Saudi Arabia Infrastructure Report Q2 2008

Published quarterly by BUSINESS MONITOR INTERNATIONAL LTD
Saudi Arabia
Infrastructure
Report Q2 2008
Including 5-year industry forecasts
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Saudi Arabia
Infrastructure Report
Q2 2008
Including 5-year industry forecasts by BMI
Part of BMI's Industry Report & Forecasts Series
Published by: Business Monitor International
Publication Date: April 2008
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Saudi Arabia Infrastructure Report Q2 2008
Business Monitor International Ltd Page 2

CONTENTS
Executive Summary .........................................................................................................................................5
Industry Trends and Developments ...............................................................................................................7

Market Overview ................................................................................................................................................................................................... 7
Industry Trend Analysis Construction Inflation Continues To Rise .................................................................................................................... 7
Saudi Arabias Economy in 2007......................................................................................................................................................................... 10
Saudi Arabias Construction Industry in 2007..................................................................................................................................................... 10
SWOT Analysis...............................................................................................................................................11
Saudi Arabia Infrastructure Industry SWOT........................................................................................................................................................ 11
Saudi Arabia Political SWOT .............................................................................................................................................................................. 12
Saudi Arabia Economic SWOT ............................................................................................................................................................................ 12
Saudi Arabia Business Environment SWOT......................................................................................................................................................... 13
Key Projects....................................................................................................................................................14
Transport............................................................................................................................................................................................................. 14
Utilities ................................................................................................................................................................................................................ 16
Residential And Commercial Construction .......................................................................................................................................................... 18
Table: Saudi Arabia Major Infrastructure Projects ......................................................................................................................................... 19
Industry Forecast Scenario ...........................................................................................................................23

Table: Saudi Arabia Construction And Industry Data ...................................................................................................................................... 23
Risks .................................................................................................................................................................................................................... 25
Business Environment ..................................................................................................................................26

Regional Overview Middle East And Africa........................................................................................................................................................... 26
Saudi Arabia: Business Environment Rating ............................................................................................................................................................ 27
Table: Middle East & Africa Business Environment Rating ................................................................................................................................ 27
Foreign Direct Investment ........................................................................................................................................................................................ 27
Labour Force............................................................................................................................................................................................................ 28
Legal Framework...................................................................................................................................................................................................... 29
Tax Regime ............................................................................................................................................................................................................... 31
Limits Of Potential Returns....................................................................................................................................................................................... 32
Risks To Realisation Of Returns ............................................................................................................................................................................... 32
Macroeconomic Outlook ...............................................................................................................................33

Table: Economic Activity..................................................................................................................................................................................... 35
Index-Company Profiles ................................................................................................................................36

Table: Key PlayersSaudi Construction Industry ................................................................................................................................................ 36
Company Profiles...........................................................................................................................................37
Damac ................................................................................................................................................................................................................. 37
Saudi Oger........................................................................................................................................................................................................... 38
Al Khodari Group ................................................................................................................................................................................................ 40
Almabani General Contractors............................................................................................................................................................................ 41
Emaar .................................................................................................................................................................................................................. 42
BMI Forecast Modelling .................................................................................................................................43

How We Generate Our Industry Forecasts ........................................................................................................................................................ 43

Introduction .............................................................................................................................................................................................................. 43
Ratings Overview...................................................................................................................................................................................................... 44
Table: Infrastructure Business Environment Indicators ...................................................................................................................................... 45
Construction Industry .......................................................................................................................................................................................... 46
Sources ..................................................................................................................................................................................................................... 46

Executive Summary
With a shift in focus towards the expansion of the non-oil economy, Saudi Arabia has outlined ambitious
plans to develop its manufacturing, communication and construction sectors. Projects worth
approximately US$300bn are being undertaken, nearly all of which have an element of construction in
them. Buoyed by high demand, the Saudi construction industry has been contributing in excess of 5% to
the countrys gross domestic product (GDP) in the last few years. This report forecasts the Saudi
construction industry to log an average growth of 5.20% over 2008-12.
Saudi Arabia represents the largest construction market in the Middle East. In recent years, large oil
revenues have made it possible for the construction industry to employ the extra liquidity for its
development. The growth of the countrys construction industry is also sustained by the governments
efforts to liberalise the economy. Provision for total ownership of property and projects by foreign
nationals, together with relaxation of taxation norms for foreign companies who are allowed to participate
in the public procurement system, has ensured attractive capital flows into the nation. At present, the
focus of the construction industry is on the development of mega cities including King Abdullah
Economic City (KAEC) and Knowledge Economic City (KEC).
The Bin Laden Group, Mecca Construction & Development, and Saudi Oger are Saudi Arabias
largest contracting groups, with extensive operations within the country and throughout the Middle East.
The Bin Laden Group was awarded the US$1.6bn contract to build the Al Bait Towers in Mecca, and has
a strong record in major infrastructure projects. Saudi Oger is particularly active in heavy civil
engineering and has been involved in several high-profile water, power and transportation projects. It
entered into a joint venture with the Saudi Arabian mining company Maadin, and the two companies are
exploring plans to develop a 1,600km railway linking the northern and eastern regions of the country. It is
also involved in the development of independent power and water projects in the kingdom.
Barriers to foreign participation in the Saudi construction market have eased considerably over the past
few years, following the introduction of the Foreign Investment Law in 2000. The new regulations
include streamlined investment procedures and more relaxed sponsorship regulations; for the first time,
total ownership of property and projects by foreign companies is allowed. In April 2003, the government
cut taxation on foreign companies from 45% to a maximum of 25% in a bid to boost foreign investment.
In 2005, a new government procurement law was also passed under which 100% foreign-owned
companies could bid for government contracts.

Despite the remarkable growth of the Saudi construction industry, it needs to be wary of rising inflation,
brought about by excess liquidity in the market via persistent budget surpluses. Political instability and
the threat of terrorism also pose challenges for the construction industry.
The nation continues to remain an attractive destination for foreign investment in spite of macro-
economic challenges faced by its economy. Its construction industry is poised to perform impressively in
the forecast period, thanks to the governments fervent efforts. Accordingly, BMI forecasts the Saudi
Arabian construction industry to register 4.75% year-on-year (y-o-y) growth in 2008 and to be valued at
US$25.46bn by 2012.

Industry Trends and Developments

Market Overview
Saudi Arabia is an oil-based economy with strong government control over major economic activities.
The kingdom has the largest reserves of petroleum in the world (25% of proven reserves). It is the worlds
largest exporter of petroleum and plays a leading role in the Organization of Petroleum Exporting
Countries (OPEC).
The Saudi government is now encouraging private sector growth to lessen the kingdoms dependence on
oil and increase employment opportunities for the growing Saudi population. Priorities for government
spending in the short term include additional funds for education, and for the water and sewage systems.
Saudi Arabia constitutes a lucrative investment destination, with the worlds lowest energy prices for
investment projects. Taxes and property registration costs are also among the lowest in the world. The
kingdom is the Middle Easts biggest free economic market, accounting for a bulk of the exports and
imports in the Arab world. It is strategically located, with easy access to Asia, Africa and Europe.
Favourable demographics, market dynamics and the governments commitment to reform have further
encouraged foreign investment.
Over the last few years, the kingdom has been investing considerably, both in residential and industrial
building construction. Construction is the largest non-oil economic industry in Saudi Arabia. It is
currently witnessing growth fuelled by high oil prices, economic performance, high liquidity, low-interest
credit from commercial banks, as well as high population growth.
Industry Trend Analysis Construction Inflation Continues To Rise
At present, the global economy is torn between two competing though interlinked trends. Economic
prospects within developed states, principally the US and the UK, appear to be receding rapidly, while the
outlook for Emerging Markets, especially commodity producers, remains firm. The corollary is that,
while the risks to the economies of the Middle East may be rising, the cost base of the construction sector
will continue to grow.

It is important not to overstate the increase Cement prices, US$

700
in economic risks to the Middle East arising 650
from the US downturn. Certainly, it is 600
550
exposed. The region's principal export is 500
US dollar denominated and, with pressure 450
400
on the greenback continuing in 2008
350
despite expectations in some quarters that it 300
had hit bottom the real value of energy 250
200
exports is under pressure. However,
Q106
Q206
Q306
Q407
Q107
Q207
Q307
Q407
notwithstanding the fact that oil prices
Sulphate Resistence Portland cement
stabilised above US$100/bbl in March, the While cement Lime
Gypsum
key risk is, not an erosion of the terms of Source: http://www.dm.gov.ae
trade as the cost of euro or other non-US
dollar denominated imports rise, but a sharp fall in oil prices should global demand growth fall rapidly as
occurred after the Asian crisis of 1997.
The sharp fall in US economic prospects, as a result of the sub-prime mortgage crisis and related credit
crunch, does increase downside risks for global energy demand. However, the analogy with 1997 is
inaccurate. Then, OPEC opened the taps just as Asian demand collapsed and, more importantly, failed to
cut production once the oil price started falling. Now, the most likely scenario is that non-US global
economic growth will moderate, rather than decline outright, which is significant as rising energy demand
is principally driven by Asian states, notably China and India, whose economies are likely to escape a
major downturn. Thus, while the risk of a substantial fall in oil prices has risen, it remains comparatively
minor. Likewise, the probability of a sharp fall in demand for the key projects within the Gulf
construction sector is, currently, low.
This does not, however, mean that the 260

Cement prices, US$
construction sector is risk free. Leaving aside 240
220
the tight supply of project managers and 200
180
contractors, a key concern remains the ongoing 160
rise in the cost of raw materials. While solid 140
120
data on this is difficult to gather, the Dubai 100
80
Municipality collates quarterly data on average
60
retail prices for main building materials 40
20
groups. With most building materials freely 0
Q106
Q206
Q306
Q407
Q107
Q207
Q307
Q407
traded into and within the Gulf, costs across
Aggregates 3/4 UAE

