meed-logo

line1 line2 line3
SIGN IN / REGISTER

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.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11816519/main.gif
Colin Foreman

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Contractors prepare Riyadh Expo infrastructure bids

    21 October 2025

     

    Fourteen firms have been invited to bid for the contract to undertake the initial infrastructure works at the Expo 2030 Riyadh site.

    Saudi Arabia’s Expo 2030 Riyadh Company (ERC), tasked with delivering the Expo 2030 Riyadh venue, floated the tender for the project’s initial infrastructure works in September, as MEED reported.

    The firms invited to bid include:

    • Shibh Al-Jazira Contracting (local)
    • Hassan Allam Construction (Egypt)
    • El-Seif Engineering Contracting (local)
    • Al-Ayuni Investment & Contracting (local)
    • Kolin Construction (Turkiye)
    • Al-Yamama Trading & Contracting Company (local)
    • Saudi Pan Kingdom (local)
    • Unimac (local)
    • Mapa Insaat (Turkiye)
    • Yuksel Insaat (Turkiye)
    • IC Ictas / Al-Rashid Trading & Contracting (Turkiye/local)
    • Mota-Engil / Albawani (Portugal/local)

    The overall infrastructure works – covering the construction of main utilities and civil works at Expo 2030 Riyadh – will be split into three packages:

    • Lot 1 covers the main utilities corridor
    • Lot 2 includes the northern cluster of the nature corridor
    • Lot 3 comprises the southern cluster of the nature corridor

    ERC issued the tender for infrastructure package Lot 1 on 21 September and has set deadlines of 26 October and 9 November for submission of technical and commercial bids, respectively.

    ERC is expected to award the contract for the Riyadh Expo infrastructure package in December.

    MEED previously reported that ERC was expected to issue the tender for some of the infrastructure packages in September.

    In July, US-based engineering firm Bechtel Corporation announced it had won the project management consultancy deal for the delivery of the Expo 2030 Riyadh masterplan construction works.

    The masterplan encompasses an area of 6 square kilometres, making it one of the largest sites designated for a World Expo event. Situated to the north of the Saudi capital, the site will be located near the future King Salman International airport, providing direct access to various landmarks within Riyadh.

    Countries participating in Expo 2030 Riyadh will have the option to construct permanent pavilions. This initiative is expected to create opportunities for business and investment growth in the region.

    The expo is forecast to attract more than 40 million visitors.

    The Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth vehicle, launched ERC in June as a wholly owned subsidiary to build and operate facilities for Expo 2030.

    In a statement, the PIF said: “During its construction phases, Expo 2030 Riyadh and its legacy are projected to contribute around $64bn to Saudi GDP and generate approximately 171,000 direct and indirect jobs. Once operational, it is expected to contribute approximately $5.6bn to GDP.”

    READ THE OCTOBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Private sector takes on expanded role; Riyadh shifts towards strategic expenditure; MEED’s 2025 power developer ranking

    Distributed to senior decision-makers in the region and around the world, the October 2025 edition of MEED Business Review includes:

    > AGENDA 1: A new dawn for PPPs
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14912102/main.jpg
    Yasir Iqbal
  • Consultants bid for New Smart City Salalah design

    21 October 2025

     

    Twenty local and international engineering firms have purchased the tender documents for providing the detailed design of Oman’s New Smart City Salalah development.

    Oman’s Ministry of Housing & Urban Planning (MHUP) released the tender on 12 October. MHUP has set a deadline of 20 November for firms to submit their bids for the contract.

    The firms that have purchased the tender documents include:

    • Royal Haskoning (Netherlands)
    • Muscat Engineering Consulting (local)
    • Parsons Corporation (US)
    • Design Group Engineering Consultants (local)
    • Khatib & Alami (Lebanon)
    • Tusker Engineering Consultancy (local)
    • F&M Middle East (local)
    • Al-Abraj Consulting Engineers & Architects (local)
    • Dar SSH (Kuwait)
    • WSP (Canada)
    • Renardet SA (Switzerland)
    • Almanarah Engineering Consultancy (local)
    • Isag Consulting Engineers (local)
    • CID Gulf (local)
    • Archplan International (Egypt)
    • National Engineering Office (Pakistan)
    • Salalah Engineering Consultancy (local)
    • Meridian Engineering Consultancy (local)
    • Hayma Engineering Consultancy (local)
    • AAW Partners (local)

    The 7.3-square-kilometre scheme is masterplanned by US-based design studio Sasaki.

