Riyadh reins in spending
24 May 2024
Register for MEED's guest programme
On the surface, it feels like business as usual in Saudi Arabia as new projects continue to be launched.
On 8 May, designs for another futuristic project at Neom’s Gulf of Aqaba were released with slick computer-generated imagery. Known as Jaumur (pictured), it includes the development of a mixed-use community featuring 1,200 residential units and two hotels offering 350 rooms. The most eye-catching part of the project is at the marina, which will have a 1.5-kilometre aerofoil that will rise above the yacht berths.
Beneath the surface, a consensus is emerging that the kingdom’s projects market is in the midst of a recalibration as spending is reined in.
The challenge for Riyadh over the next few years will be balancing the delivery of its ambitions with the reality of its financial capabilities.
The first public sign that things were changing came in December 2023, when Finance Minister Mohammed Al Jadaan told reporters at the launch of the 2024 budget that the delivery of some of the projects included in the Saudi Vision 2030 plan may be delayed to avoid pressure on the economy.
Tightening the purse strings
The ministry-level decision is trickling down as individual development companies are not getting their full budgets approved. “Our firm is working on almost all of the major projects in Saudi Arabia in some capacity,” says an international consultant. “The feedback we are getting is that budget spending for 2024 has been reduced by about 30% on average.”
Many of these delivery companies are subsidiaries of sovereign wealth vehicle the Public Investment Fund (PIF), which has taken a leading role in transforming the kingdom’s economy over the past eight years with development schemes including its five official gigaprojects, Neom, Roshn, Red Sea Global (RSG), Qiddiya and Diriyah.
The reports of budget cuts have coincided with a drop in contract awards. According to MEED’s Gigaprojects Tracker, there has been a sharp decline in the value of contracts awarded by the five official gigaprojects this year.
In April, they awarded $166m of work, down from $271m in March and $509m in February. The total in January was $5.56bn, largely due to the $4.7bn contract awarded to the local Webuild for the construction of dams at the Trojena mountain resort in Neom.
The reports of budget cuts have coincided with a drop in contract awards
Funding options
The budget cuts are just part of the message, says the consultant. The delivery companies are being told to find external investment to deliver their projects, and there are already signs of this happening. The clearest came in late April, when Neom announced a $2.7bn revolving credit facility from nine local banks to cater to the project’s short-term financing requirements.
In a statement, Neom CEO Nadhmi Nasser highlighted the project’s drive to find new sources of funding. “As Neom continues to gather pace, this new credit facility, backed by Saudi Arabia’s leading financial institutions, is a natural fit within our wider strategy for funding. We continue to explore a variety of funding sources as we deliver transformational infrastructure assets while supporting the wider Vision 2030 programme,” he said.
In a research note following the deal, London-based Capital Economics said: “While this does take some of the onus away from the government and Public Investment Fund, it is increasingly using resources that could be used more productively in the private non-oil sector.”
Capital Economics also noted that the facility adds to the growing share of commercial banks’ lending to the public sector. Since 2015, this share has increased from 7% to 22% in March 2024.
Another solution for development companies is deploying public-private partnerships (PPPs) to deliver infrastructure and utilities. This is attractive because PPPs reduce the initial capital expenditure required for a project.
RSG has already pursued this route for The Red Sea Project and Amaala; other development companies are exploring the PPP avenue for their projects.
Real estate investment is another option. There is an expectation that Riyadh will introduce a foreign ownership law that could turbocharge the market as a similar law did for Dubai in the early 2000s.
There are already examples of real estate investment deals being done, including the National Housing Company with Spain’s Urbas Group for housing in Riyadh, RSG with Kingdom Holding Company for hotels, and King Salman with a real estate development fund.
PPP offers budget and efficiency routes
Prioritising projects
As projects in the kingdom are developed differently, the challenge for the construction industry will be identifying which of the many schemes that aim to transform the Saudi economy are a top priority.
Much will depend on the success of the investment drive. The most likely projects to go ahead are those linked to global events with immovable deadlines. Experience across the region over the past decade has shown that even if construction elsewhere slowed down, construction for Expo 2020 in Dubai and the 2022 Fifa World Cup in Qatar continued regardless.
“For Saudi Arabia, there are three major events: the Asian Winter Games in 2029, Expo 2030 and World Cup 2034. They will be the obvious priorities,” says the international consultant.
Register for MEED's guest program now to access this article.
