RIYADH: At least $13.3bn of government projects are at risk of being cancelled in Saudi Arabia this year because of fiscal pressures and changing government priorities.
According to details, the total value of project awards for 2017 is forecast at $27bn, and could rise to $32bn if the Mecca Metro project, which was originally expected to be awarded in 2016, goes through this year.
The figures suggest $20bn in contracts were awarded last year, compared with $35.5bn in 2015.
The 2017 forecast assumes a major infrastructure project will be awarded by “exception or royal decree”, according to the firm’s Construction Intelligence Report on Saudi Arabia.
About 20 per cent of Saudi Arabia’s long-term projects pipeline of $820bn, or $168bn worth of projects, could be at risk of being cancelled because of the reprioritization program.
“2017 will see at least a SAR50bn cut-back due to the reprioritisation programme because of fiscal pressures and realigning the project pipeline to national priorities.
“The question really remains around the potential to switch the scheme from central government funding to a type of PPP (public-private partnership) model or bringing other forms of finance to the table, for example main contractor funding.”
The value of Saudi contract awards has varied widely year-on-year over the past eight years as state spending ebbed and flowed, with a peak in 2011 of $75.9bn, according to the firm’s data.
Following the sharp drop in oil prices, the government and private companies have taken a much more conservative stance.
The National Project Management Office (NPMO) and governmental Project Management Offices (PMOs) will be tasked with controlling government project funds and reducing inefficiencies.
Under the government’s economic development plans, vanity projects are being separated from essential schemes as for the cancellation of 10 football stadiums that Saudi Aramco had been tasked with developing in major cities around the country.