Sand w hite UAE
Concrete ready mix normal UAE
Source: http://www.dm.gov.ae

the region are likely to be broadly similar after accounting for different shipping costs.
The results confirm that existing trends continue to put pressure on the industry. Of the three major
categories cement, aggregates and sand and steel only the prices of aggregates and sand are
stabilising. Average annual inflation of a basket of three commodities tracked by BMI averaged only
3.6% in Q407, down from 25.6% in Q107. Furthermore, the deceleration was seen in the prices of all
three commodities.
However, the good news ends there. Prices of Steel prices, US$
2,700
cement have continued their fairly rapid 2,600
2,500
ascent. The mean average annual price rise of
2,400
the five cement types within BMI 's basket 2,300
2,200
was 20.8% in Q407, only marginally lower 2,100
than the average of 20.9% for all of 2007. 2,000
1,900
Furthermore, the price rise in the fourth 1,800
1,700
quarter was the second highest of the year, Q106
Q206
Q306
Q407
Q107
Q207
Q307
Q407
indicating that ongoing price pressures within
Flat steel - Turkey
the industry which have been caused by Peems steel - S Korea
Steel angled - S Korea
tight supply over the past three years on the Bars 6-8mm Turkey
Hightensile steel - Qatar
back of accelerated construction growth in Source: http://www.dm.gov.ae
the Middle East and Asia are unlikely to

abate soon. The inflationary backdrop is more moderate in steel, which rose by 13.8% year-on-year (y-o-
y) in Q407. However, this is way above consumer price inflation. More importantly, the average price of
our basket of five steel products has increased by almost 25% between Q106 and Q407.
Industry Implications
The industry is interestingly poised. BMI does not believe that there will be a substantial fall off in
energy prices in 2008 as a result of the sharp US slowdown. Furthermore, several years of strong capital
inflows into the Gulf mean that the domestic banking sector is reasonably well capitalised and has not
suffered the same crisis of confidence in counter-parties that has gripped New York and London's
financial sector. Thus, while risk premiums have risen globally since August 2007, it is by no means
certain that project financing costs will increase within the region.
However, the continued rise of project costs will add pressure to an industry in which BMI has been
concerned about an investment bubble for several years. Few projects are purely speculative, but the fact
that many have been greenlighted at a time in the economic cycle where a peak has either been reached,
or is near, suggests that margins may continue to be eroded just as central banks across the region itch to
tighten rather than loosen monetary policy. Even a modest deflation of the bubble rather than its
outright bursting would be sufficient to cause problems for many projects. As outlined in our industry

forecast scenario, BMI retains an optimistic view for the industry. However, risks will continue to
increase if input prices remain on their upwards curve.
Saudi Arabias Economy in 2007
The economy of Saudi Arabia has been experiencing budget surpluses in the last few years. Meanwhile,
public debt has reduced from 92% in 2003 to nearly 30% in 2006, indicating a vibrant economy. The GDP
of the Saudi economy is estimated to register a growth of 3.5% y-o-y in 2007. According to the Riyadh
Bank, the liberalisation policy adopted by the government will push real non-oil private sector growth,
touted to be the main driver of expansion for the country along with government spending, growth of
which is forecast to be nearly 6 % y-o-y. The main beneficiaries of this growth are expected to be the
manufacturing, communication and construction sectors. Further, a report by Riyadh-based Jadwa
Investment indicates that demand for oil will grow steadily in line with robust global economic growth,
outpacing growth in supply, especially from outside OPEC.
Saudi Arabias Construction Industry in 2007
Soaring prices of cement stocks on the Tadawul All-Share Index (TASI) stand testament to the fact that
the Saudi construction industry is buoyant even as surplus liquidity is ploughed into real estate.
The Kingdom of Saudi Arabia represents the largest construction market in the Middle East. But as the
industry is heavily reliant on oil revenues, construction spending can be erratic. However, apart from a
brief slowdown in activity following 9/11, the industry has recorded growth since the late 1990s. In 2007,
the Saudi construction industry is forecast to grow at an estimated y-o-y rate of 4.67%
During 2005-2009, Saudi Basic Industries (Sabic) plans to spend US$8bn on new petrochemical
projects. Also, in its 2005 budget appropriations, Saudi Arabia allocated US$14.4bn for ongoing public
projects, a 29% increase over 2004, with infrastructure projects mainly water, desalination and sewage
accounting for a total of US$4.95bn.
The construction industry value is likely to reach SAR70.14bn (US$18.73bn) in 2008. The industrys
contribution to GDP is estimated to reach 5.12% in 2008, compared with 4.82% in 2007.

SWOT Analysis
Saudi Arabia Infrastructure Industry SWOT
Strengths ! Saudi Arabia has the largest construction industry in the Middle East;
alongside active government spending, efforts are being made to increase
private investment, which should help maintain growth over the next few
years
! The industry growth forecast over 2007-2011 averages 5.46%, with
government-led activity in infrastructure driving demand
! In addition to infrastructure development, there is strong activity in utilities,
with new power plants as well as water and sewage plants under
construction; new schools and hospitals are also planned in the
public/commercial sector
Weaknesses ! The industry is heavily reliant on government contracts and less on a free
market driven by the private sector
Opportunities ! A number of large, ongoing projects mean that many multinational firms also
have a presence; in particular, there is good potential for further
development in the oil industry and utilities
! Increasing private investment should increase opportunities for large foreign
contractors to increase their involvement in the country
Threats ! Volatility in the oil market is of particular relevance to the Saudi Arabian
construction industry; restrictions in production could have adverse knock-on
effects on levels of infrastructure spending
! Political stability in Saudi Arabia is in doubt after various attacks in which the
country appears to be both a source as well as a victim of terrorism

Saudi Arabia Political SWOT
Strengths ! The kingdom's ample oil reserves underpin the al-Sauds' regime
! Since the country is the world's largest oil exporter, international powers
have traditionally seen its internal stability as being in their own interests
Weaknesses ! The kingdom is home to several violent Islamist groups, and a number
of affluent Saudis have been linked with financing them
! The crackdown on extremists has been used as an excuse for the ruling
family to silence dissenters, as has been witnessed elsewhere in the
region; this could well breed greater dissent
Opportunities ! Municipal elections held in 2005 were the first nationwide polls in the
country's history, setting a precedent for further democratisation,
although women are excluded and elected members make up only half
the seats on the municipal councils
! The media is reportedly opening up to a wider range of political views,
though constraints remain
! The king appears interested in dialogue with leaders of the minority Shi'a
community
Threats ! The al-Sauds' key political alliance with the US has been a double-
edged sword domestically; it also faces risks from US lawmakers and
pressure groups suspicious of the government's commitment to
clamping down on anti-Western militants, or who object to the country's
democratic deficit
! There is an ongoing struggle between modernisers (led by King
Abdullah) and the conservatives (led by Prince Nayef) within the royal
family
Saudi Arabia Economic SWOT
Strengths ! As the main OPEC swing producer, the kingdom is favourably

positioned to benefit from still high global demand for oil
! The recent oil price boom has boosted growth in the non-oil sector and
infrastructure is now much improved
Weaknesses ! Dependence on oil means that growth, exports and government revenue
remain highly vulnerable to shifts in world oil prices
! The private sector is dependent on expatriate labour, reflecting a
shortage of marketable skills among nationals
Opportunities ! The country joined the World Trade Organisation (WTO) from end-2005;
this signals progress on liberalising the economy and will boost foreign
direct investment (FDI)
! Large revenues allow the government to increase capital investment,
boosting long-term growth prospects
Threats ! Any attacks on oil facilities could potentially lead to a disruption of

output, which would be extremely detrimental to the overall economy
given the reliance on this sector
! Perceptions of high security risk deter some investors and add to the
costs of insurance

Saudi Arabia Business Environment SWOT
Strengths ! Geographically, the kingdom is well placed for firms looking to establish
a base in the region
! The government's membership of the Gulf Co-operation Council (GCC)
means it benefits from duty-free access to markets in Bahrain, Oman,
Kuwait, Qatar and the UAE
Weaknesses ! The education system is not attuned to the needs of the private sector,
with only limited technical training
! Privatisation has been slow, and given the government's aim of
increasing employment, ongoing political obstacles are likely
Opportunities ! The government is investing in training as part of its efforts to 'Saudise'

the workforce (i.e. to increase the proportion of nationals in the
workforce relative to foreigners)
! Joining the WTO and pursuing an FTA with the US mean liberalisation
will continue
Threats ! The Saudisation process has been slow; many Saudis perceive a stigma
attached to semi-skilled jobs and tend to have higher wage expectations
than expatriates
! Perceptions of high political risk have added to the costs of insurance
and of private security guards

Key Projects
Transport
Airport Construction And Related Works
Twenty-seven airports operate throughout the kingdom. The three international ones are based in Riyadh,
Jeddah and Damman, and plans are in place to establish a fourth at Medina. Airports are widely used
domestically, as Saudi Arabias rail infrastructure has yet to develop sufficiently to provide an alternative.
New And Ongoing Projects
In November 2007, Al Shaer Engineering announced that it had won a US$73.3mn contract to work on
the expansion of the King Abdul Aziz International Airport (KAIA) in Jeddah over the next five years.
The contract is part of a wider project to expand the airports Haj terminal from 4.5mn to 9.2mn
passengers by 2025; to build a new terminal, so increasing the airports full passenger capacity from the
current 10.5mn to 25mn by 2010; to construct a new runway; and to develop an airfreight village.
Through the project, the General Authority of Civil Aviation (GACA) is seeking to convert the airport
from a costly state-run utility into a profitable commercial operation, while attracting increased business
and competing with other regional airports. The project has an estimated cost of US$31bn.
In June 2007, Saudi Safari Group was the lowest bidder for a recent renovation contract of the KAIA
involving the construction of new concrete load centres. The contract will also involve replacing chilled
water systems, installing air-conditioning units and building cooling towers. The group underbid Saudi
Arabias Bin Laden Group, which is already involved in three contracts worth US$400mn.
In October 2007, the president of Saudi Arabias General Authority of Civil Aviation, Abdullah Al-
Ruhaimy, announced that five new airports were to be developed across the kingdom. Locations were not
named but the project has an estimated cost of US$53mn.
Road Construction
Due to a desert terrain and harsh climate Saudi Arabias road infrastructure has mostly developed around
the countrys major cities of Riyadh and Jeddah. The countrys key highways include Dammam-Abu
Hadriya-Ras Tanura Highway (257km); Khaybar-Al Ola Highway (175km); Makkah-Madinah Al
Munawarah Highway (421km); Riyadh-Dammam Highway (383km); Riyadh-Sedir-al Qasim Highway
(317km); Riyadh-Taif Highway (750km); and Taif-Abha-Gizan Highway (750km).