Exclusive from Meed
-
Egypt signs $420m Gabal El-Zeit wind agreements10 June 2026
-
-
Saudi Arabia and Turkiye sign railway agreements10 June 2026
-
-
All of this is only 1% of what MEED.com has to offer
Subscribe now and unlock all the 153,671 articles on MEED.com
- All the latest news, data, and market intelligence across MENA at your fingerprints
- First-hand updates and inside information on projects, clients and competitors that matter to you
- 20 years' archive of information, data, and news for you to access at your convenience
- Strategize to succeed and minimise risks with timely analysis of current and future market trends
Related Articles
-
Egypt signs $420m Gabal El-Zeit wind agreements
10 June 2026
Egypt has signed agreements worth $420m for the investment, operation and power purchase of the 580MW Gabal El-Zeit wind power complex in the Red Sea region.
Gabal El-Zeit 1 has a capacity of 240MW, while Gabal El-Zeit 2 and 3 have capacities of 220MW and 120MW, respectively.
The agreements were signed between Egypt’s New and Renewable Energy Authority (NREA), the Egyptian Electricity Transmission Company (EETC) and Dubai-based Alcazar Energy.
Under the agreements, Alcazar Energy will invest in, operate and manage the farms through a project company established under Egyptian law.
The company will be responsible for technical operations, maintenance and efficiency upgrades while maintaining a minimum capacity of 580MW throughout the contract period.
The Egyptian Electricity Transmission Company will purchase the electricity generated by the plant.
The agreements follow earlier efforts to privatise the Gabal El-Zeit wind complex, involving a deal with UK-headquartered private equity firm Actis.
According to the Egyptian government, the project supports the country’s state ownership policy and national energy strategy, which aim to increase the share of renewable energy in the electricity mix to 45%.
The Gabal El-Zeit area on Egypt’s Red Sea coast is one of the country’s most established wind power development zones. The latest Gabal El-Zeit wind farm was completed in 2014, according to MEED Projects data. Germany’s Siemens Gamesa was the main contractor.
> Be recognised among the best in the industry at the MEED Projects Awards 2026 …
https://image.digitalinsightresearch.in/uploads/NewsArticle/17170360/main.jpg -
Majid Al-Futtaim awards $545m Ghaf Woods contract to ECC
10 June 2026
Majid Al-Futtaim Properties has appointed Engineering Contracting Company (ECC) as the main contractor for the Capria East, Capria West and Maravelle Residences developments at its Ghaf Woods community in Dubai, in a deal valued at AED2bn ($545m).
The contract covers the construction of one-, two- and three-bedroom apartments and duplex residences across the two Capria clusters.
The award adds to a series of major construction contracts Majid Al-Futtaim has issued across its Dubai communities in recent years.
In May, local contractor Al-Sahel Contracting was awarded a AED700m contract for the Distrikt development, also at Ghaf Woods.
In 2024, Majid Al-Futtaim awarded AED3bn in contracts for its Tilal Al-Ghaf community, appointing Innovo Build to build 94 waterfront villas at Elysian Mansions and United Engineering Construction (Unec) to deliver 130 villas at the Alaya development.
> Be recognised among the best in the industry at the MEED Projects Awards 2026 …
https://image.digitalinsightresearch.in/uploads/NewsArticle/17170744/main.jpg -
Saudi Arabia and Turkiye sign railway agreements
10 June 2026
Register for MEED’s 14-day trial access
Saudi Arabia and Turkiye have signed two memorandums of understanding (MoUs) to strengthen bilateral cooperation in the railway and logistics sectors, advancing Riyadh’s ambitions to become a global logistics hub.
Transport and Logistics Services Minister Saleh Al-Jasser and Turkish Transport and Infrastructure Minister Abdulkadir Uraloglu signed the agreements at the ministry’s headquarters in Riyadh on 9 June, following ministerial talks held with a high-level Turkish delegation. Transport General Authority president Fawaz Al-Sahli and officials from the kingdom’s transport and logistics sector were also present.
Agreement scope
The first MoU covers logistics services and operations, including the exchange of expertise, policies and regulations. The second focuses on railway technologies, signalling and communication systems, railway digitalisation, human capacity development, the localisation of the railway industry and measures to reduce the sector’s environmental impact.
More broadly, the agreements cover cooperation on railway standards and related innovations, the exchange of expertise on the design, operation and maintenance of rail projects, and engineering, infrastructure and safety standards.
The two sides will also cooperate on research and development, with provision for joint workforce training through specialist railway academies.
Riyadh said the agreements will help support its National Strategy for Transport and Logistics Services and Saudi Vision 2030, which seeks to position the kingdom as a logistics bridge connecting three continents.
