KSA to see $20bn contract falloff in 2012

Expert predicts that Kingdom will see a drop in number of construction and infrastructure contracts awarded this year

Saudi Arabia will see a sharp drop off in the number of construction and infrastructure contracts awarded in the Kingdom in 2012, a leading expert has warned.

Speaking at the Saudi Mega Infrastructure Projects Summit in Riyadh, Edward James, head of MEED Insight, said that he expected $50bn worth of contracts to be awarded in the Kingdom this year, down from $70bn in 2011.

James added that while Saudi Arabia has many projects in the bidding stage, it is still struggling to process them into contract awards. This is due to a combination of slow-decision making by government ministries, logistical issues and contractor constraints.

Despite these issues, James said that he foresees a rebound in the Saudi project market because of rising oil prices and an inherent need for capital investment.

“The long term prognosis is good, and we expect a return to activity of about $70bn a year from 2013 onwards,” he explained.

Despite the slowdown, Saudi Arabia remains the GCC’s largest construction market by a long way. More than half the projects awarded in 2011 came from the country, while some $300bn in projects have been planned.

The major factor driving demand in the kingdom is a burgeoning population that will require more housing than is currently available. Secondly, its underdeveloped infrastructure will need to be upgraded to cope with the population increase, James said.

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