Saudi construction deals surge in 2011

Saudi Arabia awarded contracts worth nearly SR95.1 billion ($25.3bn) in the third quarter, more than the total value of deals awarded in the first half of the year, the Gulf kingdom’s largest bank reported on Tuesday.

The deals in the third quarter brought the total value of contracts of nearly SR179.5 billion ($47.7 billion) awarded during the first three quarters, National Commercial Bank (NCB) said in a study sent to 'Emirates24|7'.

“The value at which contracts have been awarded far exceeded 2010’s total and has the potential to exceed 2009’s. The pace strongly resembles the performance of 2009,” the study said.

The report showed numerous mega-projects were signed during the third quarter that were balanced across several sectors signifying the strong health of the construction industry. It said the mixed-use real estate sector accounted for about 26% of the third quarter’s value of awarded contracts while the transportation and industrial sectors amounted to 16 per cent and 15 per cent, respectively.

“The SR95.1bn in awarded contracts during Q3’11 outpaced the value of contracts during the first two quarters combined, which were valued at SR84.2bn. Q3’11’s value of awarded contracts represents a 104per cent increase over Q3’10, while the SR179.5bn through the first three quarters of 2011 represents a 125 per cent increase over the same period last year.”

Compared to the first three quarters of 2009, the value of awarded contracts in 2011 is behind by only two per cent, according to the report. But it added the value of awarded contracts during Q3’11 alone represents a 15 per cent increase over Q3’09.

The report showed NCB’s Construction Contract Index (CCI) peaked at 358.6 points in July after approximately SR69.8 billion in contracts were awarded but eased to end the quarter at 316.4 points.

The CCI in Q3’11 grew by 83 per cent compared to Q3’10’s CCI of 172.8 points, it said, adding that the level is the highest reached since the index was established, surpassing the previous mark of 307.9 points that was set in July 2009.

The distribution of awarded contracts by region confirms that the Eastern “The value of awarded contracts is showing no signs of slowing down as mega-projects continue to be awarded in record numbers. As forecast, the value of awarded contracts during H2’11 were valued greater than in H1’11,” NCB said.

It said the SAR95.1bn in contract awards during Q3’11 alone is an indication that the Saudi government continues to place an overwhelming emphasis on capital expenditures to meet its commitment to improve the Kingdom’s physical and social infrastructure capabilities.

“We expect the value of awarded contracts to continue its strong push into Q4’11. The power sector is expected to continue its significant participation in the construction sector as several contracts are anticipated to be awarded during Q4’11 by SEC in excess of SAR10 billion,” the report said.

“Additionally, the recent approval by the cabinet to build a land-bridge to connect Jeddah Islamic Port to Dammam and Jubail seaports though the existing railway network between Riyadh and Dammam, will allow for numerous contract awards beyond 2011 and into 2012.”

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