New Murabba adds to Saudi resource pressure
17 February 2023
Commentary
Eva Levesque
Correspondent
The Saudi crown prince's establishment of the New Murabba Development Company to build the world’s largest modern downtown in Riyadh underscores the way in which the kingdom has embraced its transformation projects to achieve its Vision 2030 goals and diversify its economy away from hydrocarbons.
The latest scheme, New Murabba, will cover an area of 19 square kilometres – nearly five times the size of Dubai’s downtown, which spans two sq km and was built at an estimated cost of AED73bn ($20bn).
The centrepiece of the development, the Mukaab, is set to be one of the largest buildings in the world, at 400 metres high, wide and long.
Scheduled for completion by 2030, New Murabba could potentially become the kingdom’s sixth gigaproject powered by Saudi sovereign wealth vehicle the Public Investment Fund (PIF).
Saudi Arabia launches world’s biggest downtown in Riyadh
To date, the PIF’s portfolio of gigaprojects includes the $500bn Neom city, the Red Sea Project, Qiddiya, Roshn and Diriyah Gate. However, these are just a few of the schemes that have been launched by Riyadh.
According to MEED’s GCC 2023 Planned Project Awards report, published in January, Saudi Arabia was already the largest regional projects market by far in terms of its pipeline, with more than $1.2tn-worth of known, planned and unawarded work.
There has been a significant acceleration in contract awards recently: the value of Saudi Arabia’s construction and transport project awards more than doubled between 2020 and 2022, from $15bn to $32.8bn, according to data from regional projects tracker MEED Projects.
As the activity ramps up in the country, this poses the question of how Saudi Arabia will deliver these projects and whether it will have a large enough workforce with sufficient expertise.
The crises induced by the sharp drop in oil prices in 2014-15 led local firms to lay off staff a few years later. At that time, the two biggest construction companies, Saudi Binladin Group and Saudi Oger, were the hardest hit.
As demand for engineering talent is returning, there is once again a need to create national champions that can deliver major projects.
This need is in line with the kingdom’s strategy to grow local capacities and create jobs instead of relying largely on international contractors.
Since 2017, when most of Saudi Arabia’s gigaprojects were launched to support the economic objectives of Vision 2030, the consensus has been that local contractors do not have sufficient expertise or capacity to complete all the planned projects. According to MEED Projects, in 2022 $8.2bn of construction and transport contracts in Saudi Arabia were won by international construction companies or joint ventures containing firms from outside the region.
The PIF recently invested $1.3bn in four construction companies: AlBawani Holding Company, Almabani General Contractors Company, El-Seif Engineering Contracting Company and Nesma & Partners Contracting Company. This move should help to address the kingdom’s need for national champions.
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