Meed | Saudi Arabia seeks diversification amid regional tensions

Saudi Arabia seeks diversification amid regional tensions

13 March 2024

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

Hotels in Riyadh got a fillip in early March as executives and investors descended on the capital for the Leap 2024 technology conference, held in the Riyadh Exhibition and Convention Centre, some 70 kilometres north of the city.

The event is just the sort of business gathering the Saudi authorities like to host these days as part of their efforts to remodel the economy and the country’s international reputation. Such events also provide an alternative talking point at a time when regional tensions are heightened by the Gaza war.

Some $770m-worth of regional venture capital funds were launched at the event, along with $53m in funding rounds by startups and $764m-worth of other deals, according to organisers. Among the announcements, the National Development Fund (NDF) and the Social Development Bank (SDB) unveiled SR450m ($120m) in venture capital funding for the gaming and e-sports sector.

Emerging sectors

Such activity fits in with the ambitions of Crown Prince Mohammed Bin Salman Al Saud (who is said to be a gaming fan) to attract more investment into emerging sectors.

Another key area of focus for the government is tourism. On 4 March, Tourism Minister Ahmed Bin Aqeel Al Khateeb unveiled the Tourism Investment Enablers Programme, which is designed to draw in local and international investors. As part of that, a Hospitality Sector Investment Enablers Initiative aims to attract SR42bn of investments in hotels and related areas, hoping to add SR16bn to the kingdom’s annual GDP by 2030.

It remains unclear how long it will take before there is a critical mass of activity in some of these new sectors so that they can be self-sustaining and no longer reliant on government support. The slow development of the electric vehicle sector is a case in point, with billions of dollars poured into Lucid Motors, Ceer and related businesses, but little revenues coming in.

There are some other teething problems, too. One international executive who attended the Leap summit came away frustrated with the hours it had taken to reach the venue on the clogged-up highway running from the city centre. “They’re just not ready. They’re trying to run before they can walk,” he said.

The potential of the region’s biggest economy means most businesses are willing to overlook such issues, though. On 29 February, Investment Minister Khalid Bin Abdulaziz Al Falih said that his ministry had to date issued licences to 450 foreign investors to open regional headquarters in the kingdom.

Oil-based growth stalls

The country needs more of these companies and investors to help turn around a recent slump. The economy contracted by 3.7% in the final quarter of 2023 and by 0.9% over the year as a whole.

That was reflected in the government’s finances, with a deficit of SR37bn recorded in the fourth quarter of the year. The total deficit for 2023 was SR80.1bn, equivalent to 2.1% of GDP and compares to a surplus of 2.5% of GDP in 2022, which had been the first positive balance since 2013.

According to Dubai-based bank Emirates NBD, the key differences between 2022 and 2023 were falling oil prices and output, as Opec+ members curbed production in an effort to shore up the market price of crude. Saudi output fell by almost 9% to 9.6 million barrels a day (b/d), leading to a 12% fall in oil revenues to SR754bn.

Those voluntary output cuts were again extended in early March and Emirates NBD has predicted the Saudi budget deficit will likely widen further.

Riyadh has also been trimming its longer-term production capabilities. In late January, the Ministry of Energy ordered Saudi Aramco to scrap a planned 1 million b/d increase in its maximum sustainable capacity, which had first been announced almost four years ago.

The following month, Energy Minister Prince Abdulaziz Bin Salman Al Saud told an industry conference in Dharan: “We postponed this investment simply because … we’re transitioning.”

Nonetheless, oil and gas will continue to be the central component of the Saudi economy for years to come as it remains the country’s main source of wealth. Underling that reality, the government is reported to be considering selling more shares in Aramco later this year to help fund its spending plans.

Non-oil growth

While oil-based growth is stalling, the non-oil economy is growing. Riyadh-based Jadwa Investment has predicted that non-oil GDP growth will accelerate slightly in the near term, from 4.6% in 2023 to 5% or higher in the next two years, driven by both consumption and investment.

