saudi update focus
6/7 King Abdullah Economic City, Jeddah
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ARCHITECT PERSPECTIVE
Paul Abbosh, regional development director, Atkins
INFRASTRUCTURE FOCUS
Infrastructure projects are a key focus under a series of government initiatives, with around US$400 billion allocated over the next five years. While the entire Gulf region has finally switched on to a need for better rail-based infrastructure, Saudi Arabia is already in the early construction phases of its 450-kilometre-long high-speed rail link between Makkah and Madinah with the thousand kilometre-long Jeddah/Riyadh link scheduled to get underway this year. The government also recently announced that it has shortlisted
four companies to build and operate facilities at Jeddah’s ‘Airport City’ project, which is to be developed over a 10-year period with an investment of US$2.4 billion. This project forms part of a wider plan valued at US$5.86 billion to build, own and operate one airport and terminal related facilities. The plan also envisages constructing an airport for Madinah, at a cost
of US$1.6 billion. Two further Airport Cities are slated for development in Riyadh and Dammam; and the Shoura Council also recently approved the construction of an international airport outside the city of Makkah. The proposed airport will be located outside the Haram area to allow both Muslims and non-Muslims to travel to the region. Road contracts valued at SAR2.5 billion (US$666.7 million) to improve
and build new roads and highways, have also recently been awarded to locally-based firms.
How has the Saudi real estate sector handled the current crisis?
Some larger projects have been affected by funding issues but it is fair to say that Saudi Arabia has been relatively insulated. Banks in the Kingdom generally managed to survive the global economic crisis better than others given their conservative asset to debt ratios, and so remain in a far stronger position than most to finance projects. Also, the real estate sector is being fuelled primarily by the demands of the rapidly growing local population and a growing educated middle class, rather than by foreign investors as was the case elsewhere. Additionally, since the global economic situation began, Saudi Arabia and other energy producing countries such as Abu Dhabi and Qatar are making the most of the opportunities presented by lower construction prices to take serious strides forward in their development infrastructure programmes.
What particular challenges has Atkins faced in this market?
The most challenging aspect of the current market is the strong competition for every project as many international consultancies with poor home markets turn their focus to the Middle East and the increasing requirements from clients for quality assets that can be operated and maintained efficiently across their lifetime. This is in stark contrast to before the global economic downturn when there was so much demand that major quality firms in the sector were regularly having to turn down work and a lot of low quality firms entered the markets as a result.
The most challenging aspect of the current market is the strong compe- tition for every project
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/jun-sep 2010
What are the opportunities available in the Kingdom?
Compared to its GCC neighbours, Saudi Arabia has the largest economy in the region, a rapidly growing population, the requirement to accommodate growing numbers of religious tourists and big, complex infrastructure challenges. For the built environment sector, these factors position it as a key market for long-term growth.
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TOURISM DEVELOPMENT
The fast-track development of infrastructure projects also has the potential to boost future tourism numbers, which generated approximately SAR70 billion (US$18.66 billion) for the economy in 2009 alone, according to the Saudi Commission for Tourism and Antiquities (SCTA), which equates to a 6.5 percent growth in GDP. The number of Muslims making the Hajj pilgrimage
to Makkah is expected to increase from the present four million to 20 million in future years, driving the need for additional hotel rooms and developers are already estimated to be spending US$13 billion on a variety of projects. These include the US$9.3 billion Al Shamiya
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