    The development will offer over 12,000 residential units, accommodating 60,000 residents across four neighbourhoods. It will also include 3,500,000 square metres (sq m) of open space and parks, 200,000 sq m of retail and hospitality space, 100,000 sq m of cultural space and amenities, two new hospitals and integrated transport links. 

    This project is part of the sultanate’s RO33bn development pipeline under Oman Vision 2040.

    The construction works on the project are set to commence early next year, with 5,827 residential units planned for the first phase.

    Oman released the project masterplan details in March this year.

    The statement added: “The project plans are part of the Greater Salalah Structural Plan that aims to increase the liveable capacity of Salalah, which is expected to reach a population of 674,000 by 2040.”

    New Smart City Salalah is the latest addition to the sultanate’s portfolio of high‑profile upcoming real estate schemes, which include Sultan Haitham City, Al-Khuwair downtown, Al-Thuraya and the Oman mountain destination.

    GlobalData forecasts the Omani construction industry to expand at an annual average growth rate of 4.2% from 2025 to 2028. Growth in the country will be supported by rising government investments in renewable energy and transport infrastructure, in addition to the housing sector, as part of the Oman Vision 2040 plan.

    READ THE OCTOBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Private sector takes on expanded role; Riyadh shifts towards strategic expenditure; MEED’s 2025 power developer ranking

    Distributed to senior decision-makers in the region and around the world, the October 2025 edition of MEED Business Review includes:

    > AGENDA 1: A new dawn for PPPs
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14911963/main.jpeg
    Yasir Iqbal
  • Wood leadership change holds promise for future

    20 October 2025

    Commentary
    Indrajit Sen
    Oil & gas editor

    UK energy engineering consultancy Wood Group’s announcement of a new CEO taking charge later this year is a positive signal, indicating the company is positioning itself for the future.

    The announcement also suggests that the proposed takeover of Wood by Dubai-based Dar Al-Handasah Consultants Shair & Partners Holdings (Sidara) is nearly a done deal. Wood’s board has already accepted a $292m conditional takeover bid from Sidara, with a shareholder vote scheduled for 12 November expected to be a formality.

    New ownership would naturally initiate a strategic reset and establish new priorities and goals. Iain Torrens, currently Wood’s interim group chief financial officer, will take over as CEO from Ken Gilmartin and lead the company towards these new goals.

    Despite financial difficulties in recent years, Wood has been largely successful in winning key consultancy and engineering contracts on critical oil and gas projects in the Middle East and North Africa (Mena) region. This year alone, the company has secured project contracts in Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, as well as in other international markets.

    Wood’s track record of delivering major Mena energy projects, combined with its strong regional presence, is the key factor that attracted Sidara, and the reason it has been pursuing an acquisition for the past two years.

    In addition to the takeover bid, Sidara has offered to assume $1.6bn of Wood’s debt and inject $450m in cash into the company, demonstrating its confidence in Wood’s capabilities.

    With a new owner committed to addressing the company’s financial challenges and a new CEO preparing to take the helm, Wood appears poised to enter a period of renewed stability and growth.

     Wood takeover could boost Sidara profits

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14906715/main.gif
    Indrajit Sen
  • Neom omitted from Saudi pre-budget statement

    20 October 2025

    Commentary
    Colin Foreman
    Editor

    The pre-budget statement issued by Saudi Arabia’s Ministry of Finance on 30 September provided valuable insight into how the economy will develop in 2026.

    The headline figures show that expenditure is set at SR1.313tn ($349bn) in 2026, compared to revenues of SR1.147tn, resulting in a deficit of approximately SR166bn, or around 3.3% of GDP.

    For the gigaprojects programme, a key detail was which projects were mentioned in the statement, as this implies that these are considered strategic and will continue to receive backing during a period many expect to be defined by reprioritisation.