Costs are rising for both labour and materials, though, which could undermine the prospects for such improvements. The disruption caused by the attacks on commercial shipping in the Red Sea and the Gulf of Aden by Yemen’s Houthis since November is a factor in the 25-50% increase in construction materials that has been reported in recent weeks, according to Jadwa.

Foreign policy

There are constraints on Riyadh in how it can respond to events in Yemen though, not least because Saudi Arabia remains keen on striking a deal with the Houthis that would enable it to leave the Yemeni conflict zone entirely, some nine years after it first became engaged.

That has prompted Riyadh – in common with some other Arab states – to keep a low profile regarding the Houthi shipping campaign, and the result is “a very awkward equilibrium”, according to Thomas Juneau, an associate professor at the University of Ottawa, Canada.

“Saudi Arabia and the UAE are constrained by their domestic politics, where pro-Palestinian feeling is very strong, especially in Saudi Arabia. [They are also] constrained by the pragmatic turn in their foreign policy we’ve seen in recent years,” he said.

“But also heavily constrained because they are very conscious of the prospects of Houthi retaliation, which they absolutely want to avoid. We’ve seen in the past how the Houthis can impose a cost by targeting critical infrastructure or skyscrapers or airports in Saudi Arabia and the UAE.”

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Dominic Dudley

Exclusive from Meed

Saudi Arabia raises electricity tariffs
26 October 2026
Dubai Municipality confirms AED3bn Tasreef drainage awards
26 October 2026
Nakheel awards $259m Dubai Islands buildings contract
26 October 2026
Morocco plans second high-speed rail phase to Agadir
26 October 2026
Riyadh tenders King Salman Stadium works
26 October 2026

Saudi Arabia raises electricity tariffs
26 October 2026

Saudi Energy, formerly Saudi Electricity Company, has announced revised electricity tariffs, which will take effect on 1 January 2027.

The revised tariff schedule, published on the company’s official website, covers residential, commercial, industrial, agricultural, charitable and government customers.

The largest percentage increase in consumption rates is 16.7%, for residential customers using up to 6,000 kilowatt-hours (kWh) a month. Residential customers will pay 21 halalas/kWh for monthly consumption of up to 6,000kWh, up from 18 halalas. For consumption above 6,000kWh, the rate will rise from 30 to 33 halalas/kWh, a 10% increase.

The industrial tariff will increase by 15%, from 20 to 23 halalas/kWh. Commercial customers, private healthcare facilities and private educational facilities will pay 25 halalas/kWh, up from 22 halalas, for consumption up to 6,000kWh a month, and 35 halalas/kWh above that level, up from 32 halalas.

Tariffs for charities and government customers will also increase. In addition to consumption-based charges, customers will pay a fixed monthly fee based on the capacity of their electricity meter. This replaces the previous separate charge for meter reading, maintenance and billing, with VAT applied to the revised tariffs.

Electricity investment

The new tariffs coincide with changes to water consumption tariffs announced by the National Water Company, also effective from 1 January 2027.

King Salman Bin Abdulaziz Al-Saud directed support measures following a proposal presented by Crown Prince and Prime Minister Mohammed Bin Salman Bin Abdulaziz Al-Saud.

This includes raising the minimum wage required for Saudi nationals to count as full employees towards private sector localisation quotas under the Nitaqat programme.

The tariff changes come as Saudi Arabia plans substantial investment in its electricity infrastructure. In September 2025, Saudi Energy announced plans to invest SR220bn ($58.7bn) in power infrastructure projects between 2025 and 2030.

A June 2025 report by Fitch Ratings forecast negative free cash flow of about SR16bn a year over the period and rising leverage, reflecting the financial demands of the programme.

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Mark Dowdall
Dubai Municipality confirms AED3bn Tasreef drainage awards
26 October 2026

Dubai Municipality has confirmed it has awarded four contracts worth AED3bn ($817m) to expand the emirate’s stormwater drainage network by about 100 square kilometres under phase three of the Tasreef programme.

