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Construction opportunities in Saudi Arabia for UK companies

Saudi Arabia is the largest of the Gulf States with a land mass approximately the size of Western Europe.  It has a population of 26 million which is expected to double in size by 2050. 

The country holds huge potential for UK construction companies.  It is the UK’s largest trade and investment partner in the Middle East, and the UK is the second largest foreign investor in the country.  Currently, there are over 200 UK/Saudi joint ventures that have a total worth of £9.9 billion. 

UK companies that are present in Saudi Arabia include: GlaxoSmithKline; BAE Systems; Shell; Debenhams, and Rolls Royce.  The country has the largest economy in the Middle East and is designated as one of UK trade and Investment’s High Growth Markets in the region.

The global economic crisis has largely unaffected Saudi Arabia. The country has extra liquidity due to a large repatriation and redirection of foreign investment funds from Dubai.  It has invested its oil revenue in capital spending to boost its economy.  To buoy up its construction industry, the government has relaxed its taxation norms for foreign companies, and permitted foreign nationals total ownership of property and projects.   Despite cultural and religious barriers, the Kingdom was ranked 13th in the world for ease of conducting business deals, according to a 2009 report by the World Bank.

Education

Saudi Arabia is the world’s eighth largest spender in the education sector.  Out of the 2009 budget, £22.5 billion 2009 will be spent on education and man power development. 

According to a report from the Riyadh Chamber of Commerce, by 2014 only half the required number of Saudi workers will be available to work on the Kingdom’s building projects.  It suggested that 10.8 million local and expatriate employees will be required for the necessary work to be carried out.  15 per cent of business leaders in Saudi Arabia have said that current unskilled and inadequately educated workers are very problematic to business.  A large proportion of labour is imported, with expatriate workers securing the highest paid jobs. 

The Kingdom is a growing and youthful population, with 50 per cent of the Saudi population aged less than 15 years old.  The government has planned a £3.2 billion overhaul of its education system, part of the King Abdullah Project for the Development of General Education.  A better quality of education is needed due to the increasing number of prosperous families residing in underserved parts of the country.  By 2015, 4,411 new schools are planned to be built or renovated.  Two projects a day are to be awarded to contractors.  The contracts for the first 200 schools have already been awarded.

The Saudi government department of Technical Vocational Education Training (TVET) is responsible for developing the work force.  In the next decade it plans to build 50 new technical colleges, 50 higher institutes of technology for women, four teacher training colleges, and around 162 vocational training centres. 

The Government is to install IT infrastructure into schools as a further education solution.  This is a particularly useful initiative for women who may find it impossible to enrol in education programmes.  Although internet usage is low and strictly regulated, there is a need for UK expertise in: ELT; e-learning; educational software and equipment; study in the UK; standards and accreditation, and training in the energy sector.  However, UK school suppliers must be aware that when trying to establish trade and shipping arrangements, price is critical.

The UK is a respected partner in the training sector as it understands Saudi cultural practices and has a familiarity with the country.

Infrastructure

As part of its economic reform strategy, Saudi Arabia has selected 20 areas of development for privatisation.  The sectors include: water and sewerage; desalination; power; telecommunications; railways and the national airline.

The Saudi government is investing a large proportion of its £87.3 billion 2009 budget on upgrading the region’s infrastructure.  Railway developments such as the high speed Haramain railway that will link Mecca and Medina, and the £3 billion Saudi Landbridge railway project that will link Jeddah and Riyadh.  The Saudi Railways Organisation (SRO) welcomes foreign expertise on account of the country’s railway system being relatively new.  There is a lot of scope for UK imports.  The organisation has recently imported rail engines, carriages, track and sleepers from France, Switzerland, Korea and the US.  The government will grant concessions on a Build Operate Transfer contract basis to the private sector for constructing and operating the railway network.

UK expertise is needed in the following areas:

  • Consultants, civil engineers, project managers, electrical and mechanical engineers, maintenance and construction specialists
  • Rail safety and security
  • Training providers for both technical and administrative staff
  • Signalling systems, repair and maintenance facilities, and fuelling stations
  • Material/equipment supply

The Government is spending over £80.7 billion over the next twenty years to upgrade its electricity supply.  A further £10.3 billion has been allocated to improve the water and sewerage system, agriculture infrastructure and municipal services.  This includes £2.4 billion spent by the Ministry of Transport to expand and modernise the road network.

Healthcare

To upgrade the Kingdom’s healthcare system, the Government has allocated £9.6 billion.  This will see the construction of 86 new hospitals, sports clubs, social centres, housing for the disabled, and rehabilitation centres for criminals.

Housing

Due to the Kingdom’s economic growth, the country’s population is growing rapidly.  By 2012, it is estimated that an additional 1.5 million homes will need to be built.  According to a study by Riyadh’s chamber of commerce, by 2015, the city will need to invest around £2.4 billion annually to meet housing demand.

Opportunities and Advice

Personal relationships are key to successfully securing construction contracts.  Face-to-face contact is preferred and regular visits to Saudi Arabia must be expected to develop the business relationship.  UK companies should not chase an urgent conclusion but respond quickly to client requests. 

Keen pricing is critical in establishing Saudi business relationships.  UK companies must be prepared to demonstrate an effective base price and any value components. The potential to use training or local manufacturing will be favoured.

Saudisation targets exist in most sectors.  Companies will be prioritised if they: supply products that are manufactured in Saudi Arabia; stock products in the country; have established a Saudi office and employ Saudi nationals, or have an office, storage or manufacturing facility in the Gulf Co-operation Council (GCC) area.

UK construction expertise is needed in the following areas:

  • Structural specialists (engineers)
  • Urban designers (master planners)
  • Design specialists
  • Project managers
  • Planning engineers
  • Quantity surveyors