Sep 02 2012
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China sets sights on huge Saudi construction mart
The China Daily newspaper reported that the country would likely be the source of a great number of materials, as the Kingdom is expected to embark on $100 billion worth of infrastructure projects by 2016.
Saudi economist Jamal Banoon told Al Arabiya.net Saturday that less expensive materials from China will greatly boost the boom.
"China's building material companies in the Saudi market will help those with low incomes to build their houses on less expensive budgets. They would also add to the total market value of real estate in the Gulf region, if companies started to rely on Chinese building material for future projects, " he pointed out.China's business and government officials are expected to promote the country's building materials and other construction-related goods in Riyadh this December, at the Third China Commodities Expo-Saudi Arabia, the newspaper said.
"The fair will help promote brand recognition for made-in-China products and hopefully help us build a future platform for suppliers and buyers," Chen Feng, chairman of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers and Exporters told the newspaper.
Chen expected more than 3,000 professional Saudi buyers to attend the event, it added.
Xie Zhongmei, director of the Department of West Asian and African Affairs at China's Ministry of Commerce, told the newspaper that trade between the two countries grew nearly 30 percent year-on-year to $38 billion in the first half this year. Wie estimated annual trade between the two countries would reach $70 billion this year, with an annual growth rate continuing at 30 to 40 percent.
"The construction and infrastructure sub-sectors in Saudi Arabia remain strong, growing by 177 percent over the same period, and currently accounting for 46 percent of the 2012-2013 MENA project pipeline totaling $448b," said Mutashar Murshed, Merrill Lynch Kingdom of Saudi Arabia CEO.
"It is a trend we expect to continue," Philip Southwell, Bank of America Merrill Lynch president and country executive, Middle East and North Africa, added.
"With its young and expanding population, Saudi Arabia should remain the most buoyant market, in line with its overall economic development plan. Furthermore, the recent approval of the mortgage law should help to drive growth in residential construction in response to the current housing shortage."
Taking into account 11.6 percent real growth in 2011 and the sheer number of projects in the pipeline, a recent study expects equally robust 9.3 percent real growth in construction for 2012, after a 140 percent year-on-year (y-o-y) increase in contract awards during 2011.
Over the medium term, the sector is forecast to continue average growth of 5.6 percent between 2012 and 2016.
One of the most dynamic sub-sectors in Saudi Arabia has been power plants and transmission and distribution (T&D), with the $80 billion, 10-year investment plan for electricity infrastructure (2008-2018) having led to significant activity in the energy sector.
BMI estimates that there are power projects worth $30 billion under way or in the pipeline, with the majority of these including the construction of new capacity.
The transport segment is also booming, especially in terms of rail infrastructure, with $24 billion of projects currently under way or in the pipeline.
Positive infrastructure and pipeline developments, combined with a strengthening macroeconomic backdrop will insulate the economy somewhat from global economic headwinds.
Tahir Rabani, Capital Projects Advisory, Saudi Arabia, said the Kingdom's construction market is expected to be one of the most buoyant in the world. Greater integration across the Kingdom will promote economic stability, job growth and ultimately benefit the real estate markets.
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