The projects will cover Jumeirah, Umm Suqeim, Al-Quoz, Al-Barsha, Al-Wasl and Al-Marmoom. The works include constructing and extending main stormwater drainage lines with diameters of up to three metres.

The four packages are part of Dubai’s AED30bn Tasreef programme, which aims to increase the emirate’s stormwater drainage capacity by 700% and reduce costs associated with pumping stations, network operations and maintenance by 20%.

The contracts have been awarded to China State Construction Engineering Corporation (CSCEC) and three local firms: Arifco Group, Nael Construction & Contracting (NCC) and Detech Contracting. Dubai Municipality did not state which projects the awards relate to.

According to sources, the contract awards include packages TF-15-C1, TF-15-C2 and TF-13-C1.

The first package, TF-15-C1, involves the construction of 21 kilometres of main and secondary drainage lines along Al-Wasl Road and in surrounding areas. It will cover Za’abeel 2, Al-Wasl, Jumeirah 1 and 2, Al-Bada’a, Al-Satwa and Dubai World Trade Centre. The estimated $100m contract was awarded to Detech in July, as exclusively reported by MEED.

The second package, TF-15-C2, covers the corridor between Sheikh Zayed Road and Al-Khail Road. It includes about 14km of main drainage lines serving Al-Quoz Industrial Areas 1, 3 and 4, and Al-Barsha 1. In July, MEED reported that CSCEC had won the engineering, procurement and construction contract for this project.

The third package, TF-13-C1, covers Al-Marmoom, where 23km of drainage infrastructure will be developed. According to a source, Arifco has been awarded this contract.

The final package covers Jumeirah and Umm Suqeim, where about 42km of main drainage lines will serve Umm Suqeim 1, 2 and 3; Umm Al-Sheif; Jumeirah 3; Al-Safa 1 and 2; and Al-Manara.

In May, MEED reported that NCC had been awarded a contract to build a sewage and stormwater drainage system, DS-204. However, it is unconfirmed whether this relates to the same project.

Earlier, in February, the municipality confirmed it had awarded contracts for five new projects under phase two of the programme to expand and strengthen Dubai’s stormwater drainage network.

These included two contracts awarded to Detech and one to CSCEC for stormwater drainage infrastructure. In addition, two consultancy contracts were awarded for the study and design of drainage systems in selected areas across the emirate.

Cumulatively valued at AED2.5bn, the new projects will serve 30 vital areas, spanning approximately 430 million square metres and supporting an estimated population of three million residents by 2040.

Previously, in April 2025, an earlier package of awards was announced under phase one of the Tasreef programme. The overall masterplan aims to expand Dubai’s rainwater drainage capacity by 700% by 2033.

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Mark Dowdall
Nakheel awards $259m Dubai Islands buildings contract
26 October 2026

Dubai-based master developer Nakheel, part of Dubai Holding Real Estate, has awarded local firm Parkway International Contracting a construction contract valued at about AED950m ($259m) for phases two and four of Bay Grove Residences on Dubai Islands.

The package covers 617 residential units across eight buildings, ranging from one to four bedrooms, together with basement structures, infrastructure and community amenities including swimming pools, sports courts and fitness centres.

Phase two comprises 360 homes across four buildings, with main construction scheduled for completion in late 2028.

Phase four includes 257 homes across four buildings, with completion targeted for the second quarter of 2029.

The award follows an earlier contract valued at about AED800m ($218m) awarded to local contractor Metac General Contracting Company for phases one and three, covering 537 homes across seven buildings.

Together, the two contracts total more than AED1.75bn ($476m) and account for all 1,154 planned homes across the 15 buildings of Bay Grove Residences.

Project activity on Dubai Islands has gathered pace in recent months. Earlier this month, Nakheel awarded local firm Mar Marine & Building Contracting a contract for marine and coastal works on Island B. The scope includes constructing breakwaters, removing existing rock revetments and creating a new 320-metre beach near the Bay Villas development, as well as remedial and refurbishment works along approximately 3 kilometres of the island’s western shoreline.

