meed-logo

line1 line2 line3
SIGN IN / REGISTER

Saudi demand-supply imbalance needs action

26 January 2024

Some $879bn-worth of giga projects are planned in Saudi Arabia, of which about $50bn has been awarded to date, according to regional projects tracker MEED Projects.

The data shows that 2023 was a record year for projects in Saudi Arabia. 

However, the extensive scope of work associated with these projects has exposed the challenges of scaling up the local construction supply chain fast enough to meet the surge in demand.

With projects launching in quick succession, suppliers, contractors and subcontractors are struggling to keep up with the influx of new work into the market.

Riad Bsaibes, president and CEO of Amana Investments, says this shortage of resources is a critical issue, stating, “There is currently a bottleneck in the entire supply chain, from human capital and materials to subcontractors and general contractors.”

Moreover, the construction sector faces significant execution risks.

While some projects are subject to delays, efforts to accelerate others are exerting pressure on timelines and budgets. 

Highlighting the disparity, Bsaibes notes, “This mismatch is leading to delays as schedules stretch out and costs rise above original tender amounts. This creates risks for contractors if they cannot deliver projects on schedule or within the costs estimated during the tendering process.”

Career investment

The launch of Saudi Arabia's Vision 2030 has spurred an era of growth and investment. The surge in construction projects aligns with the kingdom's goals, positively impacting employment opportunities. 

Yet recruiting top local and expatriate talent across large-scale projects is becoming a challenge in Saudi Arabia, according to Bsaibes.

He acknowledges that attracting and retaining skilled workers is getting more difficult with time, stating: “This is particularly challenging due to the scale of expansion, coupled with the pressure of Saudi Arabia’s nationalisation policies that encourage contractors to recruit qualified Saudi nationals.”

As well as focusing on hiring practices, companies must also commit to nurturing and enhancing skills over time.

Continuous upskilling is crucial in the construction industry, where new technologies, techniques and regulations frequently emerge, requiring employees to adapt and stay relevant.

Bsaibes advocates a strategic approach to talent management that involves upskilling the existing workforce before hiring new talent.

He recommends a hands-on approach to learning and improving skills.

“A core part of skills development at Amana includes on-the-job training for all employees,” he adds.

“Skills development must extend to developing competency in cutting-edge technologies such as building information modelling (BIM), modular construction and other digital tools. This long-term effort should be a key priority for firms.

“Continuous learning and development are very important throughout an employee’s career, starting from their initial entry into the construction workforce.”

Bsaibes further highlights the significance of internships in providing candidates with practical experience before taking on permanent positions. 

This approach aims to facilitate a smoother onboarding process for individuals entering the workforce, ensuring they are well-prepared for new roles.

“Companies should invest in the professional development of their employees,” he says. “This could include training programmes, workshops and educational initiatives aimed at enhancing the skills, knowledge and capabilities of the workforce.”

Credit challenge

Access to credit is another major issue in the construction sector. A strong financial profile enhances borrowing capacity and facilitates the smooth execution of projects by ensuring a steady flow of financial resources.

Addressing credit concerns is, therefore, essential for construction firms. 

Bsaibes recommends adhering to a strategic financial approach, opting to retain significant cash reserves instead of incurring debt.

“This approach not only facilitates self-financing for projects when necessary, but also serves as collateral for the letters of guarantee frequently demanded in construction contracts. 

“Moreover, it provides the company with the flexibility to navigate through any payment delays without succumbing to financial distress.

“Amana has a strong balance sheet and well-established banking relationships,” he adds. “Banks view Amana as low risk due to its solid cash reserves and strong track record of on-time payments across different regions/currencies.”

In contrast, Bsaibes points out that many other contractors struggle due to insufficient cash flow management and weaker balance sheets. 

“Maintaining high cash levels on its balance sheet is a fundamental goal for Amana.”

Strong working capital allows the contractor to be selective in bidding for projects, avoiding low-margin work while still securing sizable contracts.

