JEDDAH: ARAB NEWS
Published — Wednesday 28 November 2012
Last update 28 November 2012 1:02 am
The value of Saudi awarded contracts during the Q3, 2012 declined compared to the previous two quarters of 2012. The SR 39.2 billion in awarded contracts during Q3 reversed a familiar trend seen in previous years as the value of awarded contracts generally rise during the third and fourth quarters. The decrease was mainly attributed to the reduction of mega-projects being awarded. Conversely, there was a significant increase in the number of smaller contracts that focused on strengthening the Kingdom's infrastructure capabilities, the National Commercial Bank said in its report yesterday.
Within the roads sector alone, approximately SR 9 billion worth contracts were awarded whereas an anchor sector such as petrochemicals had SR 6.6 billion in awarded contracts. The healthcare sector also contributed significantly, accounting for SR5.2 billion, the report said.
The momentum of the value of awarded contracts appeared to have tapered off during the third quarter of 2012. Approximately SR 166 billion worth of contracts have been awarded through the first three quarters of 2012. In comparison, approximately SR 179 billion worth of contracts were awarded during the same time period in 2011. The 7 percent drop in 2012 was largely due to substantially lower value of awarded contracts during Q3, 2012 compared to Q3, 2011. The SR 39.2 billion in awarded contracts during Q3, 2012 paled in comparison to the SR 95.1 billion that was awarded during Q3, 2011, representing a 59 percent reduction.
The Construction Contracts Index (CCI) dropped in three consecutive months from 317.16 points in July down to 306.52 and 277.29 points during August and September, respectively. The noticeable drop in awarded mega-project contracts during the third quarter was the main factor in the reduction of the CCI as it was unable to sustain the growth that was exhibited during Q2, 2012. The CCI recorded a 12 percent drop at the end of the third quarter of 2012 compared to the same period in 2011, when it reached 316.44 points.
The majority of the value of awarded contracts took place in the Eastern Province, which accounted for 36 percent of the total awarded contracts. Several significant contracts in the petrochemical and oil & gas sectors boosted the Eastern Province's share. The Riyadh region's 15 percent share was largely the result of large contracts in the healthcare and roads sectors.
The Makkah region accounted for 12 percent of the total value of awarded contracts, with particular focus on the roads, power and education sectors. The awarded contracts in the roads sector comprised a significant share of the awarded contracts across all the provinces in the Kingdom, the NCB report said.
The value of awarded contracts in July totaled about SR15.2 billion, led by the petrochemical and roads sectors. Those two sectors accounted for 52 percent of the total awarded contracts for the month.
The value of awarded contracts dipped in August, reaching SR 12.8 billion. About SR 2.5 billion worth of contracts were awarded in the roads sector. The petrochemical sector has two contracts worth SR 1.9 billion.
The value of awarded contracts decreased to SR 11.2 billion in September. The roads sector tallied the highest value of awarded contracts with SR3.2 billion, while the healthcare sector came in second with three contracts worth SR2.5 billion.
The healthcare sector had a sizable contract that was awarded by the Ministry of Health to a joint-venture between Latifa Trading Contracting and Al-Habtoor Leighton in the amount of SR 1.2 billion.
Although the value of awarded contracts slipped slightly during the third quarter, those sectors that were targeted by the Saudi government as an integral focus for its capital expenditures thrived. The roads, education, healthcare and urban development sectors represented a significant portion of the awarded contracts, while anchor sectors deferred.