tightening banking liquidity and squeezing contractors.
Khodari, which last month reported a wider third-quarter net loss, said its total project backlog was 3.01 billion riyals by Sept. 30. That compared to 4.67 billion riyals at the same point of 2015. The firm, a builder of housing and infrastructure, said its total contract value was 7.78 billion riyals.
Delays built up when issuing visas, appointing consultants and making changes to designs, it said. Delays in the review and processing of invoices and work stoppages due to lack of money were also to blame.
Signs that the backlog of payments owed to contractors might be easing have emerged, with Arab News quoting Fahad al-Hammadi, chief of the National Contractors' Committee at the Council of Saudi Chambers, as saying that by Sunday construction firms had received 40 billion riyals in the past two weeks, representing 25 percent of money owed to them by various government agencies.
Fawwaz al-Khodari, chief executive of Khodari, told Al Arabiya television the same day that 10 to 15 percent of the 500 million riyals it was owed by the government had been paid. He expressed optimism that the company would receive 40 to 45 percent of the total outstanding dues by the end of the year in the best case scenario.
Saudi Arabian construction industry has to change and adapt to new conditions.. no longer the flow of guaranteed contracts from Government shall be the source of wealth, but innovative construction for solution partnering and payment by performance must be the new solution..
But, it is not easy to come out of the comfort zone!