Middle East

Saudi budget: Builders to reap rewards of record spending

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Author: SEAN CRONINThu, 2017-12-21 03:00ID: 1513810652198446000

LONDON: Saudi builders are set to emerge as big winners from the Kingdom’s record budget — with infrastructure spending surging more than 90 percent to SR54 billion.
But one of the biggest increases in the budget allocations published on Tuesday was in the “economic resources” category — which includes projects such as water supply schemes, dams and sewerage.
Spending on such projects has almost trebled to SR105 billion. It represents a dramatic turnaround for a sector that has been hit by massive losses and job cuts as the collapse of the oil price brought some big projects to a halt and major contractors to the brink of insolvency.
“We were expecting a substantial budget for 2018 on the back of better oil revenues in the second half of this year and it will greatly assist with the structural reforms necessary to achieve Vision 2030,” Chris Seymour, managing director of Mott MacDonald Middle East, told Arab News.
Mott MacDonald has been working on infrastructure projects in the Kingdom since the 1970s.
“It should be remembered that the budget as such will not all be spent on capital formation of physical infrastructure assets, where significant private sector investment is also expected as a critical part of the Public Private Partnership (PPP) initiative envisaged for many of the major areas of spend,” added Seymour.
Still, he sees the budget as a positive development for the industry and a “welcome enabler” to push forward the National Transformation Program (NTP) 2020.
That could represent a change of direction for the industry. The collapse of oil prices in 2014 had a devastating impact on the construction sector.
Payment problems trickled down the industry’s supply chain claiming many smaller contractors and suppliers in the process, while the ripples were also felt around the region as professional services serving the sector such as legal practices, architects and consulting engineers also saw work dry up.
But recent measures undertaken to stimulate the economy through heavy infrastructure spending could reverse the fortunes of the beleaguered building sector.
Budget documents released late Tuesday reveal a swathe of spending on major infrastructure — especially in the utilities sector.
The scale of the work planned and underway is reflected in some of the figures, which show that between 2016 and the end of next year the Kingdom will have added about 16,000 km of water mains.
The budget also provides for the construction of 19 dams over the same period and 51 sewage treatment plants.
Investors are already taking note. Al Rajhi Capital Research said in a note that sectors including cement, real estate, construction and building materials stand to benefit from any increase in capital spending.
There are estimated to be about $284.3 billion worth of construction projects in Saudi Arabia in the early stages of development, according to data from BNC Network.

Main category: Saudi ArabiaTags: Saudi Arabia saudi budget 2018 constructionrelated_nodes: Saudi Arabia unveils largest budget in Kingdom’s historySaudi budget: 2018 to be ‘litmus test’ for economySaudi budget: Public set to benefit from municipality allocation increase

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