The Saudi construction market is set to scale greater heights with a projected growth rate of 35 percent over the next three years. With the total value of projects planned currently estimated at $ 732 billion, the sector is poised to become the fastest-growing in the Kingdom’s economy by 2015. Construction projects worth a total of $42 billion were awarded in 2013 in the Kingdom, compared with $17 billion in 2012, making 2013 the strongest year for the country’s construction industry in recent times. Saudi Arabia’s gross domestic product grew 3.19 percent in the third quarter of 2013 in current prices compared with a 2.7 percent rise in the previous three months, according to the Central Department of Statistics. The GDP value rose from SR675.19 billion in the third quarter of 2012 to SR696.7 billion. During the same period the GDP rose by 3.05 percent in real prices, the department said. In the public sector, the GDP fell by 18.52 percent to SR102.6 billion in current prices, compared to the same period in 2012. However, it showed a growth of 2.43 percent in real prices. The private sector, on the other hand, achieved a growth of 6.53 percent in current prices in the third quarter of 2013 to reach SR244.08 billion compared to the figure of previous year, SR229.13 billion. The construction and building sector and downstream industries showed big growth at the rate of 9.76 percent and 7.87 percent respectively. In stable prices, the sector’s growth rose by 3.31 percent. In the Kingdom, the value of the estimated planned projects would be $ 732 million, according to an official from the Riyadh International Convention and Exhibition Center which has been organizing the the Saudibuild show annually for the past consecutive 25 years. Saudi Arabia holds around 39 percent of the construction market in the GCC region. The major project allocations include, $ 116 for King Abdullah Economic City, $ 40 billion for Sudair Economic City, $ 66 billion for the proposed construction of 500,000 new housing units, $ 16.5 billion to revamp the transport system in the holy city of Makkah, construction of 53,000 rooms in hotels and the proposed $ 7.2 billion expansion for the King Abdulaziz International Airport . “Driven by increasing private and public investments in 2013, we are witnessing a definitive surge in construction projects in Saudi Arabia — particularly in the fields of social and transport infrastructure,” Zeyad Al-Rukban, deputy general manager, Riyadh Exhibitions Company, said. He said the huge participation at the last Saudibuild show held in November, demonstrated the vibrancy of the construction industry of the Kingdom. The Kingdom hosted 850 companies from 35 countries at the Saudi Build 2013, held in Riyadh from Nov. 4 to 7. “It attracted companies from across the globe, provided a meeting place for industry professionals, and offered a comprehensive set of solutions covering all aspects of the construction industry,” Al-Rukban said.
Ban on high-value banknotes and goods and services tax has reduced demand
Updated 22 min 12 sec ago
NEW DELHI: It was supposed to be Johnson & Johnson’s biggest manufacturing plant in India. It was to eventually employ at least 1,500 people and help bring development to a rural area near Hyderabad in southern India.
Yet, three years after the US health care company completed construction of production facilities for cosmetics and baby products on the 47-acre site, they stand idle.
Two sources familiar with J&J’s operations in India and one state government official told Reuters production at the plant, at Penjerla in Telangana state, never began because of a slowing in the growth in demand for the products.
One of them said that demand didn’t rise as expected because of two shock policy moves by Prime Minister Narendra Modi: A late 2016 ban on then circulating high-value currency notes, and the nationwide introduction of a goods and services tax (GST) in 2017.
J&J spokespeople in its Mumbai operations in India and at its global headquarters in New Brunswick, New Jersey, declined to respond to a list of questions from Reuters.
Modi’s office did not respond to a call and an email with questions.
Aimed at rooting out corruption and streamlining the tax system, the double whammy of “demonetization” and GST, were two of Modi’s signature policy moves. But instead of encouraging economic activity as intended, they did the opposite, at least in 2016-2018, by sapping consumer demand, according to some economists.
Many businesses, especially small and medium-sized enterprises, complained publicly — some in their financial statements — that they suffered a drop off in orders. The suspended J&J project stands as one of the most vivid examples of the impact on the broader investment picture.
In the first month after demonetization, some business surveys showed that sales of products such as shampoos and soap fell more than 20 percent.
Lack of jobs growth and a farm-income crisis because of low crop prices have hurt Modi in the current general election, according to several political strategists.
Still, Modi and his ruling Hindu nationalist Bharatiya Janata Party are expected by many of the strategists to be in a position to get a second term — probably with support of some other parties — when votes are counted on Thursday, partly because of his strong stance on national security issues.
A range of Modi’s business policies, such as capping prices of medical devices, forcing tech companies to store more data locally and stricter e-commerce regulations have in the past two years hurt plans of American multinationals such as J&J, Mastercard, Amazon and Walmart-owned Flipkart.
The groundbreaking of the J&J facility in Penjerla, its third in the country, was carried out with much fanfare in 2014, attended by Telangana state’s Chief Minister Chandrashekar Rao, who hailed the foreign investment as a big win for local communities.
A document dated April 2017 that lists products the company planned to make at the facility, submitted to the Telangana government and reviewed by Reuters, names baby oil, baby shampoo, baby lotion, baby hair oil, face wash and creams.
Shaukat Ali, running a tea shop under a bamboo stall on barren land outside the plant, said local workers check in routinely for possible vacancies at the J&J site, but nothing has come up in years.
At the local pollution control board office, the member secretary Satyanarayana Reddy said the J&J plant had all the required approvals and he was not sure why it hadn’t started production.
“It is unusual for such a big plant to stay idle for so long,” he said. “But there is no problem from our side.”
Chandrasekhar Babu, an additional director at the Telangana industries department, said a J&J company official told him the plant hadn’t started due to lack of demand.
GST and demonetization were two key reasons the plan didn’t kick off, one of the sources said, adding that lack of consumer demand since then dented company’s plans.
The second source familiar with J&J’s plans said the company miscalculated Indian market demand.
On a recent visit by a Reuters reporter to the J&J plant, plush, furnished conference rooms and cubicles sat inactive; M. Sairam, who said he was the site manager, told Reuters production areas with machines were idle too.
Local officials had hoped the initial J&J plant would be only the beginning. After the groundbreaking in 2014, Pradeep Chandra, who was Telangana’s special chief secretary of industries, told Business Today magazine that “based on the extent of land (J&J) have acquired we believe that they are looking at much larger expansion here.”
Local media reports at the time said the J&J facility would employ some 1,500 people.
A J&J official, who was not identified by name, was reported subsequently in December 2016 in India’s Business Standard as saying that the $85 million plant would be operational by 2018 after it had overcome procedural delays. The official was quoted as saying the company had earmarked an additional $100 million for expansion.
Vikas Srivastava, the managing director of J&J Consumer (India), who was at the 2014 groundbreaking, did not respond to calls for comment.
Reuters also talked to two workers outside a sprawling Procter & Gamble facility making detergents and diapers, which is next to the J&J plant. They said they were part of the P&G plant’s production team and the plant had been running below capacity.
A P&G spokesperson denied that, saying the plant was “operating at full capacity.”
“India is a priority market for P&G globally and in recent quarters, P&G’s business in India has registered strong double-digit growth consistently,” the company said.
The weak rural economy, where most Indians work, has also hurt growth in sales of basic items such as detergents and shampoo in the past year.
Hindustan Unilever Ltd, an industry bellwether that would compete with the likes of J&J and P&G in some categories, said its volume growth shrank to 7 percent in the quarter ended March 31, down from double-digit growth in the previous five quarters. The company warned that the daily consumer goods segment in India was “recession resistant ... not recession proof.”