MEED Saudiarabia2019 Report

SAUDI ARABIA 2019 Trends, opportunities and challenges in the Middle East's biggest market

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Written by MEEDs experts, with Includes unique expert Detailed assessment of the chapters from Colin Foreman, analysis of how the market is outlook, opportunities and Andrew Roscoe, Jennifer changing and the impact of challenges in all of the major Aguinaldo, Indrajit Sen. Curated these market changes. business areas. and reviewed by Richard Thompson.

"The quality of information provided by MEED Insight enabled us to quickly focus on critical areas as well as providing in-depth research into future opportunities."

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300+ pages mega projects 10 key business sectors review on the Vision 2030

Contents Preface ...... 2 1 Executive summary ...... 10 2 Economic transformation ...... 13 Vision 2030: Progress Report ...... 16 2.1.1 Social reforms ...... 17 2.1.2 Transformational megaprojects ...... 17 2.1.3 The rise of the PIF ...... 19 2.1.4 Aramco IPO ...... 19 2.1.5 Privatisation and PPPs ...... 20 2.1.6 Corruption crackdown ...... 21 2.1.7 NTP 2.0 ...... 21 Vision 2030 targets ...... 22 2.2.1 Economy ...... 23 2.2.2 Project spending...... 23 2.2.3 Public Investment Fund (PIF) ...... 23 2.2.4 Oil & gas ...... 23 2.2.5 Tourism & culture ...... 24 2.2.6 Housing ...... 24 2.2.7 Healthcare ...... 24 2.2.8 Education ...... 24 2.2.9 Small and medium-sized enterprises (SMEs) ...... 24 2.2.10 Labour market ...... 25 2.2.11 Private sector development ...... 25 2.2.12 Defence ...... 25 2.2.13 Mining ...... 25 2.2.14 Renewable energy & waste management ...... 25 2.2.15 Transport & logistics ...... 26 2.2.16 GCC ...... 26 2.2.17 Food & agriculture ...... 26 2.2.18 Digital economy ...... 26 National Transformation Programme (NTP) ...... 27 2.3.1 National Project Management Office ...... 28 2.3.2 NTP targets ...... 28 3 Government ...... 33 Change in the ruling family ...... 33 Relations with the US ...... 36 Regional diplomacy and conflict...... 36

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3.3.1 Yemen ...... 38 3.3.2 Arms sales ...... 38 Diplomatic disputes ...... 38 Saudi Arabia and global oil markets ...... 39 Economic and social development ...... 40 Social reforms ...... 41 4 Economy ...... 43 GDP ...... 43 4.1.1 GDP by sector ...... 44 Inflation ...... 45 Oil production ...... 46 Government finances ...... 47 4.4.1 Anti-corruption drive ...... 48 4.4.2 Government debt...... 49 Trade flows ...... 51 Banking and monetary policy ...... 52 4.6.1 Interest rates ...... 53 Stock market ...... 53 Foreign direct investment ...... 54 Labour market ...... 55 The economy in 2018-20 ...... 57 4.10.1 The oil market ...... 58 4.10.2 Budget 2019 ...... 60 4.10.3 Medium-term financial strategy ...... 62 MEED forecast to 2020 ...... 65 4.11.1 GDP ...... 65 4.11.2 The budget ...... 66 4.11.3 Government debt...... 68 4.11.4 Exports, imports and the current account ...... 69 Saudi Aramco IPO ...... 70 The IMF view ...... 71 Credit ratings agencies ...... 72 5 Projects market ...... 73 Spending drivers ...... 76 Outlook ...... 77 Leading contractors ...... 78 Leading clients ...... 79 Megaprojects ...... 80

