Doing Business in Saudi Arabia - International Franchise Association

Construction Equipment – CON
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Saudi Arabia has enjoyed four years of strong growth driven by rising oil revenues, and these
revenues have stimulated massive project spending. In addition, the Saudi Arabian
government has taken important steps to improve the business environment. With further
reform anticipated and oil prices expected to remain high, it’s believed that the Kingdom is set
for a continued strong period of growth, especially in the construction and infrastructure
sectors.
The construction sector in Saudi Arabia is the largest and fastest growing market in the Gulf
region (GCC). Ongoing construction projects in the Gulf are valued at $2 trillion, and onequarter
of the developments are located in Saudi Arabia. A number of positive economic,
demographic, and geographic factors have combined to produce robust growth in the sector.
Aggressive building and construction programs under the 8th Development Plan will further
accelerate growth, and are expected to solve the housing shortage in the country. Under this
plan, the government expects to build more than 3.2 million housing units with extensive
participation by the private sector.
The Saudi government has commissioned numerous mega-projects to accelerate the
development of its non-oil sector. At the heart of the Saudi government’s economic
development plans and initiatives, six mega-economic cities are planned to be built across the
Kingdom, near the areas of Tabouk, Medina, Rabigh, Jazan and the Eastern Province. These
economic cities are expected to create 1.5 million jobs and accommodate a population of 5.8
million, contributing $250 billion to the GDP and raising Saudi Arabia’s per-capita GDP from
$15,000 in 2006 to $35,000 by 2020.
The Kingdom of Saudi Arabia is witnessing a real estate boom; in the first half of the year
2008, several analysts estimated that real estate prices increased by 40%-90% from 2007.
The Saudi Arabian government allows foreign ownership of real estate, which increased the
demand for houses in the whole country, especially in the big cities. And liberalization of laws
regulating the practice of foreign business activities, and property ownership has helped boost
local and international investors’ confidence in the real estate market in Saudi Arabia.
Further, the Saudi Arabian government has channeled a significant portion of its oil windfall
towards upgrading and building new infrastructure in recent years, increasing the region’s
attractiveness to both local and foreign investors. Large-scale infrastructure investments have
been made in various fundamental sectors, including energy, utilities, transportation,
education and health care.
To improve infrastructure services in the Kingdom, an investment of $800 million has been
envisaged to increase the capacity of the Jeddah Islamic Port by 45%. Airports in Riyadh,
Jeddah, Medina, Nijran, and Tabuk will be expanded at a cost of $10 billion in order to meet
the growing number of passengers, and the requirements of two new domestic airlines. The
Civil Aviation Authority has already launched a $1.8 billion upgrade of Jeddah’s King
Abdulaziz International Airport (KAIA), which is designed to accommodate the world’s largest
aircrafts, and will increase the airport’s annual capacity to 21 million passengers. The
Kingdom of Saudi Arabia has also set ambitious plans for additional rail links in the country,