Railway Construction
Saudi Arabia is the only country within the GCC that has developed a significant railway infrastructure.
Its main railway network is the 570km line, which operates between Riyadh and Dammam and the line
linking Riyadh and Hofuf.
In January 2008, Russian Railways, Russias state-owned rail monopoly, won the tender of the fourth
and final section of Saudi Arabias land bridge. Russian Railways will construct a 520km railway
between Al Zabirah and Riyadhs King Khalid International Airport. The US$800mn contract will
include the laying of track, 621 water pipes, 20 camel crossings, 26 rail and road overpasses and eight
railway bridges. The entire 2,400km project, which will stretch from the north to the south of the
kingdom, is scheduled for completion in 2010. The Public Investment Fund of the kingdoms finance
ministry set up a holding company to implement the entire project, known as the Saudi Company for
Railways (SAAR). The company divided the project into four segments and awarded them separately:
! The first segment, to build a railway link between Ras Azzar and Az Zabirah, at a cost of
SAR2.3bn (US$613.18mn), was awarded to a consortium of the Bin Laden Group, local
Mohammed Al-Swailem and German contractors;
! The second segment, covering the route from Az Zabirah to the Great Al-Nufud Desert, at an
estimated cost of SAR1.9bn (US$506.64mn), was secured by the local Al-Suwaikat Group.
! The contract for the third segment of the project, which is valued at SAR2.8bn (US$746.47mn)
and will cover the 818km of railways from An-Nafoud to Al-Haditha, Al-Jalamid and Al-
Basayta, was awarded to the Australia-based Barclay Mowlem, Japanese Mitsui and local
company Al-Rashed.
Port Construction
There are four major and two minor ports in Saudi Arabia. The largest is the combined industrial and
commercial ports at Jubail. The other ports are Yanbu, Jeddah and Dammam, with two further ports at
Jizan and Duba. The country is positioned to the south of the Suez Canal entrance, allowing Saudi Arabia
access to trade links with America, Europe and Africa.

The construction of the Red Sea Gateway Terminal is underway at Jeddahs Islamic Port. The project was
announced by the Saudi Trade and Export Development Company (Tusdeer) in May 2006, when it
signed an agreement with the Saudi Seaports Authority for the US$443mn venture. The terminal will be
developed and operated by the Malaysian infrastructure and energy group MMC Corp. The terminal,
which was designed by the UK-based Halcrow International, will consist of three berths. The first phase
of the project, which is being undertaken by the China Harbour Engineering Company, is underway
and will include dredging and land reclamation. The new container terminal, which is scheduled for
completion in 2010, will be equipped with eight twin-lift ship-to-shore cranes, purchased from Zhenhau
Port Machinery, enabling the terminal to service 1.5mn twenty-foot equivalent units (TEUs) annually.
Utilities
Oil And Gas Pipelines And Petrochemical Plant Projects
The latest Saudi Arabia Oil & Gas Report from BMI forecasts that the country will account for 18.69% of
Middle Eastern and African (MEA) regional oil demand by 2011, while providing a dominant 30.22% of
supply. The country has developed a pipeline network to service its main revenue sector.
Ethylene and propylene production capacity is on the increase, with new polymer plants due to come
online. The market may witness some restriction on its growth due to limits on ethane feedstock and a
possible downturn in the Chinese market.
In December 2007, South Korean Hyundai Engineering Co joined with fellow South Korean firm
Hanwha Engineering and Construction Corp to build an ethyleneamines plant. The petrochemical
plant has an estimated cost of US$210mn.
In the same month Seoul-based construction company Daelim Industrial Co won a US$960mn contract
to build a polyethene production facility in Al-Jubail, an industrial city in eastern Saudi Arabia, which
will have an annual capacity output of 550,000 tonnes of high-density polyethylene. Construction is due
to be completed by April 2011.

Construction Of Power Plants And Grid Networks
In 2006, Saudi Arabia had estimated installed electricity-generating capacity of around 27GW, all based
on conventional thermal sources, mainly oil. The countrys power consumption is expected to increase to
233TWh by 2011, with surplus generating capacity falling steadily. The state electricity utility Saudi
Electricity Company (SEC) announced that it planned to invest US$8bn in transmission projects during
2006-2015, and has a US$7.4bn budget for projects in 2008.
The GCC has announced that the first phase of its integrated power grid project will be initiated in 2008.
The US$1bn initial phase is being supervised by the Saudi-based GCC Interconnection Authority and will
consist of overhead lines and a submarine link, which will connect Saudi Arabia, Qatar, Bahrain and
Kuwait to the integrated North Grid. The second phase of the project will see Oman and the UAE being
linked together as part of the South Grid project and the third phase will involve the connection of the
South and North Grids.
In December 2007, the state-owned Saudi Arabian Mining Co awarded the construction project for a
US$280mn power generation and desalination plant to South Koreas Hanwha Engineering and
Construction Corp. The project is due to be completed in 2010.
Water Infrastructure And Related Projects
Saudi Arabia has set about streamlining its water infrastructure by merging governmental and local
authorities in charge of water supply into the National Water Company. The company is in charge of
Saudi Arabias water resources, sewerage systems and desalination plants. Saudi Arabia has used its
proximity to the Red Sea of to develop desalination projects. The kingdom is rated as the worlds largest
producer of desalinated water. Seventy percent of Saudi Arabias water demand is met by the nations 27
desalination plants.
In February 2007, plans for a project to modernise Jeddahs water supply were approved. The project will
include the construction of four dams in the Makkah region and the laying of new high-capacity pipes.
The project has an estimated cost of US$170mn and the government has also allocated approximately
US$255mn for new water and sanitary drainage projects in Makkah.

Residential And Commercial Construction
Residential Construction New And Ongoing Projects
In October 2007, the real estate development unit of Dubai World announced its plans to develop a
US$12bn urban project near Riyadh. The Al Wasl project will involve the development of a 1,411ha site
and as well as residential facilities will include office space, hotels, mosques, a hospital, a university and
seven shopping centres. Construction is scheduled to begin on the project in mid-2008 and will continue
over a seven-year period.
In September 2007, Keppel Land, the Singaporean developer, announced that it was to build luxury
residences in Jeddah with the Saudi Economic and Development Co (SEDCO). The project will see the
construction of three high-rise towers and 1,000 seafront apartments on Jeddahs waterfront.
Commercial Construction
Emaar is developing King Abdullah Economic City (KAEC), a 168mn m2 township located on Saudi
Arabias Red Sea coast, north of Jeddah. Being developed at a cost of US$26.6bn, it is slated to become
one of the most important cities of the Middle East. KAEC will host a range of economic activities. Saudi
Arabian General Investment Authority, the body responsible for inbound investments to the kingdom, is
acting as the prime facilitator for KAEC. It will comprise the Sea Port, Industrial Zone, Central Business
District (including the Financial District), Resort District, Educational Zone and Residential
Communities. In February 2008, Freyssinet signed a deal to build five office buildings in the first stage
of the business park, to be completed by the end of 2008 at a cost of US$92.8mn. The design and
management of the project is being undertaken by Hill International, an international design and
construction company. When completed the King Abdullah Economic City is expected to serve as the
headquarters for the Capital Market Authority and the Tadawul Stock Exchange.
Gulf Automobile Manufacturing Company has reached an agreement with the Saudi Authority for
Industrial Cities and Technological Regions (SACTR) to establish a car manufacturing plant in Dammam.
The car plant will have the capacity to produce 15,000 cars.
! In September 2007 Al Kabeer, the India-based frozen meat and ready meal producer announced
that it planned to establish a processing plant in Saudi Arabia.

