Riding on the crest of booming real estate and retail sectors, a growing band of property developers has been launching multi-million-dollar projects which are propelling Saudi Arabia’s construction sector forward.

The projects are primarily coming up along the eastern and western shores of Saudi Arabia and in the Makkah and Madinah area, where land is probably the most expensive in the entire Arab world. These generally comprise mixed-use complexes as well as shopping malls, which are being built as a source of investment.
A total of SR100 billion was invested in the local real estate sector in 2003, says the chairman of the National Real Estate Committee on the Chamber of Commerce Council, Khalid Al Qahtani.
According to the local Al-Yaum newspaper, the real estate sector is the second most active economic segment in the country, after the oil sector. Religious tourism is another important source of income.
In the public sector, projects have been relatively few over the past year despite the robust oil prices. The primary focus has and continues to be roads, power and water and educational facilities. Security concerns have meant that a significant allotment is being made in the budget to boost the kingdom’s defence and security sectors.
However, Saudi Arabia has now posted a healthy SR45 billion ($12 billion) budget surplus in the fiscal 2003 –  the first in the kingdom since 2000 – and has this year allocated almost SR42 billion for new and ongoing projects, indicating better prospects for the near future.
The government is increasingly looking upon the private sector to develop, finance and build major infrastructure projects ranging from new power plants to railways, or to supply public services such as mobile telephone networks.
The power and water sector demands massive investments over the next decade and Saudi Arabia is now looking at awarding major projects on a build-operate-transfer (BOT) basis. According to an official source at the water and electricity ministry, some SR340 billion would need to be invested in the sector over the next 20 years to cope with anticipated demand.
The oil and petrochemical sector has witnessed a slowdown in projects over the past year.  Among the major petrochemical projects on the drawing boards is Saudi Aramco’s ambitious plan to transform the Rabigh refinery on the Red Sea into a world-class petrochemical complex by 2008 at a cost of $3.5 billion. In addition, a number of private petrochemical projects are in the pipeline.

Power & water
Two major power projects were awarded in recent months to boost capacity and meet the growing needs of the kingdom’s population of around 24 million.
Saudi Electricity Company (SEC) has awarded a consortium led by Alstom, a SR3 billion contract to supply and build the Shoaiba plant Phase 2 expansion.
The fast-track project calls for the supply and installation of three steam turbines with a total capacity of at least 1,050 MW at the power station.
The contract should also include an option to build a further three units on the same site, which could be exercised within 12 months. This would make Shoaiba the largest power plant in the Middle East with an output in excess of 4,000 MW.
The second major contract went to South Korean Hyundai Heavy Industries. Saudi Aramco awarded the SR1.6 billion contract for the construction of the 1,050 MW cogeneration power plant on the Arabian Gulf. The project, which is scheduled for completion by December 2006, will comprise three gas turbines each with a capacity of 300 MW, one unit of 150 MW and eight units of heat recovery steam generator boiler.
Meanwhile, SEC has invited bids for the 1,200-MW upgrade of Riyadh’s PP9 power station.
Saudi Arabia is seeking international investment in three other major water and power plants worth nearly SR15 billion, to be developed as BOT schemes,
The largest of these projects, a SR9 billion natural gas-fuelled plant at Ras Azzour near the northern border with Kuwait, will produce 2,500 MW of electricity and 176 million gallons of desalinated water a day.
Other projects include the SR4 billion gas-fuelled plant at Jubail, which will produce 1,100 MW and 75 million gallons of water daily and a SR1.5 billion oil-fuelled plant at Shuqaiq on the Red Sea, which will provide 24 million gallons of water and 700 MW.
SEC has separately earmarked seven more power plants to be completed between 2010 and 2017. The plants – Al-Muzahimiyah, Rabigh II, Al Qurayyah II, Sulbokh, Power Plant 10, Yanbu II and Shuqaiq II – will have a combined production of 14,100 MW (see table).
At a businessmen’s meeting in Jeddah earlier this year, SEC invited private investors from inside and outside Saudi Arabia to invest in these power generation projects as well as other transmission projects worth up to $15 billion.
Among other developments, a cogeneration plant with capacity of 2,400 MW and 300,000 cu m a day of desalinated water is to be set up as an independent water and power project (IWPP) in Jubail. Marafiq, which is spearheading the project, has invited 30 local and international developers to prequalify for the project.  Marafiq – which is owned by Saudi Basic Industries Corporation (Sabic), Saudi Aramco, Gosi and the Royal Commission, will be the full offtaker.
The kingdom is also planning to build six new desalination plants at a cost of $5 billion. The Saline Water Conversion Corporation (SWCC) intends to build the plants in Farsan, Qunfudha, Laith, Rabiq, Al Wajea and Al Umlaj.
The installations, which will also generate electricity, will raise the total number of desalination plants in the kingdom to 36, making the country the world’s leading producer of desalinated water.

