Contracting market expected to hit SR1.13 trillion next year

The contracting sector is expected to register losses by the end of the current year due to rising costs of projects and labor, which are estimated at 13 percent, local media said quoting an expert.
The contracting sector has experienced rising costs, which came to various commercial, industrial and service sectors arising from decisions issued by the Ministry of Labor, head of Contractor Committee at Riyadh Chamber of Commerce and Industry (RCCI) Fahad Al-Hammadi said.
This has resulted in the high percentage of stalled projects at nearly 40 percent and the increased rate of contractors quitting the market due to losses, he said.
Mindful of risks threatening the sector, the Saudi banks tended to minimize funding (loans) to the construction sector, which has adversely affected the level of completion of projects and forced some contractors stall or fully withdraw from the market, he said.
He expected that the financial statements of nearly 80 percent of the contracting firms would register losses by the end of the year as a result of the specified problems.
The National Committee of Contractors has expected the occurrence of such problems and suggested appropriate solutions, including the creation of an independent body for contractors to encourage mergers between small- and medium-sized contract firms in the face of fierce competition in the market and empower them export contract industry to foreign countries, Al-Hammadi said.
According to experts, the volume of contracting market is expected to hit SR1.13 trillion next year.
Al-Hammadi said the committee also suggested the creation of a fund to provide loans to the sector and offset funding shortfall of the Saudi banks. This step will help contractors meet their contractual obligations and implement projects on time at high quality levels, he added.
Meanwhile, a number of experts have attributed the rising cost of projects (13 percent) to the decisions of the Ministry of Labor, which raised the Saudization (nationalization) rate in the sector from 5 percent to 8 percent, high pays to Saudis and SR2,400 levy imposed on expatriate workers for work permit.
The Saudi Council of Ministers has decided to exclude small and medium enterprises (SMEs), which have nine workers or less, from paying the SR2,400 levy. The decision is aimed to enhance SME activities, Labor Minister Adel Fakeih told reporters following the cabinet meeting.