Industrial Construction
In January 2008, Emal International, a joint venture between Abu Dhabis Mubadala Development
Company and Dubai Aluminium Company to set up an aluminium smelter complex. The plant is to be
located in the King Abdullah Economic City and will cost US$5bn. Construction on the project is due to
begin by the end of 2008.
In December 2007, the Saudi Total Lubricants Co a joint venture between Total, the French oil
group, and Saudi conglomerate Al-Zahid Group announced that it had leased land and planned to build
a 35,000 tonne capacity lubricant plant in the industrial zone of the King Abdullah Economic City.
Table: Saudi Arabia Major Infrastructure Projects
Project value (US$

Project mn) Company name(s) Timeframe Status
Airport Construction
Al-Shaer Engineering,
Expansion of King Abdul Safari Group, Bin Laden
Aziz International Airport 3,100 Group 2007-2012 Contracts awarded
5 New airport building

projects 53 na 2007+ Project announced
Road Construction
Road construction in Al-Rio Contracting and

Makkah and Dharan 173.4 Trading Ajzala Contracting 2007-2010 Contracts awarded
Wartha Abdul-Rahman Al-

Road expansion, Yanbu 11.28 Namlah 2007-2009 Contract awarded
Railways
Russian Railways, Bin

1st Phase- 613.18 Laden Group, Mohammed
2nd Phase-506.64 Al-Swailem, Al-Suwikat
Landbridge railway 3rd Phase- 746.47 Group, Barclay Mowlem, Contract for 4th
project 4th Phase- 800 Mitsui, Al-Rashel -2010 phase awarded.
Final planning
Riyadh light railway na na 2007- stages
Port Construction
MMC Corp, Halcrow

Interntaional, China
Harbour Engineering
Red Sea Gateway Company Ltd, Zenhau Construction
Terminal and JIP 443 Port Machinery Ltd 2006-2010 Underway
Bridge Construction
Tiran causeway (Saudi Construction

Arabia-Egypt) 3,000 na 2012 Underway
Oil and Gas Pipelines and Petrochemical Projects

Project value (US$

Hyundai Engineering Co
Ethyleneamines Plant 210 Ltd, Hawha Engineering 2007+ Planning stage
Polywthene Production Scheduled for

Facility 960 Daelim Industrial Co 2007-2011 completion in 2011
Manifa oil field Undertaken by Saudi Contract signed

redevelopment project 9,000 Aramco 2007-2011 with Jan De Nul
Fourth New Refinery at Announced by Saudi

Ras Tanura 7,000-8,000 Aramco 2012 Construction started
PBT complex in Yanbu 500 OSOS Petro-Chemicals na At the bidding stage
Petrochemical plant for

Saudi Basic Industries
Corp. (Jubail) 400 Samsung Engineering -2010 Project announced
Downstream gas pipeline

project on the Khurais Saudi Aramco, Metal Likely to be
crude increment Services for Trading & 2006- completed in 2
programme 67 Contracting Company 2008/2009 years
Oil recycling plant 45 Hyflux,Sedco, Lubrec na At planning stage
Negotiations are
Ras Tanura currently on with
Petrochemicals Complex Dow Chemical
(Ras Tanura) na Saudi Aramco 2009-2012 Company
Utilities and offsite

facilities at a 4mn-tpa Scheduled for
petrochemicals complex completion by
at Al-Jubail na Fluor Corp., Kalyan 2006-2009 December 2009
China Petroleum Pipeline

Laying crude oil pipelines Bureau and China
from Habshan oil field to Petroleum Engineering
Fujairah na and Constructio na At planning stage
Power Plant and Grid Network Construction
1st phase
Gulf Cooperation Council GCC Interconnection scheduled to begin
Integrated Electricity Grid 1Phase-1,000 Authority 2007+ in 2008
Power and desalination Hanwha Engineering and

plant 280 Construction Corp 2007-2010 Project awarded
Suez Energy International,

Gulf Investment
Power station and a Corporation and Arabian
desalination plant (Jubail- Company for Water and To be completed in
Yanbu) 3,400 Power Projects 2007-2009 mid-2009
Oil-fired 1,020-MW
thermal power generation
and desalination plant at Mitsubishi Heavy
Shuqaiq 1,900 Industries 2007-2010 Contract awarded
PP10 power plant near

Riyadh 1,500-2,000 na na At the bidding stage

Project value (US$

Fertilizer plant 946 Samsung Engineering 2007-2010 Contract awarded
380kilovolt transmission
line between Qurayyah Hyundai Engineering &
and Al Jubail 102 Construction 2007-2009 Contract awarded
Electric station in Jizan

region 91.45 Areva 2009 Contract awarded
Water Infrastructure
Dams under
Jeddah water project 425 na 2007+ construction
Water desalination plant, Doosan Heavy Industries

Jeddah 180,000 and Construction 2006-2009 Contract awarded
The Shuquaiq Water ACWA Power Projects,

Transmission system Mitsubishi Corp, Gulf Contract for second
project 1,000 Investments Corp -2010 phase signed
Water transmission
system for cities Yuksel Insaat, Insaat
Dammam, Al khobar etc. 384 Saudia na At planning stage
Hotel Construction
221-room hotel- Al Diyafa Diyafa Real Estate, Contract signed

Radisson Hotel, Makkah na Rezidor 2007-2010 with Jan De Nul
Crowne Plaza Hotel in Al Inter Continental Group Due for opening in

Madinah na and investors Saudi Telal 2007-2008 Q408
Residential Construction
Riyadh Urban Project 1,200 Dubai World 2008-2015 Planning stage
Jeddah Waterfront
Project na Keppel Land 2007+ Planning stage
Two mega real estate

projects at Riyadh and Kingdom Holding
Jeddah 20,000 Company 2007+ Land acquired
The mixed-use City

Fanar or Lighthouse City
complex (between Al- Land reclaimation
Khobar and Damman 160 Ballast ham 2006- complete
Commercial Construction
King Abdullah Economic Hill International, 1st phase due for

City 2,660 Freyssinet 2006+ completion by Q408
Gulf Automobile
Car Plant in Dammam na Manufacturing Company 2007+ Planning stage
Frozen meat and ready

meal processing plant na Al-Kabeer 2007+ Planning stage
Multimedia Development
Knowledge Economic Corporation, Multimedia Phase 1
city, Al-Madinah 7,000 University, Seera City Real 2008-2020 construction

Project value (US$

Estate Development underway
Cayan Investment
Company, Zahran Real
Estate Investment
Lamar Towers (Jeddah) 533.53 Company 2007-2010 Construction started
Cement plant in Al-Ahsa Al-Ahsa Development

near Hofuf 320.12 Company 2007+ At planning stage
Al-Jawharah tower in Construction to start

Jeddah na DAMAC Properties 2008-2011 in 2008
Industrial Construction
Mubudula Development
Company, Dubai Construction due to
Aluminium Smelter 5,000 Aluminium Company 2008+ begin in 2008
Lubricant plant na Total, Al-Zahid 2007+ Land leased
Desalination plant near

Jubail Industrial city 1,100 Veolia Environmentt na At planning stage
na = not available. Source: BMI

Industry Forecast Scenario
Table: Saudi Arabia Construction And Industry Data
2005 2006e 2007f 2008f 2009f 2010f 2011f 2012f

Construction
industry value,
SARbn 54.95 59.14 65.45 71.30 76.99 83.21 89.97 95.84
Construction
industry value,
US$bn 14.67 15.79 17.48 19.04 20.56 22.22 24.02 25.59
Construction
industry, real
growth, % y-o-y 5.39 6.43 4.67 4.75 4.83 4.93 4.98 6.52
Construction
industry, % of GDP 4.65 4.52 4.58 4.51 4.69 4.87 4.99 5.05
Total capital
investment, SARbn 195.63 222.74 242.24 268.30 292.51 316.13 341.83 375.04
Total capital
investment, US$bn 52.24 59.48 64.68 71.64 78.11 84.41 91.28 100.14
Total capital
investment, % of
GDP 16.54 17.04 16.95 16.95 17.83 18.50 18.97 19.78
Capital investment
per capita, US$ 2,260.41 719.39 698.40 681.89 696.10 701.32 698.37 706.91
Real capital
investment growth,
% y-o-y 5.19 6.34 4.67 4.75 4.83 4.93 4.98 6.52
Exports of
machinery and
transport
equipment, US$bn 0.88 0.92 0.97 1.02 1.07 1.12 1.18 1.24
Exports of
machinery and
transport
equipment, % of
total exports 0.49 0.44 0.40 0.37 0.39 0.40 0.41 0.42
Exports of
machinery and
transport
equipment, % y-o-y -16.36 5.00 5.00 5.00 5.00 5.00 5.00 5.00
Imports of
machinery and
transport
equipment, US$bn 26.93 28.23 33.68 38.69 42.68 46.09 49.72 53.71
Imports of
machinery and
transport
equipment, % of
total imports 46.40 46.54 46.27 46.22 46.36 46.35 46.30 46.31

Table: Saudi Arabia Construction And Industry Data
2005 2006e 2007f 2008f 2009f 2010f 2011f 2012f

Imports of
machinery and
transport
equipment, % y-o-y 39.55 4.84 19.30 14.88 10.33 7.98 7.89 8.02
Trade balance,
machinery and
transport
equipment, US$bn -26.05 -27.31 -32.71 -37.67 -41.61 -44.96 -48.54 -52.47
Construction
industry
employment, '000 750.42 836.90 875.96 917.57 961.91 1,009.30 1,059.56 1,128.63
Construction
industry
employment, % y-o-
y 5.39 11.52 4.67 4.75 4.83 4.93 4.98 6.52
Total workforce,
'000 6,561.56 7,522.98 7,788.54 8,063.48 8,348.12 8,642.81 8,947.90 9,263.76
Construction
industry employees
as % of total labour
force 11.44 11.12 11.25 11.38 11.52 11.68 11.84 12.18
e/f = BMI estimate/forecast. Source: ILO, UNCTAD, Central Department of Statistics, SAMA.
Increasing private sector participation in the delivery of major power and water projects should ensure
that the construction industry of Saudi Arabia delivers an average y-o-y growth of about 5.20% over
2008-2012.
The Saudi government hopes to attract investment in the petrochemical, transport and knowledge-based
industries. BMI expects that major corporate tax cuts will help, but bureaucracy remains a problem.
Commercial bank lending to the construction industry is expected to expand for a further year on the back
of an expected increase in government spending on projects, as well as the ongoing private-sector
investment in real estate and commercial centres.
The kingdom is now keen to attract an increasing volume of FDI in order to develop the non-oil sector. It
also seeks inward investment to improve the domestic skills base, which will be necessary to boost non-
oil growth and reduce unemployment. Slashing the rate of corporate tax from 45% to 25% will help
attract firms that might otherwise be deterred by high insurance and security costs.

