Saudi Gazette report

RIYADH — The head of the National Contractors Committee Eng. Fahd Al-Nasban said that the contracting market has survived the deflation period it suffered during the past years. He said that the recession stage in which the sector has been through is coming to an end. Al-Nasban added that the sector is currently witnessing good signs of recovery hence the announcement of new development projects such as housing projects, Al Qiddiya projects, Neom and other development projects, Al-Eqtisadiah reported.

He pointed out that the market accounts for nearly 6 percent of the gross domestic product of Saudi Arabia. It employs some 300,000 people, 35,000 of whom are engineers. The sector represents about 20 percent of the total number of establishments registered in the Kingdom with about 4.5 million construction workers. He pointed out that the sector plays a vital role in the economy of the Kingdom. It is the main engine driving other businesses as it grows.

He pointed out that the contracting sector, during the last five years, faced the worst phase since the beginning of this industry in the Kingdom. He noted that the global economic crisis had a significant impact on oil prices that led to this recession and lowered incomes of the producing countries, which had a negative impact on government spending.

The contracting market has declined by at least 70% of its value over the past five years, resulting in several contracting establishments leaving the market due to the low number of projects offered in the Saudi market, whether governmental or non-governmental.

He pointed out that the contraction and the lack of supply of construction projects in the market led to a decrease in the cost of materials and equipment. He explained that the departure of many of the regular labor force during the recent period has affected the construction sector enterprises that have lost the gist of their technical and administrative expertise built over decades.

He added that the contracting sector during the past years faced many challenges and obstacles that hit many of its facilities and led to an unprecedented slowdown in its growth and the failure of many of its projects. These obstacles represented a significant recession in the market, which led to a decline in investment opportunities.

He also added that the appropriate solutions to these obstacles and challenges suffered by the sector is to strengthen the partnership with the relevant government agencies and respond to complaints of the investors in this sector.

Khalid Al-Jarbu, owner of a real estate development company, said that the construction sector witnessed a gradual recession during the past five years, reaching a recession rate of more than 40 percent. The cost of constructing a 450 square meter villa had previously been SR800,000. Now, after the decline of construction materials, it costs a maximum of SR750,000. He added that one of the reasons that affected the market was applicants going from the Real Estate Development Fund to banks, which made many reluctant to build.