Turkish projects
Turkish contractors have already established themselves as key players in the region’s rail sector. In 2012, Yapi Merkezi secured a $2.1bn contract for work on the Haramain high-speed rail network in Saudi Arabia, while Turkish firms Mapa and Limak are leading the ongoing civil works on Dubai’s $5.5bn Metro Blue Line project as part of a China Railway Rolling Stock Corporation (CRRC) consortium. Turkish consultancy Proyapi Muhendislik ve Musavirlik Anonim Sirketi has also won design contracts for the 111km Kuwait National Rail Road project.
The agreements signed by Saudi Arabia and Turkiye may also give momentum to longstanding discussions around a rail corridor linking the GCC with Turkiye. The route, which has been discussed for years, has gained renewed impetus in recent months as the effective closure of the Strait of Hormuz has pushed regional governments to accelerate the development of overland trade alternatives.
READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDFGCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.
Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
> AGENDA: Gulf races to reroute trade> EXPORT ROUTES: Regional war boosts oil and gas pipeline project activity> CURRENT AFFAIRS: UAE’s Opec departure fulfils multiple ends> MEED TOP 100: Middle East stocks recover unevenly> LEADERSHIP: Building the infrastructure that makes net zero possible> TRADE DEAL: UK-GCC trade deal talks concludeTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/17169958/main.gif -
Joint venture tenders Algeria field development contract
10 June 2026
Register for MEED’s 14-day trial access
Hassi Bir Rekaiz Group (GHBR), which operates Algeria’s Hassi Bir Rekaiz field, has issued a tender for phase 2A of the asset’s field development project.
GHBR is a joint venture of Algeria’s national oil and gas company Sonatrach and Thailand’s national exploration and production company PTTEP.
The scope of the contract focuses on the “provision of engineering and supervision services”, according to documents published by Sonatrach.
The tender has been issued with a bid deadline of 16 June 2026.
In May, GHBR signed a $1.1bn contract for phase two of the Hassi Bir Rekaiz development project.
The contract was won by a consortium of Egypt’s Petrojet and Italian engineering and contracting company Arkad.
Petrojet’s portion of the project was estimated to be worth around $600m, and Arkad’s portion was estimated to be worth $500m.
The contract used the engineering, procurement, construction and commissioning model.
The scope of the project contract is focused on the construction of a central processing facility (CPF) capable of processing crude oil and associated gas.
It also includes developing off-plot pipelines, as well as related utilities and infrastructure.
The CPF will have the capacity to process 32,000 barrels a day (b/d) and will be designed to support future expansions.
The related infrastructure will include an extensive pipeline network spanning approximately 217 kilometres, as well as a road network.
READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDFGCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.
Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
> AGENDA: Gulf races to reroute trade> EXPORT ROUTES: Regional war boosts oil and gas pipeline project activity> CURRENT AFFAIRS: UAE’s Opec departure fulfils multiple ends> MEED TOP 100: Middle East stocks recover unevenly> LEADERSHIP: Building the infrastructure that makes net zero possible> TRADE DEAL: UK-GCC trade deal talks concludeTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/17163750/main3325.jpg -
Algeria extends deadline for urea-formaldehyde project
10 June 2026
Algeria’s national oil and gas company Sonatrach has extended the bid deadline for a project to develop a new concentrated urea-formaldehyde unit in its Arzew industrial zone.
The latest bid deadline is 15 June.
The contract uses the engineering, procurement, construction and commissioning model, and the bid deadline for technical tender submissions was originally set for early April.
The condensed urea-formaldehyde unit will be located at the CP1-Z facility.
The CP1-Z facility began operations in 1975 and has a capacity of 152,000 tonnes a year. It produces products including methanol, resin and formol.
It is a two-phase tender. The first phase is a technical bid submission, and the second phase is a commercial bid submission.
To be eligible to win this contract, companies must specialise in petrochemical industrial installation projects.
They also need to have a share capital of at least $7m and more than 15 years of relevant experience.
The new unit, UFC85, will have the capacity to produce 40,000 metric tonnes of concentrated and condensed urea-formaldehyde annually.
The project’s scope also includes the development of auxiliary equipment and installations.
Urea-formaldehyde has a wide range of uses, including the production of laminates, textiles and paper.
In the wood industry, it is used as a thermosetting adhesive to bond wood to create plywood and particleboard. In agriculture, urea-formaldehyde is widely used as a slow-release fertiliser.
READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDFGCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.
Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
> AGENDA: Gulf races to reroute trade> EXPORT ROUTES: Regional war boosts oil and gas pipeline project activity> CURRENT AFFAIRS: UAE’s Opec departure fulfils multiple ends> MEED TOP 100: Middle East stocks recover unevenly> LEADERSHIP: Building the infrastructure that makes net zero possible> TRADE DEAL: UK-GCC trade deal talks concludeTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/17163657/main.jpg