Risks
On the back of strong macroeconomic indicators, the crucial challenge for the future is to tackle the
problem of unemployment. The workforce in Saudi Arabia accounts for less than 60% of the
economically active population, against a world average of almost 80%. For Saudi nationals, the figure
drops to below 40%. It is an issue that is becoming increasingly pressing, as the results of the census
published in 2005 revealed a population growth rate of 2.5%.

Business Environment
Regional Overview Middle East And Africa
The Middle East is emerging as a global infrastructural hub on the back of a rush of petrodollars as the
price of crude touches new peaks. The real estate boom that has emerged due to increased inflows is
characterised by huge, ambitious projects that are transforming the shores of the Persian Gulf with some
of the most fantastic and expensive structures on earth. The rush of petrodollars is also creating enormous
private and public wealth and reshaping Gulf business and society.
Much of the money has been earmarked for projects such as the building of new roads, residential and
commercial centres and modernisation of oil refineries. Governments are tailoring their infrastructure
projects to attract clusters of similar businesses, which gain from being close together. Emaar is
developing the new King Abdullah Economic City on the Red Sea coast north of Jeddah. Planners of the
new metropolis envision a giant port, with manufacturing businesses including petrochemicals and
pharmaceuticals. In line with its international expansion strategy, Emaar has also set up joint ventures and
projects across the region, covering Egypt, Turkey, Morocco, Syria, Tunisia and Saudi Arabia. It is also
venturing outside the Middle East, as are many other UAE and Gulf-based companies.
However, many of the Gulf regions economies as well as Nigeria are heavily dependent on oil.
Overheating of the economy is also a concern as investors are borrowing money to invest in local stocks
and consumer debt is growing to worrying levels in some of the Gulf countries. Moreover, political
problems across the region are far from solved whether it is a question of conservatives versus
moderates, or being perceived as pro-US and therefore open to terrorist threats. While there are
differences between the countries of the Middle East and Africa region, there is still some common
ground. Most countries in the region require more efficient development and upgrading of their
infrastructure power, telecommunications, transportation, water and related works. For instance, many
people in the region most of them in rural areas lack access to safe drinking water. Only 20% of urban
wastewater is treated, compared with 60-70% in the US and Europe. Both the availability and the cost of
finance are among the primary hindrances to regional infrastructural growth.
On account of its advanced country structure and relatively low perceived risks, Israel tops BMIs
Infrastructure Business Environment Rankings for the region. It is followed by Qatar and the UAE. Oman
comes in at the lower middle of the ratings table because of low scores on the Infrastructure Market
parameter, even though the perceived risks are low. Nigeria is placed at the bottom of the table due to low
scores on all parameters. The risk perception for the country is high, and the business environment is
riddled with corruption.

Saudi Arabia: Business Environment Rating
Table: Middle East & Africa Business Environment Rating
Business Environment Country Risk Sector
Labour Legal Long Term Structural Anticipated Infrastructure

Market Financial Frame Political economic Competitive Sector Business
Infrastructure structure -work Risk risk Environment Growth Environment
Algeria 43.8 34.7 43.5 65 63.9 50 50 46.7
Egypt 46.2 42.7 38.5 61.7 56.1 50 50 45.3
Iran 52.6 34.6 40.6 55 63.2 50 50 45.4
Israel 62.2 78.4 63.1 68.3 57.4 50 50 51.1
Kuwait 56.4 79.4 59.1 60.8 71 50 50 51.5
Morocco 26.9 46.9 43.4 60 63.2 50 50 45.5
Nigeria 34.9 31.4 36.7 46.7 46.5 50 50 40.2
Saudi
Arabia 53 68.9 42.4 53.3 65.8 50 50 47.7
South Africa 55.2 71.6 62.2 73 65.8 50 50 52.2
Turkey 41.6 39.2 44 65.8 52.9 50 50 45.3
United Arab
Emirates 55.2 56.1 56.1 72.5 71.6 50 50 51.7
1 All states rated by BMI. Sources: BMI's Country Risk/Business Environment Ratings, Sector analysts.
The components of the kingdoms score:
Foreign Direct Investment
The kingdom's investment regime has been transformed since the establishment of the main foreign
investment promotion agency, the Saudi Arabian General Investment Authority (SAGIA), in 2000. A
series of measures have made the climate far more propitious for foreign investment, with 100% foreign
ownership of both projects and real estate allowed. Tax code revisions have also slashed taxes on foreign-
owned capital. According to SAGIA, the mixture of an improved regulatory framework and a booming
Saudi economy has ramped up FDI flows. SAGIA says that the value of the licences it issued in 2005 for
joint and foreign projects exceeded SAR200bn (US$53.3bn) though not all of these projects will be
implemented. There are some significant drawbacks for foreign investors, notably a still tense security
situation in light of the terrorist campaign that accelerated in 2003.

The 2000 Foreign Investment Act governs all FDI in Saudi Arabia. The law, introduced at a time when
oil prices were at a historical low and the kingdom needed to secure new investment to kick-start a
flagging economy, provides for 100% ownership of the projects and property required for the project,
while equalising treatment with national companies for investment incentives, such as soft loans from the
Saudi Industrial Development Fund. FDI is particularly encouraged in key infrastructure sectors:
telecoms, power and water and transport.
A list bars foreign investment in a number of sectors, though SAGIA is resolved to shortening the list
over time. The sectors currently closed to foreign investment include three manufacturing categories and
16 service industries. A notable exclusion from foreign investment is oil and gas exploration and
production (E&P) the most highly prized area of the Saudi economy for foreign investors. But some
new areas have opened up in the past few years, including banking and insurance, and the mining sector
is seen as one of the country's strongest growth prospects.
Foreign investors are allowed to transfer money from their enterprises outside of the country and can
sponsor their foreign employees. There are no restrictions on foreign exchange and the repatriation of
capital and profits.
Ongoing institutional and legislative reforms are helping to create a level playing field between local and
foreign companies, helped by the recent adoption of a competition law. The government is currently
reviewing laws covering intellectual property rights (IPR), in order to conform to the WTO's TRIPS
(Trade-Related Aspects of Intellectual Property Rights) requirements.
Significant investment barriers remain: prominent among these is the Saudisation policy that restricts
companies' ability to recruit non-Saudi staff. Visa-processing (especially multi-entry variants) for
expatriate employees can also be unnecessarily slow, while many investors report tardy payment when
engaged in government contracts. The legal framework for the resolution of commercial disputes is also
questionable, with a lack of transparency prevalent. The Saudi workforce's lack of adequate training and
education is another key obstacle.
There are no free-trade zones in Saudi Arabia.
The top destinations for FDI are ICT and software, energy and textiles, with the primary source countries
the US, UK and UAE.
Labour Force
The local workforce comprises just 3.2mn citizens. However, demographic trends suggest this will rise,
with a forecast 4% annual increase in the size of the indigenous labour force.

The Saudi Labour Ministry claims unemployment among Saudi males is only 5% but anecdotal
evidence suggests unemployment is close to 20-30%. The majority of Saudis are employed in the public
sector. The government's long-term aim is to reduce the foreign population to 20% of the total by 2012. It
aims to raise the proportion of nationals working in the private sector from an estimated 13% in 2004 to
around 45% through the Saudisation programme.
Women reportedly make up less than 5% of the workforce in Saudi Arabia, but are likely to account for a
larger proportion in the future. In September 2005, the government approved a new labour law that will
allow women to work in any field.
The 2005 Labour Law has raised the target rate of Saudisation to 75%. The law, however, allows the
Labour Minister to reduce this rate temporarily if there is a shortage of qualified staff a get out clause
that will doubtless be frequently invoked.
Saudisation requirements are a concern, given generally poor education and skills levels among Saudi
nationals. Employers have traditionally been resistant to employing Saudi nationals because of higher
costs where a South Asian labourer can earn less than SAR1,000 a month, a Saudi will demand an
average SAR5,500 minimum.
Companies say that the Saudisation programme has been implemented too rigorously. As the list of
construction projects grows, demand for construction workers is also expanding but few Saudis
consider such work. Saudisation's strict visa requirements are making it harder for contractors to bring in
expatriate workers to fill posts. Getting block visas is a problem for many companies.
The Ministry of Labour and the Ministry of Interior are charged with regulating the recruitment of
expatriate workers. In general, the government encourages the recruitment of workers from Muslim
countries.
There is no tradition of industrial unrest in Saudi Arabia and the law forbids unions, strikes and any form
of collective bargaining though the Government allows companies that employ more than 100 Saudis to
form 'labour committees'. However to date, no labour committees have been established. There is no
forced or compulsory labour but domestic workers are not covered under the provisions of the new
Labour Law. A July 2004 decree addresses some workers' rights issues for non-Saudis, and the Ministry
of Labour has begun taking employers to the Board of Grievances.
Legal Framework
The Saudi Arabian legal system is based on Islamic law, or Sharia. Sharia courts exercise jurisdiction
over common criminal cases and civil suits. There are four tiers of Sharia Courts, which fall under the