“Additionally, we have a positive history with lenders, which allows Amana to support its operations and capitalise on growth opportunities.”

Incentivising growth

Clearly, there is a need for industry-wide improvements.

Bsaibes says the most impactful change would be longer-term transparency across developers’ project pipelines. 

“This approach contrasts with the unpredictable, stop-start demand cycles currently prevalent in the industry. 

“It involves providing the supply chain with visibility into funding-backed plans over a three to five-year period. Such transparency is crucial for better resource planning and timely project delivery,” he adds.

Bsaibes also emphasises the importance of incentivising suppliers, subcontractors and contractors to scale up their capacity. “This will help them grow in a coordinated manner through financial/regulatory support from the government.”

Another area of improvement is the digitisation of government processes, although Bsaibes notes that progress is already being made.

Bsaibes also calls for changes in Saudi Arabia’s regulatory environment.

The continued maturation of Saudi Arabia’s evolving regulatory framework will reduce the complexities faced by international firms. Yet, greater alignment with global construction norms will stimulate competition and investment in the kingdom’s expanding market.

According to Bsaibes, transitioning contract law closer to international standards, such as those outlined by the standards organisation International Federation of Consulting Engineers (FIDIC), would significantly mitigate risks for new market entrants. Presently, the reliance on sharia law introduces an element of unpredictability into obligations, he says.

To achieve this, he recommends adopting contract laws aligned with common law systems, such as the UK’s, to provide foreign suppliers and partners with a clearer understanding of their obligations.

Bsaibes concludes that while the continued evolution of Saudi Arabia’s regulatory environment will take time, gradual alignment with international construction norms will ultimately ease risks and costs for both local and global industry players.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11449096/main4309.jpeg
Sarah Rizvi

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

Click here to register
Exclusive from Meed
Related Articles
  • Riyadh tenders Al-Zulfi passenger railway station

    22 October 2025

    Saudi Arabia Railways (SAR) has tendered a design-and-build contract for the construction of a passenger railway station in the Zulfi governorate, located 260 kilometres northwest of Riyadh.

    The station in Al-Zulfi will serve SAR’s North Railway line.

    According to the tender notice published on SAR’s website, the scope includes the construction of the station building, firefighting facilities, track works, signalling and telecommunication systems, utilities, access roads, parking, landscaping and other associated works.

    SAR has set 4 December as the deadline for firms to submit their bids.

    The passenger section of the North Railway – formerly known as the North-South Railway – extends over 1,250 kilometres.

    The line originates in Riyadh and runs northwest to Al-Haditha, near the Jordanian border, passing through Majmaah, Qassim, Hail, Jouf and Qurayyat.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14921216/main.jpg
    Yasir Iqbal
  • Procurement begins for $372m Rixos Alkhobar resort

    22 October 2025

     

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s Tourism Development Fund and US-based investment firm FTG International Group have invited companies to prequalify for a contract to develop a mixed-use resort at Half Moon Beach in Alkhobar, in the kingdom’s Eastern Region.

    “The prequalification process is ongoing and the project is likely to be tendered in a few weeks,” sources close to the project told MEED.

    The estimated SR1.4bn ($372m) project will cover an area of approximately 262,000 square metres.

    It will comprise 400 hotel units and 41 residential villas.

    The resort will operate under the Rixos brand and be fully managed by French hospitality firm Accor.

    UK-based analytics firm GlobalData expects Saudi Arabia’s construction industry to grow by 4% in real terms in 2025, driven by investments in housing, energy and transport infrastructure.

    The commercial construction sector is projected to grow by 3.7% in real terms in 2025 and maintain an average annual growth rate of 3.7% from 2026 to 2029. This is supported by Saudi Arabia’s Vision 2030, which aims to attract 150 million tourists annually and add 320,000 hotel rooms by 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14920903/main.png
    Yasir Iqbal
  • Saudi Arabia plans Mecca transit-oriented development

    22 October 2025

    Register for MEED’s 14-day trial access 

    Saudi Railway Company (SAR) has signed an agreement with local investment firm Riyad Capital to establish a real estate fund to develop a mixed-use, transit-oriented project in Mecca.

