KSA CONSTRUCTION OVERVIEW

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Overview of KSA s Economic Outlook According to the International Monetary Fund (IMF), Saudi Arabia (KSA) has announced a bold reform program under its Vision 2030.

2 Overview of KSA s Economic Outlook According to the International Monetary Fund (IMF), Saudi Arabia (KSA) has announced a bold reform program under its Vision Growth is expected to be robust over the medium-term as structural reforms are implemented (refer Figure 1). Risks are anticipated to arise from uncertainties regarding future oil prices and the impact on ongoing economic reforms. Moreover, KSA is expected to bring in additional revenues through new taxes and fees, including Value Added Tax (VAT), extra fees on expats working in the kingdom and potential additional costs imposed on foreign businesses. KSA Budget Outlook KSA s 2018 budget is deemed the largest ever and the government is expected to spend US$ 261 Bn.. The budget provides a roadmap for the ongoing economic transformation directing at the direction of oil prices and energy equities. Analysts predict that the prime feature of the budget were the key focus on structural reforms accompanying rising spending patterns. In 2018, the government forecasts a deficit of US$ 52 Bn., which is equivalent to 7.3%. KSA s public budget at a glance from 2015 to 2018 With KSA s 2018 budget, the government is recommitting to investments in the future. The kingdom s construction market is expected to show significant growth and offer lucrative potential due to its Vision 2030, NTP 2020, and ongoing reforms to diversify away from oil.

3 Figure 1 represents KSA s *macroeconomic indicators Real GDP Growth Rate, Inflation Rate, (all figures in %) (all figures in %) Current Account Balance % of GDP, Population, (all figures in %) (all figures in %) *Note: All figures are in annual percentage change; F: Forecasts. In January 2018, the IMF has recently raised its economic growth forecasts for KSA as oil prices rise. The government expects GDP to grow 1.6% in 2018 and 2.2 % in SAR= USD Exchange rate taken. Source: IMF, October 2017.

4 Figure 2 represents KSA s public budget at a glance from 2015 to 2018 Real GDP Growth Rate, Value in US$ Billion Public Expenditure, Value in US$ Billion Budge Deficit, Budget Allocations, A 21% Military B 20% Education C 15% Health Social Development D 11% Economic Resources and Public Programs E 10% Security and Regional Administration F 9% General Items G 6% Infrastructure and Transport H 5% Municipality Services I 3% Public Administration Source: Albilad Capital s report on Saudi Arabia Economy, December 2017.

Classification of KSA Construction Market The construction market in this report comprises of the building, infrastructure and energy markets.

education facilities and industrial projects Infrastructure sector: Roads, bridges, railways, ports, wastewater and sewarage Energy sector: Oil & gas and power & water Overview of KSA Construction

All companies that are working on contracts with government departments in KSA will need to modify their bills to include the 5% VAT.

5 Classification of KSA Construction Market The construction market in this report comprises of the building, infrastructure and energy markets. Figure 3 represents the classification of KSA construction market Building sector: Residential, commercial, mixed use, airports, sports facilities, hotels & recreational facilities, healthcare, education facilities and industrial projects Infrastructure sector: Roads, bridges, railways, ports, wastewater and sewarage Energy sector: Oil & gas and power & water Overview of KSA Construction Contractor Awards KSA s contractor awards across the building, infrastructure and energy sectors are forecast to increase from US$ 34,151 Mn. in 2017 to US$ 40,068 Mn. in All companies that are working on contracts with government departments in KSA will need to modify their bills to include the 5% VAT. The building construction sector is expected to register the highest contractor awards followed by the energy and infrastructure sectors in 2018 (refer Figure 4). Increase in population growth, urbanisation, and tourism are expected to drive growth in the building sector especially in the residential and leisure markets. According to Oxford Business Group, the government is stepping up investment in KSA s transport infrastructure, fast-tracking key projects and creating new opportunities for service providers. Transport infrastructure gains prominence in the Vision 2030 and National Transformation Programme (NTP) as vital to economic growth. In 2018, the government has allocated 6% of its budget towards transport and infrastructure. Figure 4 represents KSA s building, infrastructure and energy construction contractor awards from 2015 to 2018 in US$ Mn. KSA Contractor Awards by Sector, Value in US$ Billion 35,000 30,000 25,000 20,000 15,000 10,000 5, Buildings 23,582 29,827 14,701 18,022 Infrastructure 5,515 3,249 4,595 5,786 Energy 20,902 17,869 14,855 16,260 Source: Ventures ONSITE Projects Intelligence Database:

6 Landmark Project Announcements in 2017 The US$ 500 Bn. NEOM city is 26,500 square kilometers (km) (10,230 square mile) zone and will focus on industries including energy and water, biotechnology, food, advanced manufacturing and entertainment. KSA government, the PIF and local and international investors are expected to invest over half a trillion dollars into it in the coming years. Phase 1 of the project is expected to be completed by KSA has officially declared that public movie theaters will return to the kingdom for the first time in more than 30 years in March Opening cinemas is anticipated to act as a catalyst for economic growth and diversification. By developing the broader cultural sector, it will create new employment and training opportunities, as well as enrich KSA s entertainment options. By 2030, there are projected to be over 300 cinemas with more than 2,000 screens. KSA will allow women to drive effective from June 2018, ending a longstanding policy of the oppression of women in the highly conservative kingdom. KSA Boost for the Private Sector KSA is to inject US$ 19.2 Bn. into the private sector of the economy in a bid to stimulate activity in the non-oil sector, which has been hit by the slowdown in government spending as a result of oil revenue weakness. Housing and small business are major beneficiaries of the stimulus package. Among the measures announced in a decree by King Salman are a US$ 6 Bn. initiative on subsidised loans to provide housing, a US$ 4 Bn. injection into new building technologies, and a proposal valued at US$ 3 Bn. to support the funding of big infrastructure initiatives. Other big items include a US$ 0.4 Bn. initiative to support companies in financial distress, and a US$ 1.86 Bn. plan to refund government fees to small and medium enterprises.