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6 Oil and Gas ...... 84 Overview ...... 84 Vision 2030 targets ...... 87 Market structure ...... 87 Saudi Aramco ...... 88 6.4.1 Aramco IPO ...... 91 6.4.2 Aramco’s Downstream Strategy ...... 92 Upstream oil ...... 93 6.5.1 Revised Proven Reserves ...... 93 6.5.2 Oil Production ...... 94 6.5.3 Resource depletion ...... 95 6.5.4 Exploration ...... 99 6.5.5 Export infrastructure ...... 99 Natural gas ...... 100 6.6.1 Liquified Petroleum Gas (LPG) ...... 103 6.6.2 Wasit gas development ...... 103 6.6.3 Fadhili Gas Plant ...... 103 6.6.4 Unconventional gas ...... 104 6.6.5 Shaybah NGL ...... 105 6.6.6 Empty Quarter ...... 105 6.6.7 Midyan project ...... 106 6.6.8 Gas demand ...... 106 6.6.9 Fuel reforms ...... 106 Refining ...... 107 6.7.1 Refinery projects ...... 110 Projects market ...... 112 6.8.1 Leading contractors ...... 115 7 Petrochemicals ...... 117 Petrochemical Industry overview ...... 117 Feedstock issues ...... 118 Refining petrochemicals integration initiative ...... 119 Key companies ...... 121 7.4.1 Sabic ...... 121 7.4.2 Saudi Aramco ...... 124 7.4.3 Sipchem ...... 125 7.4.4 Tasnee ...... 125 7.4.5 Chevron Phillips ...... 126 Projects market ...... 126

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8 Mining and natural resources ...... 128 Investment ...... 132 Gold and base metals ...... 134 8.2.1 Base Metals ...... 136 Phosphate ...... 136 Aluminium and bauxite ...... 138 Industrial minerals ...... 139 Exploration ...... 139 Vision 2030 targets ...... 140 Talent and experience ...... 141 9 Industry ...... 142 Diversification ...... 143 9.1.1 Incentives ...... 144 9.1.2 Industrial cities ...... 145 9.1.3 Challenges ...... 148 9.1.4 Employment ...... 149 Automotive ...... 150 Polysilicon ...... 151 Cement ...... 152 Steel ...... 154 Aluminium ...... 157 Fertilisers ...... 158 Defence ...... 159 9.8.1 Vision 2030 targets and impact ...... 160 Outlook ...... 162 10 Power ...... 165 Overview ...... 165 Market Structure ...... 166 Supply and demand ...... 167 10.3.1 Installed Capacity ...... 167 10.3.2 Power Generation ...... 170 10.3.3 Power Consumption ...... 171 10.3.4 Peak Load Demand ...... 172 Power generation projects ...... 175 Upcoming projects ...... 176 Conversion projects ...... 177 Steam plants ...... 178 Decommissioning ...... 178

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Private power market ...... 179 Developers ...... 182 SEC privatisation ...... 183 SWCC privatisation ...... 185 Fuel sources ...... 185 Nuclear ...... 186 Energy efficiency ...... 187 Transmission & distribution ...... 189 11 Renewable energy ...... 194 Overview ...... 194 NREP projects ...... 198 Other projects ...... 200 12 Desalination...... 203 Market structure ...... 204 Supply/demand ...... 204 Saline Water Conversion Corporation ...... 206 Private developers ...... 208 Future private projects ...... 210 Decommissioning ...... 211 Future projects ...... 212 Privatisation ...... 213 13 Wastewater ...... 214 Management contracts ...... 215 13.1.1 Future private sector partnerships ...... 218 Past and future spending ...... 219 13.2.1 PPP water projects ...... 221 13.2.2 Water masterplans ...... 221 Groundwater...... 223 Treated sewage effluent ...... 223 Marafiq ...... 226 14 Construction ...... 228 Overview ...... 228 Projects market ...... 230 14.2.1 Major projects under execution ...... 230 14.2.2 Projects on hold...... 230 14.2.3 Projects pipeline ...... 231 14.2.4 Leading clients ...... 232 Contractors and the government...... 233

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14.3.1 Leading contractors ...... 234 PPP projects...... 235 Real estate ...... 236 14.5.1 Major project pipeline ...... 237 14.5.2 Housing ...... 240 Healthcare ...... 243 Education ...... 244 Roads ...... 245 15 Tourism ...... 248 Overview ...... 248 Vision 2030 and the tourism sector ...... 254 Cultural tourism ...... 255 Hospitality ...... 256 Leisure projects ...... 258 Retail projects...... 260 16 Rail ...... 262 Railway masterplan ...... 263 Structure of the rail industry ...... 264 Mainline rail infrastructure ...... 266 16.3.1 North-South Railway ...... 266 16.3.2 Haramain high-speed railway ...... 269 16.3.3 Saudi Landbridge ...... 269 16.3.4 Other lines ...... 269 16.3.5 Mainline railways – PPP ...... 270 Metro/light rail transit ...... 271 16.4.1 Urban rail – PPP...... 271 16.4.2 Riyadh Metro ...... 272 16.4.3 Mecca Metro ...... 275 16.4.4 Medina Metro ...... 276 16.4.5 Jeddah Metro ...... 277 16.4.6 Dammam Metro ...... 280 Monorail ...... 280 17 Aviation ...... 282 Airport projects ...... 285 17.1.1 Planned and unawarded projects...... 289 Market liberalisation ...... 291 17.2.1 Privatisation of the aviation sector ...... 293 18 Ports ...... 296

