Saudi construction sector faces tough times ahead, says leading builder
Companies in Saudi Arabia have benefited from a boom over the past decade as high oil prices have prompted heavy spending on transport, social infrastructure and industrial facilities, but those prices have more than halved since last summer
Saudi Arabia's construction industry faces difficult times ahead as the prospect of state budget cuts adds to painful labour reforms, according to major builder Al-Khodari, in a sign of the strain on an economy squeezed by lower oil prices.
Companies in the sector have benefited from a construction boom over the past decade as the world's top oil exporter has taken advantage of high crude prices to spend heavily on transport, social infrastructure and industrial facilities.
But prices have more than halved since last summer due to a global supply glut and the volume of building projects looks set to shrink as the government, facing a mammoth budget deficit, starts to economise by slowing or shelving some plans.
Construction firms, including foreign companies operating there, have also been hit hard by labour reforms by a government seeking to reduce its reliance on oil, and also avoid the kind of social unrest seen elsewhere in the Arab world.
It has been pushing companies to hire more Saudi citizens instead of cheaper foreign workers, in order to move Saudis out of the state sector and into private industry. It is also keen to keep a lid on an 11.6 per cent unemployment rate.
“I think we should expect the difficult situation in the (construction) sector to go on for 18 more months,” said Fawwaz al-Khodari, the chief executive of Abdullah Abdul Mohsin al-Khodari Sons.
