2012-08-31 03:56:06 - Fast Market Research recommends "Saudi Arabia Infrastructure Report Q4 2012" from Business Monitor International, now available
BMI View: A significant upward revision of historical data by the Saudi National Commercial Bank, and a 140% year-on-year (y-o-y) increase in contract awards during 2011, have prompted us to adjust our 2012 construction forecast. Taking into account 11.6% real growth in 2011 and the sheer number of projects in the pipeline, we expect equally robust 9.3% real growth for 2012. We furthermore anticipate this trend to continue in the short to medium term on the back of the government's vast infrastructure investment scheme, aimed at staving off public discontent, and forecast an annual average real growth of 5.6% between 2012 and 2016.
We are now forecasting 9.3% and 6.5% real growth in 2012 and 2013, respectively. This reflects the significant
number of contracts awarded in 2011 (140% increase y-o-y), as well as increased government spending, which was pledged in response to popular discontent and the Arab Spring. Over the medium term, we continue to forecast robust average growth of 5.6% between 2012 and 2016.
Full Report Details at
- www.fastmr.com/prod/451374_saudi_arabia_infrastructure_report_q4 ..
Sectors To Watch:
* One of the most dynamic sub-sectors in Saudi Arabia has been power plants and transmission and distribution (T&D), with the US$80bn, 10-year investment plan for electricity infrastructure (2008-2018) having led to significant activity in the energy sector. BMI estimates that there are power projects worth US$30bn under way or in the pipeline, with the majority of these including the construction of new capacity. It is estimated that there is 30 gigawatts (GW) in development. Notably, a consortium led by Saudi-owned ACWA Power has started construction on the largest independent power generation project (IPP) globally at Qurayyah. The project is a major development in the Saudi power sector and is a substantial component of the country's plan to meet its rapidly increasing power demand.
* Huge investment into the social infrastructure sector is in the pipeline, in part to appease the populace. Both the SAR1.44trn (US$385bn) Ninth Development Plan (2010-2014) and social benefit packages, which is worth a total of US$130bn, announced in response to protests in which swept the Middle East during 2011, are heavy on social infrastructure spending. Healthcare and education investment are growing, and the potential for private sector participation is increasing. On the other hand, huge social housing projects are already in the pipeline, with SAR250bn pledged and construction of 500,000 housing units planned.
* A draft law revolutionising the mortgage market has also been approved in Saudi Arabia, presaging the formation of a more liberalised housing sector. We believe that the move could prove a huge boon to both domestic firms and international players looking to capitalise on the significant growth potential possessed by the Kingdom. The mortgage law has been under discussion for three decades, but took a long time to be approved due to resistance from religious scholars concerned about its appliance with Islamic, or sharia, law. We believe the regional political upheavals, which were largely triggered by youth unemployment, lack of proper housing and economic pressures, have helped to push the law back on the political agenda. However, in light of the long and torturous history of the law, we treat the news with caution.
* The transport sector is also booming, especially rail infrastructure - with US$24bn of projects under way or in the pipeline. The Haramain High Speed Railway has taken centre stage, with the final contract for the project (worth US$1.4bn and awarded to the Spanish Al-Shoula consortium) awarded in July 2011. Attention should now turn to the SAR26bn (US$7bn) Saudi Landbridge project - an east-west rail line that will link Jeddah and Dammam.
* The annual Hajj (the Muslim pilgrimage to Mecca) places intense pressure on the Saudi infrastructure framework, especially airports - with an estimated 1.9mn visitors entering the country to make the pilgrimage. In Q411, the Saudi Binladin Group (SBG) secured US$2.3bn of funding from a syndicate of local and international banks, led by the Gulf International Bank (GIB), for the expansion and development of King Abdulaziz International Airport in Jeddah. The US$7.2bn project was awarded in 2010 and is designed to boost capacity at the airport to 30mn passengers a year through the construction of four terminals.
* The government continues to promote the private sector's participation in the construction sector and, according to the Ministry of Finance's end of year press release in 2011, around 2,600 government projects worth an estimated US$38.0bn were signed with the private sector over the course of the year. However, we note that there has not been total success. Most notably, we note that the Saudi Landbridge rail project, which has been in the pipeline for a number of years, was initially launched as a public-private partnership (PPP) concession. However, the project was approved for construction using government funds in October 2011.
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