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Sector drivers ...... 298 Major ports ...... 298 Projects and investments ...... 300 Port-rail links...... 302 Privatisation ...... 302 Public private partnerships (PPP) ...... 303 Vision 2030 targets ...... 303 19 Doing Business ...... 304 Foreign direct investment in Saudi Arabia ...... 305 Trading with Saudi Arabia ...... 306 Doing business with the public sector ...... 310 Saudi Arabia’s Privatisation Push ...... 311 Taxation ...... 312 Employment law ...... 313 Intellectual property ...... 315 Enforcing contracts, resolving disputes, and liquidating a business ...... 315

All rights reserved. No part of this publication may be reproduced, stored in any retrieval system, or transmitted in any form, by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the copyright owner. While every care has been taken in completing this report, no responsibility can be accepted for any errors or omissions that may occur.

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SAUDI ARABIA 2019 Trends, opportunities and challenges in the Middle East's biggest market

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The second biggest area of activity is the government services sector, which is essentially funded by oil revenues and includes items such as public administration, defence and other activities.

The third largest area of activity is financial and business services, followed by wholesale and retail trade, restaurant and hotels – a sector which is being boosted by growing demand for services for pilgrims and should also benefit from the ongoing development of the general tourism industry – and then manufacturing industry, such as petrochemicals, steel and aluminium.

Saudi GDP by sector, 2017 (% of total)

Utilities, 1.6 Oil and gas, 28.2

Community, social & personal services, 2.3 Agriculture, 2.5

Construction, 6.0 Govt services , 19.1 Transport & communications, 6.4

Manufacturing, 9.7 Finance, real estate & business Trade, restaurants services, 13.1 & hotels, 10.7

Source: Sama

Inflation

Saudi inflation, 2007−2018 (%)

7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -1.0 -2.0

Source: IMF

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After two challenging years in which the value of contracts awarded in Saudi Arabia plummeted to about half of the 2010–15 average, the kingdom’s projects industry received a welcome boost in October 2017 from Crown Prince Mohammad bin Salman’s announcement of a series of mega-projects aimed at transforming the Saudi economy. These mega-projects included the $500bn Neom project. However, there are doubts about how quickly such schemes will move forward.

Overall, between 2010 and 2018, Saudi Arabia awarded close to $366bn of contracts across all sectors; $228bn of contracts are still under execution.

Total value of contract awards, 2010−18 ($m) 70,000 58,299 57,624 60,000 49,591 50,896 50,000 40,354 40,000 31,560 28,810 30,000 27,320 21,389 20,000

10,000

0 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: MEED Projects

Contract awards by sector, 2010−18 ($m)

140,000 130,712

120,000

100,000 82,267 80,000

60,000 47,087

40,000 29,458 26,164 24,545 16,176 20,000 9,434

Source: MEED Projects

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Ministry of Housing. Saudi Arabia and South Korea have signed an agreement to build 100,000 houses in the Al-Fursan region over the next seven years.

Another major deal due to be signed this year is a $16bn contract for the construction of the Mecca Metro by the Makkah Mass Rail Transit Company (MMRTC), which involves four new metro lines – A, B, C and D – complementing the Al-Mashaaer Al-Mugaddassah metro line.