Airport
Among the largest civil projects in the country is the expansion of King Abdul Aziz International Airport (KAAIA) in Jeddah which is slated for completion by 2010.
International engineering-construction firm Bechtel and Saudi engineering firm Dar Al Riyadh have been awarded a $1.5 billion contract for work on the project by the Presidency of Civil Aviation.
The expansion project includes the construction of new terminals for international and domestic passengers, expansion of existing terminals, construction of 25 air bridges, additional parking facilities, a new access road, and the upgrade of landside and airside infrastructure. 
The project will  increase the capacity of the airport from 13 million passengers per year to 21 million passengers. KAAIA currently handles about 80 per cent of pilgrim traffic and 40 per cent of overall air traffic in the kingdom.

Commercial/residential complexes
Numerous mega developments are under way in Makkah and Madinah to accommodate the growing number of pilgrims that descend on these cities during the pilgrimage seasons.  Among the largest such projects is the SR12 billion Jabal Omar development, which entails developing the mountainside overlooking the Grand Mosque in Makkah. The project, which covers a 1.2 million sq m plot, involves the construction of 11 hotel towers as well as apartment blocks, a shopping mall, and parking facilities for more than 10,000 cars. The project is being developed by the Makkah Construction and Development Company.
The Saudi Binladin Group is developing the SR6 billion Al Bait Towers in Makkah, which will be completed by early 2006. The development includes a five-star hotel, a shopping mall and four 27 to 30-storey residential towers, one of which is the SR1.5 billion Zam Zam Tower, the first timeshare property in Saudi Arabia.
The government is also planning to build a number of 10-storey residential buildings in Mina outside Makkah as part of its efforts to house more pilgrims in the tent city. The first phase of the project will cost SR2 billion.
Riyadh-based Saudi Amjad Holding is developing the SR1 billion Meridien Towers project, which comprises eight 22-storey towers (see page 153). 
Also in Makkah, the Jeddah-based Aqar Holding Company is investing billions of riyals in developing a 1.3 million sq m area over the next seven years. Among the projects it is developing is the 17-storey Al Qibla centre. The estimated SR1 billion project includes a hotel, apartments, a car park and a shopping mall.
The leading property developer has awarded Almabani General Contractors the main construction and fit-out package for its SR2 billion Al Haram Commercial and Residential Centre in Madinah. The project comprises nine 17-storey towers sitting on a four-level podium, which houses the 1,200-outlet Bani Alnajjar Shopping Mall.
Aqar Holding is also drawing up plans for a SR250 million overhead rail system in Madinah.
In Riyadh, the firm has just awarded the main construction package on the 130,000 sq m Riyadh Galleries, a four-storey shopping mall.
A number of high-rises are being built or have been planned for Jeddah. These include the SR600 million Burj Al Umara, to be built by Saudi Iqar Bina Real Estate Investment. The tower is expected to be the tallest in the Western Province and will comprise a five-star hotel and a commercial complex.
Also under construction in Jeddah is the SR200 million Corniche Dreams, a 25-storey complex and the SR278 million Abraj Al Farsi, the three-tower complex on the corniche (see page 157).
Saudi Abdullatif Alissa Group plans to build a $213.3 million tourist complex on the Red Sea coast, near Jeddah, which is targeted mainly at low-income individuals and families. Construction works on the complex, which will cover a total area of 1.1 million sq m, will start in 2005.
In the Eastern Province, Rikaz Development Company is investing $200 million in the Al-Fanar City project, which is to be built between the Dammam and Al Khobar (see page 145).
Real estate company Al Oula Development is developing the Al Oula Towers in Al Khobar and has invited investors to participate in the venture. The seafront Al-Oula Towers will comprise luxury housing units and a shopping mall.
Meanwhile, the Khalid Al Shobily Group Real Estate Investment is planning to launch a SR1 billion ‘floating mall’ close to Al Khobar. Work on the Al Shobily Grand Mall is set to commence shortly (see page 163).
Another developer which is spearheading mall projects is the Abdul Mohsen Al Muqrin & Sons Group, which is reported to be investing SR600 million in setting up such projects across Saudi Arabia. These include the SR120 million Al Badia Mall in Riyadh and another in the southern part of capital city as well as a shopping centre.
Carrefour Saudi Hypermarkets Company has three stores under construction in Riyadh and one in Al Khobar, and is also evaluating other opportunities while Geant plans to build up to 12 stores in Riyadh, Jeddah and in the Eastern Province.
The Savola Group is pressing ahead with expansion plans for its Al Azizia Panda hypermarket chain, with a total of eight stores planned across the country. Other local chains, such as Al Othaim Commercial Group and the Al Muhaidib Group’s Giant Stores, are also pursuing similar plans.