In August 2025, Nakheel awarded Fibrex Contracting a AED2.6bn ($708m) construction contract for the Bay Villas residential project. That followed a AED527m ($143m) contract awarded to Al-Nasr Contracting Company in April 2026 for primary infrastructure and utilities on Island B.

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Yasir Iqbal
Morocco plans second high-speed rail phase to Agadir
26 October 2026

Morocco has outlined a second rail investment cycle for 2030-35, which includes beginning construction of a high-speed rail extension from Marrakech to Agadir and connecting Essaouira to the national rail network.

The pipeline forms part of the government’s 2026-31 programme, presented to parliament last week.

The Marrakech-Agadir link is estimated to cost close to MD55bn ($5.5bn) and will cover a 240-kilometre (km) route through the High Atlas Mountains via Chichaoua. Civil engineering structures, including tunnels and viaducts, are expected to account for nearly 70% of the alignment.

In September, the government issued a decree declaring the Marrakech-Agadir and Chichaoua-Essaouira rail corridors to be of public utility, paving the way for land acquisition and expropriation procedures.

Under the long-term masterplan Plan Rail Maroc 2040, Essaouira is expected to connect to the network via a separate line branching off at Chichaoua, designed for operating speeds of up to 200km an hour. The mainline to Agadir is designed for speeds of up to 320km/h.

The 2030-35 cycle also includes rehabilitating the Casablanca-Khouribga-Oued Zem line; constructing a new line between Oued Zem and Beni Mellal via Bejaad, with a branch to Fquih Ben Salah; doubling and upgrading the 140km Benguerir-Safi line; expanding capacity on the Fez-Oujda corridor; and building new-generation passenger stations.

The plans follow Morocco’s ongoing MD134bn ($13.4bn) 2024-30 rail investment programme, which focuses on completing the Kenitra-Marrakech high-speed line ahead of the 2030 Fifa World Cup.

The programme also includes developing regional express network services across five regions, electrifying the Fez-Oujda line and completing a freight rail link to the Nador West Med port.

Work on the Kenitra-Marrakech line had reached about 30% by May 2026, with commercial services targeted to begin in September 2029.

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Yasir Iqbal

Riyadh tenders King Salman Stadium works

26 October 2026

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Saudi Arabia’s Sports Ministry has tendered a contract covering early works at King Salman International Stadium in Riyadh.

The scope includes enabling works, site preparation and initial construction activities.

The tender was issued on 11 October, with a submission deadline of 19 November.

The stadium will cover about 660,000 square metres (sq m) and seat 92,000. Facilities will include a 150-seat royal suite, 120 hospitality suites, 300 VIP seats and 2,200 dignitary seats.

The wider development will include sports facilities covering more than 360,000 sq m, including two training fields and fan zones; a closed sports hall; an Olympic-sized swimming pool; an athletics track; and outdoor courts for volleyball, basketball and padel.

The stadium is set to host the final of the 2034 Fifa World Cup and will serve as the Saudi national football team’s main base.

US-based architectural firm Populous is the lead architect for the stadium.

Construction of the stadium is expected to be completed by 2029.

The stadium will be located next to King Abdulaziz Park.

Firms submitted prequalification statements for the main design-and-build contract in February.

Saudi stadium plans

In August 2024, MEED reported that Saudi Arabia planned to build 11 new stadiums and refurbish four facilities for the 2034 Fifa World Cup.

Eight stadiums will be located in Riyadh, four in Jeddah and one each in Al-Khobar, Abha and Neom.

A further 10 cities will host training bases: Al-Baha, Jazan, Taif, Medina, Alula, Umluj, Tabuk, Hail, Al-Ahsa and Buraidah.

There are expected to be 134 training sites in the kingdom, including 61 existing facilities and 73 new venues.

Saudi Arabia was officially selected to host the 2034 Fifa World Cup during an online convention of Fifa member associations at the Fifa Congress on 11 December 2024.

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