Largest projects due for award in 2019 Budget Owner - Project Status Completion ($m) PIF - Neom: Infrastructure and Utilities 100,000 Study 2025 MOH - Dahiyat Alfursan 20,000 Study 2025 MMRTC - Mecca Metro 16,000 Bid Evaluation 2030 Jeddah Metro Company - JPTP: Jeddah Metro 13,000 Main Contract PQ 2023 PIF - Red Sea Project 10,000 Main Contract PQ 2030 Makkah Region Development Authority - Al 10,000 Study 2025 Faisaliah City GACA - KAIA: Phase 2 10,000 Study 2026 REPDO - Renewable Energy Program: Round II 10,000 Main Contract PQ 2023 Jeddah Metro Company - Jeddah Metro: Orange & 8,000 Main Contract PQ 2023 Blue Lines MMRTC - Mecca Metro: Lines B and C 8,000 Bid Evaluation 2024 SAR - Saudi Landbridge 7,000 Main Contract PQ 2023 Maaden - Third Phosphate Fertiliser Manufacturing 6,400 Study 2024 Facility PIF - New Jeddah Downtown 5,000 Study 2029 Satorp - Mixed Feed Cracker & Derivatives 5,000 Study 2024 complex SRO - Yanbu Jeddah Jizan and Taif Khamis 4,200 Study 2025 Mushayt Abha Rails MMRTC - Mecca Metro: Line D 4,000 Study 2024 MMRTC - Mecca Metro: Line A 4,000 Study 2024 WEC - Jubail 3 IWPP 4,000 Main Contract PQ 2022 MMRTC - Mecca Metro: Phase 1 (Lines B, C): Part 3,547 Bid Evaluation 2024 1: Package 3 (SYS) Jeddah Metro Company - Jeddah Metro: Red Line 3,500 Main Contract PQ 2023 SB Energy - Solar PV Project at Sudair 3,000 Bid Evaluation 2023 Ministry of Municipal and Rural Affairs - Riyadh 2,900 Design 2022 Storm Water Drainage Project Shomoul Holding - The Avenues Riyadh: Mixed 2,700 Design 2021 Use Development MMRTC - Mecca Metro: Phase 1 (Lines B, C): Part 2,653 Bid Evaluation 2024 1: Civil: Package 1 SCTA - Al Rayis Development 2,500 Design 2027 SEC - Shuqaiq Power Plant Expansion: Phase 1 2,500 Study 2022 SEC - Jeddah South Power Plant: Phase 2 2,500 Study 2023 Expansion YALJ - Kaaki Development in Mecca 2,000 Design 2022 PQ: Pre-Qualification; Source: MEED Projects

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SAUDI ARABIA 2019 Trends, opportunities and challenges in the Middle East's biggest market

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parent Hyundai Heavy Industries (HHI). This adds to Aramco’s existing 64.3 per cent stake in S-Oil Corp, South Korea’s third-largest refiner.

Aramco is expected to continue shopping for refining assets going forward. The company’s downstream capacity covers only a third of its production – a much lower ratio than the oil majors Aramco wants to compete with. Greater downstream integration would also provide a key hedge against low oil prices in the future.

Upstream oil

Hydrocarbons resources in Saudi Arabia are limited to a relatively small geographical region and a number of large oil fields. Production primarily comes from 12 reservoirs in the north-eastern corner of the kingdom, along with the Shaybah field in the south.

The kingdom has three of the world’s six giant fields in Khurais, Safaniya and Ghawar, which each have the capacity to produce over 1 million b/d. Ghawar is the world’s largest oil field, and is capable of producing about 5 million b/d. Safaniya and Khurais each possess a production capacity of 1.2 million b/d.

Other large fields in the kingdom include Shaybah, Zuluf and Abu Safah, which produce 750,000-850,000 b/d. The Marjan and Qatif are also major fields, with production capacities of 450,000-500,000 b/d each. Saudi Arabia’s allocation from the Divided Zone is about 350,000 b/d. Other smaller fields include Haradh and Berri, each with capacities of over 300,000 b/d.

Saudi oil and gas fields

Source: Arab Oil & Gas Directory

6.5.1 Revised Proven Reserves

In January 2019, Aramco revealed Saudi Arabia’s hydrocarbons reserves after a third- party audit – a process carried out as part of its plans to prepare for a stock market listing.

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Maaden Phosphate Company

MPC’s main source of phosphate rock is the Al-Jalamid mine in the north, near the border with Iraq. The site includes a beneficiation plant and supporting infrastructure. The mine produces about 11.6 million tonnes a year (t/y) of ore, which is processed into about 5 million t/y of dry concentrate.

The phosphate concentrates at Al-Jalamid, which has a measured resource of 534 million tonnes, is transported by rail to Ras Al-Khair on the Gulf coast for processing into fertiliser.

Ras Al-Khair, 90km north of Jubail, hosts MPC’s $5bn integrated chemicals and fertiliser production plant, which manufactures saleable products from Al-Jalamid concentrate.