    Four of the official gigaprojects – Roshn, Red Sea Global, Diriyah and Qiddiya – are mentioned multiple times throughout the document. Neom, however, is not mentioned. All five were referenced in the 2025 pre-budget statement.

    Neom’s omission from the pre-budget statement comes at a pivotal time for projects in Saudi Arabia. While project priorities have not been officially communicated, it is widely believed within the construction sector that event-driven projects – including Expo 2030 Riyadh and the Fifa World Cup 2034 – will be prioritised.

    Although the Asian Winter Games is scheduled to be held at Neom’s mountain resort, Trojena, in 2029 – and had previously been assumed to be a priority – reports over the summer suggested the event may be postponed to 2033, with South Korea or China potentially stepping in to host the 2029 edition.

    Other priority projects are expected to include transport and social infrastructure, as well as developments in and around Riyadh, including Diriyah, Qiddiya and projects led by Roshn.

    MEED’s October 2025 special report on Saudi Arabia includes:

    > COMMENT: Riyadh strives for sustainable growth
    > GOVERNMENT: Riyadh confronts rising regional chaos
    > ECONOMY: Riyadh looks to adjust investment approach
    > BANKING: New funding sources solve Saudi liquidity challenge
    > OIL & GAS: Aramco turns attention to strategic projects
    > GAS: Saudi Arabia and Kuwait accelerate Dorra gas field development
    > POWER: Saudi Arabia accelerates power transformation
    > WATER: Transmission projects drive Saudi water sector growth
    > CONSTRUCTION: Saudi construction pivots from gigaprojects to events
    > TRANSPORT: Infrastructure takes centre stage in Saudi strategy
    > DATABANK: Saudi Arabia maintains growth momentum

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14906273/main.gif
    Colin Foreman
  • Qiddiya high-speed rail PPP is a bold but risky move

    20 October 2025

    Commentary
    Yasir Iqbal
    Construction writer

    Saudi Arabia’s Qiddiya high-speed rail project is the latest GCC rail scheme to be structured as a public-private partnership (PPP). Past schemes planned as PPPs include railways serving mining assets in Oman, Bahrain’s metro network, and the Red and Green Line extensions of the Dubai Metro. However, none of these projects moved into construction as a PPP.

    The Qiddiya high-speed rail scheme offers an opportunity to set a successful precedent for the region. Led by the Royal Commission for Riyadh City, in collaboration with Qiddiya Investment Company and the National Centre for Privatisation & PPP, the project represents a litmus test of the kingdom’s ability to leverage private capital and expertise to deliver complex mobility infrastructure.

    The project will connect King Salman International airport and King Abdullah Financial District (KAFD) with Qiddiya City, transporting passengers at speeds of up to 250 kilometres an hour and reducing travel time to just 30 minutes. Beyond its engineering appeal, it is the project’s PPP structure that makes it transformative.

    It signals a maturing market increasingly willing to share risks and rewards between public and private players – a model proven globally to drive efficiency, innovation and long-term value for money.

    International experience offers key lessons for the success of the Qiddiya high-speed rail project. As highlighted in a KPMG report, factors such as effective procurement and financing, political commitment and strong operational planning are critical.

    The Hong Kong Mass Transit Railway system, for example, succeeded by aligning rail development with real estate value capture.

    Similarly, projects such as the Nottingham Express Transit in the UK and Manila’s Mass Transit Railway demonstrate that transparent risk allocation and a robust business case can lead to financial and policy success.

    Despite these successes, it is worth noting that PPPs have fallen out of favour in some countries due to cost overruns, inflexible contracts and disputes over value for money. These experiences serve as a cautionary reminder for Saudi Arabia.

    While PPPs can attract private investment and accelerate delivery, they also require careful structuring, rigorous due diligence and transparent governance. The Saudi government must, therefore, maintain oversight while allowing private partners the flexibility to innovate.

    For the Qiddiya high-speed rail, meticulous project planning, a credible feasibility framework and maintaining private sector confidence in regulatory stability will be vital.

    If executed well, the Qiddiya high-speed rail could become a benchmark for future PPP ventures in the Gulf. The scheme stands as both a symbol and a significant challenge in Saudi Arabia’s broader drive to modernise its transport sector under Vision 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14884582/main.gif
    Yasir Iqbal