jurisdiction of the Ministry of Justice. Much commercial law has been removed from the Sharia court
system. For example, the Ministry of Finance has jurisdiction over disputes involving letters of credit and
checks, while the Banking Disputes Committee of the Saudi Arabian Monetary Agency (SAMA
central bank) adjudicates disputes between bankers and clients. Other civil proceedings, including those
involving claims against the government and enforcement of foreign judgements, are held before
specialised administrative tribunals, such as the Commission for the Settlement of Labour Disputes and
the Board of Grievances.
The latter body which is not a Sharia court settles commercial disputes and grievances, tax disputes
and contractual affairs. It also reviews complaints of improper behaviour brought against public officials
and holds jurisdiction over disputes with the government and commercial disputes. The king appoints the
president of the board. There is also a Supreme Judicial Council (SJC), whose membership is appointed
by the king, but this does not have the status of a court and cannot reverse decisions made by a court of
appeals though it may review lower court decisions and refer them back to the lower court for
reconsideration. In 1994, the kingdom joined the New York Convention of 1958 on the Recognition and
Enforcement of Foreign Arbitral Awards and it is a signatory to the Washington Convention on dispute
resolution. However, Saudi courts do not yet routinely accept judgements of foreign courts.
The Judicial Law of 1975 empowers the SJC to appoint, promote and transfer judges. It also declared the
judiciary independent judges are only subject to the dictates of Sharia and the law. However, the Saudi
judiciary is far from independent and is heavily influenced by the extended Saudi royal family. Provincial
governors, for example, have the authority to exercise leniency and reduce a judge's sentence. Judges are
appointed by the Ministry of Justice and confirmed by the Royal Diwan (Royal Court). Effectively the
ministry exercises judicial, financial, and administrative control of the courts. The SJC has powers to
discipline or remove judges.
Saudi commercial law remains undeveloped. Foreign firms' major complaints centre on the inadequate
dispute-settlement mechanisms in Saudi Arabia, which remain slow and uncertain. Even when decisions
are reached in favour of a foreign party, the enforcement of the judgement can take years to complete.
The legal system can be heavily weighted against foreign investors, with Saudi partners free to remove
foreigners' exit visas, while courts can impose precautionary restraint of personal property pending the
adjudication of a commercial dispute. Reform is underway. In December 2005, a Saudi International
Arbitration Commission (SIAC) was formed, as part of the International Chambers of Commerce (ICC).
This will adopt the same arbitration system as the International Court of Arbitration. Furthermore, the
ICC-Saudi Arabia Office is to open several arbitration centres in major cities to address commercial
disputes. In November 2005, a royal decree was passed that will pave the way for the establishment of
commercial courts.

Non-Saudi firms are due to be granted the right to buy real estate according to the new foreign investment
code, but implementation appears unclear. There is little overall protection for foreign investors within
the legal system. According to BMI's Business Environment Rankings, Saudi Arabia is in a poor 118th
position globally in terms of investor protection. However, there are no known cases of government
confiscation of foreign-owned assets.
As part of its efforts to overhaul its business regulations and comply with the WTO's TRIPS obligations,
the government has in recent years updated the Trademark Law, the Copyright Law and the Patent Law
(2004). More resources have been devoted to enforcing these laws, with stiffer penalties for copyright
violators although many companies question the overall impact. Implementation as ever is a bugbear.
The Saudi patent office has a backlog of an estimated 9,000 applications dating back more than 15 years.
Enforcement is showing signs of becoming more effective, with the Ministry of Commerce & Industry
sporadically conducting high-profile crackdowns on trademark infringements.
There is a legal focus on combating corruption, with senior government officials barred from engaging in
business activities within their ministry. However, corruption remains an issue in Saudi Arabia, with
bribes and the use of commission widespread. There are only isolated cases of officials being charged
with corruption. Government efforts to improve transparency in public procurement have yet to yield
much fruit. The bureaucracy is extensive and a major drawback for companies doing business in the
kingdom. Heightened security precautions, lengthy and arduous tendering processes, and difficult visa
procedures all present problems.
Tax Regime
The Saudi tax regime is one of the top draws for foreign investors, with reforms introduced in 2004
cutting the corporate tax rate by more than half. The kingdom is one of the few countries that allow firms
to carry forward losses indefinitely, which allows companies to be free of a tax burden until they start to
report profits.
Corporate tax: The rate is 20%. Companies are subject to tax only on Saudi-sourced income. Exceptions
in the natural-gas sector are subject to a 30% tax rate, and businesses in the oil sector are taxed at 85%.
Individual tax: There is no taxation on wages and salaries, though non-Saudis can be taxed at a 20% rate
on their Saudi-sourced income. There is also a religious tax (called zakat) based on 2.5% of equity less
fixed assets.
Capital gains: Both companies and individuals' capital gains are generally taxed as income.
Indirect tax: There is no value-added tax or any sales taxes.
Withholding tax: Ranges between 5%-20%, depending on the types of services rendered.

Limits Of Potential Returns

Infrastructure Market
Historically, the Saudi kingdom has focused on exploiting its oil and gas reserves to earn revenues, so
much so that despite being the largest construction market in the Middle East, the construction industry
has been growing rather slowly. However, factoring the Saudi governments fervent intent to increase its
non-oil revenues, the sector year-on-year growth, over the forecast period, is observed to be quite healthy.
Country Structure
Saudi Arabias performance with regard to labour, power and financial infrastructure is impressive. With
its power system firmly in place, supply of electricity does not pose a threat to timely completion of
construction activities. Its financial structure is also well defined and is expected to be improved by
private-sector credit expansion. On the labour front, the performance of the country is rather average. The
year-on-year performance of construction sector employment is observed to be on the rise over the
forecast period; however, the growth is quite sluggish.
Risks To Realisation Of Returns

Market Risk
Barriers to entry have been reduced considerably since the introduction of the Foreign Investment Law in
2000, followed by the decision to slash taxation on foreign companies to 25% in 2003 and the
announcement to allow wholly owned foreign entities to bid for government contracts in 2005. However,
recent attacks on foreign nationals have brought to light the threat of terrorism. Despite this, Saudi Arabia
still manages to perform quite impressively on this account.
Country Risk
On the political and legal front, the kingdom performs quite evenly. As illustrated by the kings recent
decision to re-appoint the entire cabinet for another four-year term, caution seems to be the keyword in
Saudis political environment. With regard to international relations, the US will remain Saudi Arabia's
most important strategic partner, regardless of the result of the US presidential election in 2008. The
country also seems to be on a path of reconciliation with Iraq, as reflected by its decision to reopen its
embassy in Baghdad, an important symbolic gesture of support for the Iraqi government. However, the
legal framework of the nation needs to be revamped and made more stringent.

Macroeconomic Outlook
Non-Oil Growth To Lead The Way

BMI View: We forecast GDP growth to pick up in the next five years after a slowdown in 2007 on
the back of a strong annual growth from the non-oil sector, which we expect to outpace the hydrocarbons
sector throughout the forecast period.
We predict that real GDP growth will have slowed down to 2.9% in 2007 down from 4.3% in 2006 on
the back of a contraction in oil output, with production set to fall from 10.9bn b/d to 10.8bn b/d.
Thereafter, we expect growth to pick up again, averaging over 4% annually until 2012 when it will slip
back to 3.7% on the back of a strong performance from the non-oil sector, which will account for over
70% of GDP in 2012. Indeed, going forward we expect non-oil sector growth to outpace that of the
hydrocarbons sector, driven by a combination of expansionary fiscal policy and healthy inward
investment.
That said, the oil and gas sector which accounted for 28.2% of GDP in 2006 remains the key driver of
the Saudi economy, accounting for 90% of export revenues and over 70% of budgetary revenues. Indeed,
with oil prices currently at historic highs.. In the medium term the kingdom looks set to remain flush with
petrodollar liquidity, which will buoy investment in development and diversification projects. Although
oil production will reach 12.2mn b/d by 2011, up from 11.1mn b/d in 2008, annual growth in the oil
sector is forecast to slow over the coming years down to 2.0% in 2011 from 3.3% in 2008.
Non-Oil Growth To Outstrip Oil Sector

The non-oil sector is set to overtake the hydrocarbons industry in terms of annual growth figures, and we
forecast growth in the private non-oil sector to average 5% y-o-y until 2012. Growth in the government
non-oil sector will not be as strong, although we expect annual figures above 4.5% between 2009 and
2012. These trends paint a positive picture for the Saudi economy as diversification away from the oil
sector will boost long-term GDP potential and reduce dependence on oil revenues. The non-oil sector
accounted for over 66% of GDP in 2006 and by 2012 we expect this figure to have grown to 71%.
The services industry registered robust growth figures in 2006, and remains a key component of Saudi
Arabia's non-oil economy with the transport, storage, communications sectors and the construction sector
expanding by 9.8% and 7.3% respectively. In addition, the manufacturing sector recorded growth of 6.6%
in 2006 and is likely to be one of the fastest growing economic sectors in Saudi Arabia over the next five
years. Indeed, a report from the Khaleej Times recently said that in 2007 the number of manufacturing
and industrial enterprise projects in the kingdom totaled more than 3,800, employing 415,000 people and
exporting products worth around US$21bn. We expect further expansion in the industry, as a second
industrial area in Jubail which will double the city's industrial site is already being built and it is

expected to generate FDI totaling US$56bn and provide over 380,000 job opportunities. That said,
diversification into other key industries such as construction and finance will still be important, as
manufacturing accounted for only 11.6% of GDP and 6% of total employment in 2006.
FDI To Support Non-Oil Sector's Growth