The fertiliser complex contains a phosphoric acid plant, sulphuric acid plant, ammonia plant, di-ammonium phosphate (DAP) granulation plant, a co-generation, and desalinisation plant and associated facilities.

Railways supporting Ras Al-Khair minerals city

Source: Maaden

The DAP granulation plant started production in February 2012 and has a capacity of 3 million t/y. The offtake from the plant is sold on the international market, with 400,000 t/y of surplus ammonia being sold domestically or internationally.

The complex also has the capability to produce mono-ammonium phosphate (MAP) if market requirements demand it. A new ammonia plant began production at Ras Al-Khair in January 2017.

The process for establishing a third sulphuric acid plant (DAP3) at the site is underway. In November 2018, Maaden signed the financing agreement of $266m with Industrial Development fund for the development of the project. The main contract tender issue for the project is expected in the third quarter of 2019.

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Package (82 per cent completed); and PP13 Combined Cycle Power Plant: Early & General Civil Works Package (85 per cent completed).

The £925m SEC PP14 Combined Cycle Power Plant covers three projects: PP14 Combined Cycle Power Plant: Electro-mechanical Installation Package (95 per cent completed); PP14 Combined Cycle Power Plant: Industrial Buildings Package (96 per cent completed); and PP14 Combined Cycle Power Plant: Early & General Civil Works Package (completed).

Major power plants under construction Estimated Scheduled Project Owner Main Contractor contract commissioning value ($m) Jizan Refinery IGCC Power Plant: Saudi Aramco SEPCO 2,500 2020 Package 4: CCPP SEPCO III Electric Yanbu Power Plant: Phase 3 SWCC/Marafiq JV Power Construction 1,370 2020 Corp Jizan Refinery IGCC Power Plant: Saudi Aramco Saipem 1,000 2019 Package 1: Gasification Unit Jizan Refinery IGCC Power Plant: Saudi Aramco Saipem 1,000 2019 Package 2: Sulphur Recovery Unit Waad Al Shamal Integrated Solar General SEC 980 2019 Combined Cycle (ISCC) Power Plant Electric/Abener JV Doosan Heavy Saudi Fadhili IPP Industries & 896 2019 Aramco/SEC Construction Co. PP13 Combined Cycle Power Plant: SEC GAMA 320 2019 Electro-mechanical Installation Package SEPCO III Electric PP14 Combined Cycle Power Plant: SEC Power Construction 293 2019 Electro-mechanical Installation Package Corp PP14 Combined Cycle Power Plant: SEC Alkifah Contracting 160 2019 Industrial Buildings Package Upgrade Sulfur Handling and Export M R Al Khathlan for Saudi Aramco 130 2019 Facilities at Berri Gas Plant Contracting PP14 Combined Cycle Power Plant: Early SEC Archirodon 120 2019 & General Civil Works Package PP13 Combined Cycle Power Plant: Early Assad Said SEC 118 2019 & General Civil Works Package Contracting PP13 Combined Cycle Power Plant: Alfanar Bena SEC 61 2019 Industrial Buildings Package Contracting Source: MEED Projects

10.3.3 Power Consumption

Power consumption in the kingdom has increased due to rising economic activity, as well as buoyant residential consumption.

The residential sector was the largest consumer of electricity in the kingdom in 2017, accounting for 48 per cent of total energy consumption that year. The industrial sector was the second largest user, accounting for 18 per cent, followed by commercial users with 16 per cent and government with 13 per cent.

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Transmission & distribution

The kingdom has comfortably been the region’s largest spender on transmission and distribution (T&D) infrastructure since 2008, with about $28.9bn-worth of contracts awarded until the end of December 2018. The largest of these was a $550m contract awarded in 2008 to Middle East Engineering & Development Company for the construction of the Qassim-Medina Transmission Line project.

Transmission & Distribution contract awards, 2011−18 ($m)

7,000 5,980 6,000

5,000

4,000 3,740 3,324 3,114 3,000 2,765

1,855 2,000 910 997 1,000

0 2011 2012 2013 2014 2015 2016 2017 2018

Source: MEED Projects

Investment in the transmission sector increased from 2011 to 2014 when it peaked at a total value of nearly $6bn. Investment in the transmission sector is divided between investment in cables and overhead lines, as well as substations and control centres. Investment in the latter accounted for an average of 66 per cent of total investment between 2011 and 2014.

