Construction sector equations seem to be fast changing in the GCC, particularly in the Kingdom of Saudi Arabia. No sooner than new labour laws were issued by Riyadh early last month leading to close to 50 per cent of workers being forced to quit their jobs thanks to irregularities in the visas issued by the contracting companies another major problem has come to the fore leading to important projects being stonewalled. Delay in payments to contractors by various government agencies in Saudi Arabia is now being touted as being the main reason for the faltering of government projects as per an assessment by the International Federation of Consulting Engineers (FIDIC).
Currently, an amount in excess of SR100 billion, which represents up to 30 per cent of the total volume of government projects in the Kingdom, is being claimed by contractors. In Saudi Arabia, delayed payments to contractors extend for periods ranging from three to six months, and up to a year in many cases. What has made things particularly difficult for contractors in KSA is that the system there requires contractors to implement projects as long as the contract has been signed, even if the payments are delayed.
For Saudi Arabia which has the largest construction sector in the GCC not to mention a huge project pipeline such developments certainly do not bode well. The bleak outlook is further bolstered by a recent report by Delotte which suggests that the Kingdom, which since 2008 held a position of construction sector pre-eminence, has now lost out to the United Arab Emirates. Against that background the launch of an umbrella body for contractors appears to be one of the important solutions to the many obstacles plaguing the KSA's construction sector.
Meanwhile, undeterred by the numerous problems in the construction sector, the Saudi Arabian government has gone ahead and backed its belief in development by investing $22 billion into a public transport mega-project in the capital Riyadh. Chronically underdeveloped until now, the expansion of public transport in the Saudi capital will also cope with the projected boom in the local population. Slated to begin construction in early 2014 and the first trains operational in 2019, the new metro network will encompass over 176 km of train lines and 85 stations, linking Riyadh's centre to universities, the airport, a newly built financial district and commercial areas. The metro presents not just a great opportunity for contractors to acquire some business but also for locals to rid themselves of their car fixation and to take to public transport. The Saudi government is reportedly weighing up increasingly the cost of fuel to give public transport a boost.
Assuredly such measures are a step in the right direction. With hydrocarbon reserves starting to get depleted, and as oil and liquefied natural gas (LNG) continue their uptrend, governments in the region have taken recourse to exploring alternative sources of power and are looking to become one of the world's major green energy producers. The countries have already put in the pipeline some $155 billion worth of solar power installation projects. While Saudi Arabia intends to double its electricity capacity by installing 54-gigawatt renewable energy by 2032, of which 41GW will be sourced from solar, Qatar and Kuwait have also set their eyes on renewable energy sources. Dubai too has made public its plans to build a $3.2 billion, 1 gigawatt, facility by called Mohammad Bin Rashid Al Maktoum Solar Park, by 2030, the biggest project announced so far in the region. Abu Dhabi's Masdar City, which already houses a 10 MWphotovoltaic plant and a pilot solar thermal plant, is expected to be served entirely from renewable energy.
Present glitches on the ground notwithstanding, GCC's development future seems headed for the sun. And that should be happy news.