7 KSA s Major Construction Projects Top projects expected to be awarded to contractors in 2018 Project Name KA-Care - Alternative Energy Projects - Nuclear Plants Jeddah Light Rail Transit King Abdullah City of Atomic and Renewable Energy (KA-Care) - Alternative Energy Projects - Phase 1 The Avenues Riyadh Offshore Berri Field Client King Abdullah City of Atomic and Renewable Energy (KA-care) Jeddah Metro Company; Ministry of Transport, Saudi Arabia King Abdullah City of Atomic and Renewable Energy (KA-care) Shomoul Holding Company Saudi Aramco 400 MW Wind Power in Dumat Al Janda Renewable Energy Project Development Office (REPDO) Ammonia Plant in Ras Al Khair South Obhur Project - Housing Complex Project - BP-04 & PB MW Solar Facility at Sakaka King Fahd Causeway Passports Island (Saudi Sector) - Phase 2 Saudi Arabian Mining Company (Maaden) Al Raidah (Rayadah) Investment Company Ministry of Electricity & Water, Saudi Arabia King Fahd Causeway Authority

8 KSA s Major Construction Projects KSA s major projects awarded to contractors in 2017 Project Name Industry Client Project Value (US$ Mn.) Expansion of King Khalid International Airport - Terminal 1 & 2 Expansion of King Khalid International Airport - Terminal 3 & 4 Buildings General Authority for Civil Aviation (GACA), Saudi Arabia 1,493 Buildings General Authority for Civil Aviation (GACA), Saudi Arabia 1,390 AMC Long-Term Medical Care Hospital Buildings Anfas Medical Care (AMC) 1,300 Batterjee Medical City in Dammam Buildings Middle East Healthcare Company (MEAHCO) 1,070 Satellite Haradh Gas Compression Plants (Sa-GCP) - Package 2 South Haradh Gas Compression Plants (S-GCP) - Package 3 North Haradh Gas Compression Plants (N-GCP) - Package 1 Oil & Gas Saudi Aramco 1,000 Oil & Gas Saudi Aramco 1,000 Oil & Gas Saudi Aramco 1,000 Hawiyah Gas Plant Expansion Oil & Gas Saudi Aramco 1,000 Safaniyah - Phase 6 Oil & Gas Saudi Aramco 1,000 Maritime Yard in Ras Al Khair - Dredging & Reclamation Infrastructure Lamprell LLC, Dubai, The National Shipping Company of Saudi Arabia (Bahri), Saudi Aramco 780 New International Airport in Hail Buildings General Authority for Civil Aviation (GACA), Saudi Arabia 500 Freeflow Pipelines of Haradh Oil & Gas Saudi Aramco 500

9 KSA s Major Construction Projects KSA s major projects announced in 2017 Project Name Industry Client Project Value (US$ Mn.) Neom Business City Buildings Public Investment Fund (PIF) 500,000 The Red Sea Project Buildings Public Investment Fund (PIF) 8,000 Public Transportation Network in Taif Infrastructure Ministry of Transport, Saudi Arabia 7,199 New Jeddah Downtown Buildings Public Investment Fund (PIF) 4,800 New Energy Industrial City in Abqaiq Industrial Saudi Aramco 4,400 Al Faisaliah Housing and Administrative in Makkah Buildings Makkah Region Development Authority (MRDA) 4,000 Jizan Economic City (JEC) - Pure Terephthalic Acid (PTA) and Poly Ethylene Terephthalate (PET) Production Plant Industrial Pan-Asia PET Resin (Guangzhou) Co, Saudi Aramco 3,800 Waad Al Shimal Mining City - New Phosphate Mine and Industrial Complex Industrial Saudi Arabian Mining Company (Maaden), Eastern Province, Mosaic Company, Saudi Basic Industries Corporation (Sabic) Offshore Marjan Oil and Gas Field Oil & Gas Saudi Aramco 3,000 Berri Increment Programme Oil & Gas Saudi Aramco 1,500 Redevelopment of East Wing of the Prophet s Mosque Buildings Public Investment Fund (PIF) 1,200 Batterjee Medical City in Dammam Buildings Middle East Healthcare Company (MEAHCO) 1,070 3,200 Source: Ventures ONSITE Projects Intelligence Database:

10 Conclusion The large budget indicates that KSA is expecting significant revenue growth in the years to come. The Vision 2030, NTP 2020 and private sector investment boost, and ongoing reforms are likely to be the growth drivers for KSA s construction market in 2018 and beyond. According to Riyadh officials, KSA s economy is entering a post-oil era in which the kingdom s mega-cities, which are under construction, will provide the country s future growth. About Ventures ONSITE Ventures ONSITE, a product by Ventures Middle East, has been a market leader in tracking construction projects across the Middle East and Africa region for more than 15 years. Ventures ONSITE provides accurate and detailed information on completed, current, and future construction projects. Request a demo today and experience how Ventures ONSITE can help you Win More Construction Contracts!

Saudi Vision 2030: What Does It Mean for Your Industry?

Saudi Vision 2030: What Does It Mean for Your Industry? by Jonathan Reardon - j.reardon@tamimi.com - Al Khobar September 2016 The Saudi Vision 2030 was announced in April 2016 and represents Saudi Arabia