Industry
Saudi Arabia’s industrialisation drive continues with some 191 factories expected to be built during the first half of this year, representing a seven per cent rise compared to the same period last year.
The kingdom is also earmarking additional areas for industrial development. The Royal Commission for Jubail and Yanbu (RCJY) is developing a second industrial zone near Jubail and has launched engineering studies on the project. The project – which is expected to cover 5,395 hectares – is to be carried out in four phases, with the first phase scheduled to be completed by the end of 2007. In addition, earlier this year, the Minister of Industry and Electricity, Hashem bin Abdullah bin Hashem Yamani, earmarked some 159,000 sq m of land for a total of 36 industrial projects near five Saudi cities of Qassim, Hasa, Jouf, Tabuk and Hail.
Sabic has given the go-ahead for a plan to build a wholly-owned world-scale petrochemical complex at Yanbu which is expected to cost more than $2 billion and be completed in 2007. The project, which will include a 1.3-million tonnes per year (tpy) ethylene plant, is dubbed United 2 and will be modeled on the petchemical complex of Sabic’s subsidiary, Jubail United Petrochemical Company, in Jubail.
Among the major industrial ventures in the pipeline is a $1 billion venture by National Petrochemical Industrialization Company (NPIC) to build acetic acid, vinyl acetate monomer (VAM) and methanol projects in Jubail Industrial City in joint venture with Canada’s Acetex Corporation. The project is to be completed in 2007.
NPIC is also developing a $215 million polypropylene plant in Yanbu and has awarded Italy’s Tecnimont a turnkey contract for construction of the 420,000-tpy plant.
Saudi Alujain Corporation, which specialises in investing and developing petrochemical and metal projects, is conducting feasibility studies for new propylene and polypropylene projects.
Gulf Farabi Petrochemical is to build the first n-paraffin and linear alkyl benzene (LAB) plants in Saudi Arabia. Engineering, procurement and construction contracts have been signed with SNC Lavalin, Canada, and MR Al Kathlan, Iran. Engineering work is expected to finish by the end of 2005 with commercial production starting in early 2006. 
Most of the cement plants in Saudi Arabia have launched expansion plans to meet the surging demand for the material in the region. Turkish construction company Gama Endustri, for example, is expanding at least two cement plants – one for Saudi Yamama Cement Company and the other for Eastern Province Cement Company (EPCC).  Southern Province Cement Company (SPCC). Qassim Cement Company and Arabian Cement Company are among other firms that have launched expansion plans.
Steel is another building material that has been rising in demand and to meet market requirements, Saudi Iron and Steel Company (Hadeed) has embarked on an expansion programme which will increase its production of long and flat steel products to over five million tpy by 2006.
Also, Al Rajhi Steel is to build a 750,000 tonnes steel plant in Jeddah and has awarded a contract worth SR920 million to Danieli and Company of Italy to erect it.

Housing
Housing is a major area that requires urgent attention in the kingdom. According to Minister of Planning and Economy Dr Khaled Al Gosaibi, Riyadh alone faces a shortage of 270,000 housing units by the end of the seventh five-year plan ending next year.
The sector requires some SR700 billion in investments over the next 20 years to meet the needs of the country’s growing population, according to a Saudi real estate developer.
According to Al Gosaibi, the Saudi Real Estate Development Fund has granted loans worth SR135 billion for the construction of housing units over the next decade.
Private sector initiatives are under way to meet some of this shortage. Prince Alwaleed bin Talal is committed to building 10,000 homes over a 10-year period at the rate of 1,000 units per annum. Under the fifth phase of the programme, 1,000 homes were completed in the Baha region last year.
Among other initiatives, Jeddah’s Ewa Al Deera for Real Estate Development is building the SR359.9 million Um Al Khair housing project in Abraq Al Raghama, east of Jeddah, for medium-income earners.
The project will have 423 housing units and cover an area of 250,000 sq m. Some 80 units will be built in the first phase and will be ready by the end of this year.

Railway
The kingdom’s much-awaited $2 billion railway made some headway in early March when a $10 million deal was signed with Canadian, French and Saudi consulting firms to design the 1,600 km railway linking northern mineral deposits to the Gulf port of Jubail.
Saudi Arabia is expected to launch an international tender for construction of the railway once the firms complete their studies.
Meanwhile, the Arriyadh Development Authority (ADA), the agency responsible for developing the Saudi capital, has issued requests for proposals (RFPs) to international transport consultants interested in carrying out the preliminary engineering design on the planned $400 million light railway scheme. ADA intends to implement the first stage of Riyadh’s light railway by 2013. The preliminary design contract will cover two light rail lines running from north to south and from east to west, covering a total distance of about 38 km.
A total of 11 consultants have prequalified for the project.

Educational facilities
A string of technical and vocational training centres are being built to hone the skills of locals to meet the demands of the Saudi job market. Currently, East Consulting Engineering Center is designing a total of 10 technical colleges and 19 vocational training centres which will be constructed in various parts of the kingdom (see page 171).