Post-2014, there was a declining trend in investment in the transmission sector. Between 2017 and 2018, there was a marginal increase in investment, particularly in cables and overhead lines.

Selected T&D contract awards, 2018–2019*

Project name Contractor Value ($m) 230/115/69 kV Abqaiq Central Substation Al Babtain Contracting 80 380/132/13.8 kV Al-Remal Substation (9046) Al Babtain Contracting 64 380kV OHTL from Arar BSP and Waad Shamaal BSP National Contracting Company 64 380KV OHTL Fadhili Gas Plant S/S to Wadi Al Arabia Electrical Transmission Summan 380/115/33kv BSP Line Construction Company 62 Middle East Engineering & 380/230 kV Haradh & Hawaiyah OHTL Development Co 60 Construction of EIC S/S 1 & 2 and Transmission Line Larsen & Toubro 60 380 kV UG for Al Rawabe(9047) BSP to Riyadh Saudi Services for Electro Metro (9054) BSP & 9017 Mechanic Works 60

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Water supply by source (million cm/d), 2017

7 6.5 6 5 4 3.3 3 2

1 0.2 0 Desalination water Ground water Surface water

Sources: SWCC

Historically, the kingdom opted for desalination rather than alternatives such as large water transfer projects or further over-exploitation of deep groundwater. However, much of the existing desalination capacity was built before 1990 and needs to be replaced over the coming decade.

Existing desalination plants

Source: SWCC

In 2000-08, very little new capacity was commissioned as a result of budgetary problems for the government and SWCC; this was exacerbated by the fact that several contractors faced serious payment issues for projects undertaken in the late 1990s.

However, rising oil prices and the launch of a utility privatisation programme resulted in an increase in investment. In 2010, Saudi Arabia regained its position as the leading desalination producer after two of the world’s largest plants – the Shuaibah IWPP on the Red Sea and the Jubail IWPP on the Gulf coast – were commissioned. The plants boosted

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Demand for TSE in Riyadh, Jeddah, Medina, Mecca and Greater Dammam, 2012−30 (thousand cm/d) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016 2020 2024 2028 2030

Source: NWC

To address this area, NWC is planning to spend an average of $600m a year on TSE projects until 2028, including $1.5bn on projects in three major cities over the next four years. Among its plans, the company will invest $800m in Riyadh, $530m in Jeddah and $160m in Mecca.

All NWC’s new treatment projects will employ tertiary technology as a minimum. This is a prerequisite, given that NWC is aiming for a significant increase in TSE reuse.

NWC has signed more than 12 agreements and memorandums of understanding (MoUs) with companies for bulk TSE supply. Under the 20–25-year contracts, the private sector is responsible for distributing the TSE from the STPs.

Forecast of TSE usage in the kingdom’s six major cities, 2011−30 (cm/d) 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000

2012 2011 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Riyadh Jeddah Makkah Madinah Dammam & khober.

Source: NWC

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Saudi Arabia tourism contract awards, 2010−18

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0 2010 2011 2012 2013 2014 2015 2016 2017 2018

Cultural Hospitality Leisure Retail

Source: MEED Projects

The biggest project currently on hold is the construction of four-star hotels in Group 4A of Dar Al Hijrah’s Pilgrim City project. Dar Al Hijrah, a body owned by the Public Investment Fund, is planning to develop an integrated mixed-use project called Pilgrim City comprising 100 buildings to accommodate over 120,000 pilgrims and 31,000 employees.

Major tourism projects on hold in Saudi Arabia Value Project Client ($m) Pilgrim City: Four Star Hotels: Group 4 A 1,000 Dar Al Hijrah Company Ishbiliyah City Centre 800 Majid Al Futtaim Salboukh Mall in Riyadh 600 Arabian Centres General Presidency for Grand Mosque and Prophet Grand Mosque Expansion: Utilities Bldg 540 Mosque Affairs Botanical Gardens In Riyadh: Phase 3 500 King Abdullah International Gardens Riyadh Land: Kingdom Oasis: Four 500 Kingdom Holdings Seasons Mecca Museum 500 Saudi Commission for Tourism & National Heritage Four Seasons Hotel in Jeddah 480 Midad Real Estate Investment & Development Co Sharma Complex: Hotels & Accomodation 360 PIF Riyadh Walk 320 Raj Real Estate Jeddah Gate: Radisson Blu Hotel & 300 Al Tawfeeq for Development & Investment Residence Sofitel Luxury 5 Star Hotel In Riyadh 300 King Abdullah bin Abdulaziz Foundation for Housing Dev Al Sharif Mansour Bin Saleh Abu Rayash Investment & Millennium Jeddah (Corniche Jeddah) 250 Development Co Source: MEED Projects