Saudi Arabia continues to offer an attractive business environment for investors and in order to sustain
growth in the non-oil sector, it must continue its efforts to attract FDI. With abundant liquidity from
petrodollar inflows, the kingdom has performed well in terms of inward investment. FDI stocks grew
almost 91% from US$1.2bn in 2005 to US$2.2bn in 2006, and FDI inflows have displayed a similar
growth story, increasing annually since 2002. In addition, the Saudi Arabian General Investment
Authority (SAGIA) is continuing its efforts to attract inward investment, recently announcing a marketing
strategy that will focus on three strategic sectors: energy, transportation and knowledge-based industries.
In addition, SAGIA has invited foreign countries, such as France, to participate in these industries, which
could potentially offer around US$500bn of investment opportunities until 2020.
Risks To Outcome
Inflation remains the key risk to Saudi Arabia's future economic performance, with increased liquidity
from the recent rally in oil prices putting upward pressure on prices. Indeed, inflation in the kingdom
accelerated to 4.8% y-o-y in September 2007 the highest level in almost a decade and we expect
inflation of 5.0% y-o-y in 2007 as a result of persistent dollar weakness and high government spending,
equaling 33.3% of GDP in 2006. In addition, rising prices are starting to have an effect on the economy: a
number of private sector companies including Saudi Aramco and Etihad Etisalat recently raised
wages by 15-40% to offset the impact of rising inflation, a move that will put further upward pressure on
prices. Although the government has attempted to curb price rises they recently created a new
department for consumer protection their actions will do little to address the root causes of inflation. We
therefore expect inflation to stay high in the medium term before easing to 3.0% in 2009, where it will
stay for the rest of the forecast period.
Although not our core scenario, a marked fall in the oil price would have a detrimental effect on Saudi
Arabia's economy by reducing oil revenues and thus limiting liquidity in the kingdom. Such a scenario
would act as a drag on GDP growth as the oil sector's contribution to GDP would be severely diminished,
while a reduction in investment as a result of lower petrodollar inflows would have a knock-on effect
on the non-oil sector. However, global demand for oil remains strong with China and India leading the
way and, according to our forecasts, the price of the OPEC basket is set to remain above US$58.00/bbl
for the next five years.

Table: Economic Activity
2006e 2007f 2008f 2009f 2010f 2011f 2012f
Nominal GDP, SARbn [1] 1,307.50 1,369.30 1,509.50 1,463.20 1,503.40 1,582.60 1,653.40
Nominal GDP, US$bn [1] 349.1 365.6 403.1 390.7 401.4 422.6 441.5
Real GDP growth, %

change y-o-y [1] 4.3 2.9 4.1 3.9 4.7 4.1 3.5
GDP per capita, US$ [2] 14,744 15,069 16,212 15,257 15,220 15,555 15,777
Population, mn [3] 23.7 24.3 24.9 25.6 26.4 27.2 28
e/f = BMI estimate/forecast. Source: 1 Central Department of Statistics. 2 BMI calculation; 3 Saudi Arabia Monetary
Agency.

Index-Company Profiles
Table: Key PlayersSaudi Construction Industry
Revenue No. of
Company (US$ mn) Period Employees Year Established
Damac na na 5,000 1982
Saudi Oger na na 5,000 1978
Almabani General Contractors na na na 1972
FY ending December
Al Khodari Group 127.92 31 2005 12,000 1955
Emaar 0.88* H107 na 1997
Source: BMI Research; na: not available *Net profit

Company Profiles
Damac
Overview
Damac Properties, a major construction company within the Middle East and Address
! Tahlia Street, FAHDA Centre
a unit of Damac Holdings, was founded in 1982 as a catering company. Over
Bldg, 102. Riydah
the last two decades, the Dubia-based Damac has extended its portfolio into Tel: +966 1 217 5858
Fax: +966 1 217 5959
real-estate development and is behind a number of large construction projects
Email:
across Dubai including Palm Island and Dubai Marina. [email protected]
The company has extended its operation out across the world in 16 countries Key Statistics
! No. of employees: 5,000
and is engaged in projects in the UK and Russia.
! Year established: 1982
The company has three bases in Saudi Arabia, in Riyadh, Dammam and
Key Personnel
Jeddah. ! Chairman: Hussain Sajwani
In September 2007 the company announced that it was involved in the project
to build the 178m-high Al-Jawharah tower in Jeddah. The 40-storey project is
scheduled to take three years to complete.

Saudi Oger
Overview
Saudi Oger is a large domestic construction contractor that undertakes a wide Address
! Saudi Oger
range of activities. It focuses on the energy sector, as well as on transport,
PO Box 1449
infrastructure and general contracting. The company is multi-divisional and Riyadh 11431
Saudi Arabia
has subsidiaries and affiliates in the Kingdom of Saudi Arabia as well as
! Tel: +966 (1) 477 3115
overseas. Currently, it is executing major projects throughout the Middle East,
! Fax: +966 (1) 477 0079
Africa, Europe and in the US.
! Web: www.saudioger.com
In July 2007, Saudi Oger was awarded a contract worth SAR698mn Key Statistics
(US$186.13mn) to implement the first phase of the King Abdullah road in ! No. of employees: 5,000
Riyadh. The project comprises construction of three lines in the main road ! Year established: 1978
and erection of service roads.
Key Personnel
! General Manager:
In May 2007, Saudi Oger was awarded a US$131.73mn contract to construct Saadeddine Rafic Hariri
four residential towers as a part of the first phase of the King Abdullah ! Vice President and Board
Economic City development project. The company will also undertake Member : Bahaa Rafic Hariri
construction of roads and parking areas as well as landscaping.
In April 2007, Oger Dubai (a subsidiary of Saudi Oger) reported that it was
awarded a US$436mn contract at the Dubai International Centre. The
subsidiary will be responsible for the construction of the 235m-high The
Buildings tower. The project is a part of Dubais major mixed-use
development initiative and will include offices, residential apartments, retail
space and a luxury hotel.
In December 2006, a subsidiary of Saudi Oger, Oger Abu Dhabi, won a

US$409mn construction package from Abu Dhabi-based Mubadala
Development Company for the UAE Universitys new campus at al-Ain. The
campus is to be constructed over four years, with the first phase due to be
ready by mid-2008.
In November 2006, the second-phase agreement of the Saraya Aqaba

construction contract was signed between Jordan-based Saraya Aqaba and
Saudi Oger. The contract is worth US$700mn. The foundation stone for the
project was placed in January 2006. The first phase was signed off before the
foundation stone was laid and included the mobilisation and infrastructure of

Saraya Aqaba. The second phase comprises completion of the construction

work on the project. Saudi Oger is the exclusive build contractor for the
project, which is likely to begin operations in 2009, adding about 1.5km of
beachfront to the Gulf of Aqaba. The project comprises about 617,000m2 (not
including Radisson SAS land) of master-planned development, combining
shopping, dining, entertainment, freehold accommodation and cultural
activities within the context of an authentically styled ancient city. The total
cost of the project is in the region of US$995.7mn. Founding partners in the
project include the Jordan-based Social Security Corporation (SSC), the Arab
Bank, the Aqaba Development Corporation (ADC) and a number of
individual and corporate investors.
In partnership with the Saudi mining company Maadin, Saudi Oger won the
contract for the execution of the 1,600km privately managed rail link between
Jeddah and Dammam. Half the cost of this project is being borne by the Saudi
government. The link is designed to provide a means for Maadin to transport
minerals between al-Zubaira and the Jalameed belt regions. At full capacity,
Maadin will transport 4.5mn tpa of phosphate from Jalameed to Jubail, as
well as transport bauxite from al-Zubaira to smelter plants in the eastern
province.

Al Khodari Group
Overview
Founded in 1955, Al Khodari is one of the leading contractors in Saudi Address
! Al-Khodari Group
Arabia. The group has offices and an active presence in the Middle East and
Al-Khodari Complex
Africa. King Abdulaziz Street
Al-Khobar
Saudi Arabia
The group owns about 2,300 pieces of heavy construction equipment at over ! Tel: +966 (3) 895 2840
32 different locations in Saudi Arabia, Middle East and in Africa. ! Fax: +966 (3) 864 9684
! Web: www.alkhodari.com
Al Khodari has played an important role in the development of Saudi Arabia
and other Middle East countries by supporting the construction of roads, Key Statistics
! Revenue (FY05):
bridges, buildings, infrastructure, land transportation and environmental
US$127.92mn
services. It serves as general contractor for a range of services, including ! No. of employees: 12,000
general civil construction, oil and gas industry infrastructure, water and ! Year established: 1955
electricity.
Key Personnel
The groups major clients include: the Royal Commission for Jubail & ! Chairman: Fawzi
Yanbu, the Saudi Ministry of Transport, Saudi Aramco, British Columbia-

based Fama Holdings Company, Kellogg Brown & Root International (a
subsidiary of US-based Halliburton Company) and Saudi Arabian Texaco.
The groups work includes the Al Khodari Mosque in Al Khobar, the Al Hasa
General Library, the high-pressure implant pipeline in Uthmaniyah and a
number of water storage facilities in Kuwait.
At present, the group is responsible for a number of road projects, including

the Shaybah Access Road, which is about 386km long and runs from the main
KSA-UAE highway near Batha to the Saudi Aramco Shaybah facilities.
Financial Highlights
For the financial year 2005, the company reported annual sales of
US$127.92mn.

Almabani General Contractors

Overview
Almabani General Contractors undertakes general contracting works on a Address
! Almabani General
number of projects. It has worked on prestigious projects throughout the
Contractors
kingdom, including high-rise buildings, government ministries, laboratories Riyadh Office
Malaz District
and R&D centres, roads, major airports, runways and sewerage systems.
PO Box 4339
A diverse team of specialists allows the player to undertake projects from Riyadh 11491
Saudi Arabia
design through to completion. Aside from its Saudi operations, Almabani has
! Tel: + 966 (1) 403 3701
a branch in the Sultanate of Oman in Muscat and has undertaken works
! Fax: +966 (1) 405 7828
throughout the Middle East with a large presence in Lebanon, where it has
! Web: www.almabani.com.sa
constructed a number of major roads and undertaken reconstruction work.
Key Statistics
In April 2007, the company reported winning a contract for the design, ! Year established: 1972
engineering, supply and execution of the restoration of a runway at King
Khaled air base. The contract is worth SAR66.2mn (US$17.65mn). Key Personnel
! General Manager:
Nahme Y Tohme
As reported in September 2006, Almabani General Contractors was the
lowest bidder for the contract to build a new runway and taxiway at Prince
Sultan military airbase at Al-Kharaj, about 100km from Riyadh. Almabani
submitted a bid of SAR135mn (US$40mn), while the only other bidder, the
Saudi Bin Laden Group, submitted a bid of SAR233mn (US$62mn). The 18-
month contract involves the construction of a 4km runway with a width of
60m, a taxiway and related facilities.
In July 2006, Almabani received the letter of award from the GACA for the
execution of the KAIA airfield facilities. The SAR902mn (US$240.53mn)
project is to be completed within three years.

