Saudi 9-month construction projects at SR80bn

Saudi Arabia awarded nearly SR80 billion worth of construction projects in the first nine months of 2010 and more than half of them were offered in the third quarter, the Gulf Kingdom’s largest bank said on Saturday.

Although the value in the first nine months was far lower than in the same period of last year, it surpassed that during the first nine months of 2008, National Commercial Bank (NCB) said in a study sent to Emirates 24/7.

New contracts awarded in the fourth quarter indicate the construction sector, a key component of the country’s non-oil GDP, would continue to expand in the medium term, NCB said in a five-page construction sector index survey.

“In line with the kingdom’s initiative to expand its infrastructure networks as well develop many of the sectors that impact the construction industry, the investments made by both public and private organizations continue to gain momentum during 2010,” the study said.

“The construction sector is quickly becoming a focal point for the economy as many mega-projects have been and continue to be implemented. Through the first nine months of 2010, the value of awarded contracts in the construction industry has reached approximately SR80 billion.”

It said the amount being spent so far this year serves as a reminder that the construction sector plays a vital role in expanding the kingdom’s non-oil GDP, as has been the case over the past few years.

Reflecting positive growth in the construction sector, the total value of awarded contracts grew during each of the first three quarters of 2010 from SR8.8 billion to SR24.2 billion to SR46.7 billion respectively, the report said.

Compared to the first three quarters of 2009, which experienced a significantly high value of awarded contracts at approximately SR183.4 billion, the value of awarded contracts during the same period in 2010 was close to SR80 billion. “However, compared to the same period in 2008, where the total awarded contracts were valued at SAR71.8 billion, the value of awarded contracts in 2010 is seen to be relatively strong despite the decline from 2009’s level.”

NCB said the first two quarters of 2010 saw its Construction Contracts Index (CCI) drop below the 100 point mark, which may have indicated that the construction sector was not performing at the high level seen in prior years.

“However, as was forecast during the previous two quarterly reports, the CCI saw a significant jump, as it reached 172.8 points by the end of the third quarter. The rise in the CCI was driven by a number of significant mega-projects in heavy spending sectors. Through the first three quarters of 2010, the CCI has gone from 79.02 points to 80.36 points and finally to 172.8 points, respectively.”

The report said the construction sector in Saudi Arabia, the world’s dominant oil power, continues to exhibit strong growth on the back of initiatives that have been set forth by both the public and private organizations.

“The goal to make the kingdom a regional leader in several sectors such as the power, water, infrastructure areas is evident in the scale of mega-projects that have been awarded in 2010 thus far,” it said.

It noted that the recent invitation to bid by Saudi Aramco for the King Abdullah Sports City near Jeddah which is expected to attract more than SAR10 billion worth of investment capital into the project “reflects the goal to diversify investments outside of the petrochemicals and power sectors.”

Other potential contract awards during the fourth quarter of this year includes a residential real estate housing project in the Eastern region headed by the Saudi Binladen Group in the amount of SAR5 billion.

“The construction sector in the Kingdom is expected to continue its momentum into the near to medium-term,” NCB said.

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