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16.4.3 Mecca Metro

Mecca has a light rail system in operation, but it is only used during peak pilgrimage times, which is about seven days a year, to transport worshippers between various holy sites. The pilgrim metro line, also known as the Al Mashaaer al Mugadassah Metro, links the holy sites of Mecca, Mina, Arafat and Muzdalifah. It spans 18km, and has the capacity to transport 72,000 passengers an hour.

The metro was built by Chinese contractors under a $1.77bn contract between the Municipal & Rural Affairs Ministry and China Railway Construction Corporation (CRCC) signed in February 2009. The contract covered the construction of the scheme and a three- year O&M concession.

After a limited capacity test run during the 2010 Hajj, the metro was used at full capacity from 2011 to 2013. CRCC operated the trains from 2011 to 2013, incurring net losses estimated at $607m prior to transferring the project to the client. In May 2015, Malaysia’s Prasarana Berhad won a SR807m three-year O&M contract for the service.

A further multi-phased light rail project has also been proposed for the city. The proposed Mecca mass rail transit project (MMRT) will include the construction of four new metro lines, A, B, C and D, complementing the Al Mashaaer Al Mugaddassah line. The new lines will have a total length of 180km and will link about 88 stations.

The project aims to address the city’s traffic congestion issues, caused by a consistently growing population and the rising number of pilgrims, whose number is expected to exceed 25 million by 2030.

Mecca Metro

Source: Development Commission of Mecca and Mashaer

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Due to its location on the Red Sea coast and its relative proximity to the Suez Canal, KAP is being touted as Saudi Arabia’s response to Jebel Ali port in Dubai, catering not only to the domestic market but to transhipment cargo as well.

Saudi ports

Sources: Saudi Ports Authority; Ports Development Company; MEED

Annual cargo throughput at Saudi ports (million tonnes), 2013−17

300

250

200

150

100

0 2013 2014 2015 2016 2017

Import Export

Source: Saudi Ports Authority (SPA)

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Petroleum products form a large majority of exports (78.5 per cent in 2018), followed by petrochemicals products such as propylene and ethylene. Automobiles represent the largest share of imports, followed by telecoms devices and medicine.

The kingdom exports mainly to the UAE, China, India, Singapore and Kuwait. It imports mainly from China, the US, Germany, Japan, South Korea and the UAE.

Riyadh usually enjoys a trade surplus, although its scale varies with the fluctuations in global oil prices. Exports grew rapidly in 2018, aided by rising oil prices, to reach SR1.1 trillion ($294bn). Its imports in 2018 were SR507bn, leaving a surplus of SR597bn, the highest since 2015.

Saudi imports and exports (SRm) 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2013 2014 2015 2016 2017 Imports Exports

Source: GSAT

Those wishing to sell products and services to Saudi Arabia are not required to establish a direct or permanent presence in the kingdom. Instead, they can trade on open account and deal with Saudi customers by phone and email without even sending an employee into the country; this is often adequate for small companies and those that do not attach great significance to the local market. For others, however, the option of establishing a direct or indirect presence has to be seriously considered to take advantage of the opportunities the market offers, and to conform to local law.

The simplest way to establish a local presence is by appointing a Saudi company as a local agent or representative. There is no standard approach to this, although there is a set of commercial agency regulations that define the parameters of any arrangement.

The first condition is that the Saudi agent or representative is properly incorporated under the kingdom’s regulations for companies. This entails a Saudi national or corporation registering with the Commerce & Industry Ministry and other relevant bodies and stating which activities it wishes to pursue. Foreign firms working with individuals or entities that are not properly incorporated and registered will quickly discover that few advantages will be secured by taking this route.

Foreign firms appointing a Saudi company as an agent or representative are free to define the relationship by contract within the terms of the commercial agencies’ regulations. This can be registered in a foreign jurisdiction, although it will make the enforcement of

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300+ pages mega projects 10 key business sectors review on the Vision 2030