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Funding concerns usher in new era for Saudi projects

22 April 2024

Commentary
Colin Foreman
Editor

Saudi Arabia is still moving ahead with its ambitious gigaproject plans. But how those projects and the kingdom's other major developments are delivered is starting to change, ushering in a new era of more focused development.

Over the past few years, the Saudi construction market has grown at a breakneck pace, allowing contractors to grow rapidly as they secure multibillion-dollar contracts. The Public Investment Fund or the government has funded most of these projects. As construction activity and contractors' bills ramp up, Riyadh has started questioning whether it can, or indeed should, continue with such a large amount of project spending.

Those questions have resulted in two key trends in 2024. First, there is a focus on the parts of projects that need to be delivered first. This is best seen at The Line at Neom, where the priority is completing the modules at the marina. The next prime concern is diversifying project funding.

Project developers are also ramping up efforts to find investors for project elements, and some are looking to raise debt. Neom is reportedly mulling a sukuk issuance to access additional funding sources for the project.

These are important developments for the construction industry. This means that not all of the projects that were expected to go ahead will do so imminently, while those that do proceed will be more reliant on external funding than before.

Companies that can identify the projects that are able to secure external funding will be successful.

MEED's April 2024 special report on Saudi Arabia includes:

> GVT & ECONOMY: Saudi Arabia seeks diversification amid regional tensions
> BANKING: Saudi lenders gear up for corporate growth
> UPSTREAM: Aramco spending drawdown to jolt oil projects
> DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector
> POWER: Riyadh to sustain power spending
> WATER: Growth inevitable for the Saudi water sector
> CONSTRUCTION: Saudi gigaprojects propel construction sector
> TRANSPORT: Saudi Arabia’s transport sector offers prospects

 

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Colin Foreman

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