    The project will span more than 90,000 square metres in the Al-Rusifah district, near the Haramain high-speed railway station in Mecca.

    The development is estimated to cost more than SR6bn ($1.6bn).

    Riyad Capital operates through four business lines: asset and wealth management, brokerage, corporate investment banking and securities services.

    In an official statement, the company said its real-estate portfolio spans three continents and is valued at more than $6bn.

    UK-based analytics firm GlobalData expects Saudi Arabia's construction industry to grow by 4% in real terms in 2025, supported by investments in the housing, energy and transport infrastructure sectors.

    The commercial sector is estimated to grow by 3.7% in real terms in 2025 and to register an average annual growth of 3.7% from 2026 to 2029, supported by the government’s Vision 2030 plan. Under that plan, the government aims to attract 150 million tourists annually and add 320,000 hotel rooms by 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14920539/main.jpg
    Yasir Iqbal
  • Petrojet consortium wins $1.1bn oil contract in Algeria

    22 October 2025

    Register for MEED’s 14-day trial access 

    A consortium of Egypt’s Petrojet and Italy’s Arkad has been awarded a $1.087bn contract for the second phase of the Hassi Bir Rekaiz oil field development project in Algeria.

    The consortium is led by Petrojet and the client is Groupement HBR, a joint venture of Algeria’s national oil and gas company Sonatrach and Thailand’s PTTEP.

    The scope of work includes the construction of a central processing facility with a capacity of 31,500 barrels a day (b/d), along with associated facilities and pipeline networks extending over 217 kilometres.

    It also includes the construction of a power distribution station and storage tanks.

    In a statement, Petrojet said: “This award represents a significant step forward in strengthening Petrojet’s presence in the Algerian market and reaffirms its position as a leading regional [engineering, procurement and construction] EPC contractor delivering integrated, world-class energy projects.”

    Groupement HBR, which operates the Hassi Bir Rekaiz oil and gas concession, tendered the design contract for the second phase of the field development project in August 2023.

    HBR started production from phase one of the project in June 2022.

    China Petroleum Engineering & Construction Corporation executed EPC work on the first phase of the field development project. The contract was signed in 2020, with a value of $116m.

    The production target for phase one was 13,000 b/d of oil.

    The project site, in the eastern part of Algeria, contains blocks 443a, 424a, 414ext and 415ext.

    PTTEP and its partners found oil and gas in 10 out of 11 exploration wells drilled in the 1,916-square-kilometre area between 2013 and 2016.

    Algeria oil and gas sector

    Project activity in Algeria’s energy, industrial and manufacturing sectors is steadily building as the country focuses on a vertically integrated strategy that leverages the exploitation of its natural resources.

    In July, Sonatrach and Italian energy company Eni signed a production-sharing hydrocarbons contract estimated to be worth $1.35bn.

    The contract covers the exploration and exploitation of the Zemoul El-Kebir concession area, located in the Berkine Basin, approximately 300km east of Hassi Messaoud.

    The deal with Eni is the latest of several high-profile agreements that Sonatrach has announced with international oil and gas companies.

    In June, Algeria awarded five out of the six oil and gas exploration licences it offered during its 2024 bidding round, a move viewed as a success by stakeholders in the country’s energy sector.

    The companies that were awarded blocks included France’s TotalEnergies, state-owned QatarEnergy, Eni and PTTEP.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14920390/main3739.jpg
    Wil Crisp
  • Contractors prepare Riyadh Expo infrastructure bids

    21 October 2025

     

    Register for MEED’s 14-day trial access 

    Sixteen 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)
    • Almabani / FCC Construction (local/Spain)

    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