Emaar
Overview
Emaar Properties is a Dubai-headquartered real-estate giant famous for its Address
! Emaar Business Park
under-construction Burj Dubai, the worlds tallest skyscraper. Its presence in
Building 3
Saudi Arabia is marked by Emaar The Economic City, a joint stock PO Box 9440
Dubai, United Arab Emirates
company incorporated for undertaking flagship development in the King
! Tel: 971 (4) 367 3333
Abdullah Economic City.
! Fax: 971 (4) 367 3000
! Web: www.emaar.com
Being developed at a cost of US$26.6bn, the KAEC is currently Saudi www.kingabdullahcity.com
Arabias largest private sector project. It promises to become an important (for KAEC)
economic hub and a major international cosmopolis. Located north of Jeddah,
the city will have six distinct components: Industrial District, Financial Key Statistics
Island, Education Zone, Resorts, Seaport and The Residential Area. Emaar ! Net profit (for six months
ended June 30 2007):
recently entered into a US$13.86mn contract with the International Centre for AED3.26mn (US$0.88mn)
Commerce and Contracting and a US$131.7mn contract with Saudi Oger for ! Year established: 1997
construction of various units within the city.
Key Personnel:
! Chairman of the Board:
Emaars other project in the kingdom is the US$11.2bn Jeddah Hills project,
Mohamed A. Alabbar
on which it is working with Saudi Arabias Al Oula Development. Spread ! Vice-Chairman of the Board:
over 5,314 acres and with a built-up area of 3,768 acres, the project comprises Abdullah Saleh Kamel
20,000 residential units along with commercial and retail facilities.
Financial Highlights
The company reported a net profit of AED3.26mn (US$0.88mn) for the six
months ended June 30 2007.

BMI Forecast Modelling

How We Generate Our Industry Forecasts
BMIs industry forecasts are generated using the best-practice techniques of time-series modelling. The
precise form of time-series model we use varies from industry to industry, in each case being determined,
as per standard practice, by the prevailing features of the industry data being examined. For example, data
for some industries may be particularly prone to seasonality, i.e. seasonal trends. In other industries, there
may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than
cyclical booms.
Our approach varies from industry to industry. Common to our analysis of every industry, however, is the
use of vector autoregressions. Vector autogressions allow us to forecast a variable using more than the
variables own history as explanatory information. For example, when forecasting oil prices, we can
include information about oil consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variables own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data
quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a
basis for analysis and forecasting.
It must be remembered that human intervention plays a necessary and desirable part of all our industry
forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks,
anomalous data, turning points and seasonal features where a purely mechanical forecasting process
would not.
Introduction
BMIs Infrastructure Business Environment Ratings (IBER) provide a numerically based evaluation of
prospects for the infrastructure sector in each state that we cover. BMI has revised the methodology of its
Infrastructure Business Environment Ratings. Our approach has been threefold. Firstly, we have redefined
the risks rated in order more accurately to capture the operational dangers to companies operating in this
industry globally. Secondly, we have attempted, where possible, to identify objective indicators that may
serve as proxies for indicators that were previously evaluated on a subjective basis. Finally, we have used
BMIs proprietary Country Risk Ratings (CRR) in a more nuanced manner in order to ensure that only

the aspects most relevant to the industry have been included. Overall, the new ratings system which is
now integrated with those of all 16 industries covered by BMI offers an industry-leading insight into
the prospects and risks for companies across the globe.
Ratings Overview
Conceptually, the new ratings system is divided into two distinct areas:
Limits of Potential Returns: An evaluation of sectors size and growth potential in each state, and also
broader industry/state characteristics that may inhibit its development.
Risks to Realisation of those Returns: An evaluation of Industry-specific dangers and those emanating
from the states political/economic profile that call into question the likelihood of anticipated returns
being realised over the assessed time period.
For each category and sub-category, each state is scored out of 100 100 being the best, with the overall
IBER a weighted average of the total score. Importantly, as most of the territories that are evaluated are
considered by BMI to be emerging markets, our IBER will be revised on a quarterly basis. This will
ensure that the IBER draws upon the latest information and data from across our broad range of sources,
and the expertise of our analysts.

Table: Infrastructure Business Environment Indicators
Indicator Rationale
Limits to potential returns
Market structure
Construction expenditure, Objective measure of size of sector the larger the sector the greater the opportunities
US$bn available.
Objective measure of growth potential rapid growth will result in increased future
Sector growth, % y-o-y opportunities.
Capital investment, % of
GDP Used as a proxy for the extent the economy is already oriented towards the sector
Government spending, % of Proxy for extent to which structure of economy is favourable to

GDP infrastructure/construction sector.
Country structure
Rating from BMIs CRR to denote availability/cost of labour. High costs/low quality will
Labour market infrastructure hinder company operations.
Rating from BMIs CRR to denote ease of obtaining investment finance. Poor availability
Financial infrastructure of finance will hinder company operations across the economy.
Rating from BMIs CRR. Low electricity coverage is proxy for pre-existing limits to
Access to electricity infrastructure coverage.
Risks to potential returns
Market risk
Subjective evaluation against BMI-defined criteria. This indicator evaluates
No. of companies
barriers to entry.
Transparency of Subjective evaluation against BMI-defined criteria. This indicator evaluates
tendering process predictability of operating environment.
Country risk
Rating from BMIs CRR, to denote health of underlying economic structure,
Structure of economy including seven indicators such as volatility of growth; reliance on commodity
imports, reliance on single sector for exports.
Rating from BMIs CRR, to denote vulnerability to external shock principal
External risk
cause of economic crises.
Subjective rating from BMIs CRR, to denote predictability of policy over
Policy continuity
successive governments.
Rating from BMIs CRR, to denote strength of legal institutions in each state
Legal framework
security of investment can be a key risk in some EM.
Rating from BMIs CRR, to denote risk of additional illegal costs/possibility of
Corruption opacity in tendering/business operations affecting companies ability to
compete.
Source: BMI

Construction Industry
A number of principal criteria drive our forecasts for each construction and engineering variable:
Construction GDP and Infrastructure Spending

Figures for construction GDP and infrastructure spending are based, where possible, on national accounts
as published by the relevant central banks, as well as primary government/ministry sources and official
data. Where these are unavailable, construction GDP forecasts are based on a range of variables
including:
! stated infrastructure and development programmes;

! likely increases owing to related urban or industrial sector developments;
! and political factors (such as an electorally-motivated public works programmes).
Construction as a percentage of GDP is calculated using BMIs own macroeconomic and demographic
forecasts.
Employment within the Construction Industry

These figures are forecast based on:
! the growth or otherwise of the construction industry;

! and company results and expansion plans.
Sources
Sources used in construction reports include UN statistics, national accounts, housing and economy
ministries, officially released company results and figures, trade bodies and associations and international
and national news agencies.

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What is the purpose and scope of the report?

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What factors drive BMI's construction industry forecasts?

What factors drive BMI's construction industry forecasts?

Published quarterly by BUSINESS MONITOR INTERNATIONAL LTD

2008 Business Monitor International. All rights reserved.

Part of BMI's Industry Report & Forecasts Series

Published by: Business Monitor International

Publication Date: April 2008

Business Monitor International 2008 Business Monitor International.

Business Monitor International Ltd Page 2

Executive Summary .........................................................................................................................................5

Industry Trends and Developments ...............................................................................................................7

Industry Forecast Scenario ...........................................................................................................................23

Business Environment ..................................................................................................................................26

Macroeconomic Outlook ...............................................................................................................................33

Index-Company Profiles ................................................................................................................................36

BMI Forecast Modelling .................................................................................................................................43

Business Monitor International Ltd Page 3

How We Generate Our Industry Forecasts ........................................................................................................................................................ 43

Business Monitor International Ltd Page 4

Business Monitor International Ltd Page 5

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Industry Trends and Developments

Industry Trend Analysis Construction Inflation Continues To Rise

Business Monitor International Ltd Page 7

It is important not to overstate the increase Cement prices, US$

This does not, however, mean that the 260

traded into and within the Gulf, costs across

Aggregates 3/4 UAE

Business Monitor International Ltd Page 8

the Middle East and Asia are unlikely to

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Saudi Arabias Economy in 2007

Saudi Arabias Construction Industry in 2007

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Saudi Arabia Infrastructure Industry SWOT

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Saudi Arabia Political SWOT

Saudi Arabia Economic SWOT

Strengths ! As the main OPEC swing producer, the kingdom is favourably

Threats ! Any attacks on oil facilities could potentially lead to a disruption of

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Saudi Arabia Business Environment SWOT

Opportunities ! The government is investing in training as part of its efforts to 'Saudise'

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Airport Construction And Related Works

New And Ongoing Projects

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New And Ongoing Projects

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New And Ongoing Projects

Oil And Gas Pipelines And Petrochemical Plant Projects

New And Ongoing Projects

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Construction Of Power Plants And Grid Networks

New And Ongoing Projects

Water Infrastructure And Related Projects

New And Ongoing Projects

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