Saudi Arabia 2023
The Global Leaders in Construction Management (GLCM) program at Columbia University represents a comprehensive research initiative involving eight students hailing from diverse countries such as the United States, India, Lebanon, Kuwait, China, and Peru. In January 2024, members of the GLCM program embarked on a visit to Saudi Arabia, driven by the primary objective of immersing themselves in gaining firsthand knowledge about the monumental giga-projects and remarkable development unfolding in the country. This endeavor extended beyond construction insights to encompass an exploration of Saudi culture, an understanding of distinctive challenges, and an examination of the dynamic construction industry landscape.
Site Visit with Nesma & Partners
On their first day in Riyadh, GLCM members explored cultural landmarks like Boulevard World, Riyadh Season, and Bujairi Terrace, immersing themselves in the country's rich culture while also savoring local cuisine.
Each workday began early in the morning; at roughly 8 A.M. Each day, our team members convened at the hotel lobby. Our itinerary for the day usually involved taking meetings with scheduled companies either at their headquarters or local offices. Among the corporations on our schedule were the Public Investment Fund (PIF), Schneider Electric, Diriyah Gate Development Authority (DGDA), Parsons, Mace, ROSHN, WakeCap, NESMA, King Abdullah City of Science and Technology (KACST), Red Sea International (RSI), Bechtel Corporation, Turner and Townsend, and Qiddiya Investment Corporations. These meetings engaged corporate leadership in discussions on business operations and construction trends, with a focus on the adaptation of digital technology as well as digital transformation. Additionally, the afternoon sessions often included visits to in-progress job sites.
During our visit, we explored several notable construction sites, including the Avenue Shopping Mall, the Diriyah Gate, and ROSHN Sedra Modular houses. While confidentiality restricted sharing detailed insights, it became clear that Saudi Arabia's construction endeavors are poised to become globally iconic projects. This article serves as a summary, highlighting eight major takeaways from our journey to Riyadh, Saudi Arabia.
The Ever-Evolving KSA’s Construction Industry
Top Eight Lessons Learned:
1. Transformative Giga Projects to Accomplish Saudi Vision 2030
The construction industry plays a pivotal role in realizing the ambitious objectives outlined by Saudi Vision 2030, led by the Public Investment Fund (PIF). Key giga-projects such as NEOM, the Red Sea Project, Qiddiya, ROSHN, and Diriyah exemplify the nation's commitment to economic diversification and reducing oil dependence. Qiddiya, among these projects, signifies a paradigm shift in entertainment and cultural aspirations, aspiring to be the premier global destination for tourism and recreation. These initiatives not only prioritize cutting-edge infrastructure and real estate development but also aim to establish new ecosystems, foster economic growth, and embrace sustainable practices. Saudi Arabia has engaged with global enterprises to bring these visions to life while ensuring inclusive opportunities for its citizens to contribute. Notably, the "Saudization'' initiative mandates companies to reserve a specified number of positions for citizens, promoting local involvement in these transformative projects.
Site Visit with Nesma & Partners
2. Saudi Arabia's Pursuit of “Economic Diversification and Sustainable Growth”
Saudi Arabia, a nation rich in history and resources, stands at a transformative moment in its economic trajectory. The country's Vision 2030 presents a blueprint for a future less dependent on oil, leaning towards a more diversified economy. The continuous advancement of development and infrastructure projects in Saudi Arabia has witnessed substantial progress, particularly in crucial domains like housing, water desalination, expansion of oil fields, and industrial endeavors. The Kingdom's steadfast commitment to advancing these vital sectors reflects its dedication to fostering progress and achieving sustainable growth.
In a proactive move to diversify the economy, Saudi Arabia is actively working towards hosting esteemed international events and elevating its sports sector. A comprehensive USD 2.7 billion program has been launched to bolster these endeavors, showcasing the nation's aspirations to position itself as a worldwide hub for sports and entertainment. Additionally, demonstrating an unwavering dedication to timely project execution and development, Q2 2023 showcased a significant movement of over USD 14.5 billion worth of projects from the tender to the construction phase. Furthermore, the nation currently boasts USD 70 billion worth of active tenders, presenting a thriving environment for investment, and reaffirming its position as a vibrant hub for the global construction industry.
Four Indicators of Economic Diversification
3. Innovation in KSA’s Construction Industry is driven by the Developer’s Appetite
The developers of the giga-projects that are happening in KSA have a strong appetite for innovation. The massive scale and complexity of the projects in the kingdom, with over $1 trillion being invested across more than 25 major initiatives, generate the need for innovative technologies that can provide efficient solutions to problems related to traditional construction processes, such as supply chain shortages and resource allocation inefficiency. This situation drives developers of projects like Qiddiya, Diriyah, NEOM, and ROSHN to eagerly welcome innovative solutions and prompt contractors, designers, and project managers to implement innovative technologies both on and off-site.
For example, WakeCap, a construction technology startup, developed wearable sensors through Internet of Things (IoT) technology, capable of monitoring workers on-site to provide real-time data that can enhance resource as well as safety management. This IoT integration enables precise tracking of workforce movements and health indicators, significantly enhancing on-site safety protocols and operational efficiency. As stated by its CEO, Hassan Albalawi, this innovative construction technology would have never succeeded if it were not for the project developer’s appetite for innovation. As he mentioned, the willingness of these developers to not only adopt but also demand the use of such technologies underlines a broader commitment to advancing the construction industry's efficiency, safety, and sustainability standards (Albalawi, personal interview).
Likewise, the Public Investment Fund (PIF), through its Center of Excellence, plays a key role in motivating key industry stakeholders to develop these new technologies. For instance, King Abdulaziz City for Science and Technology (KACST) has developed a revolutionary modular construction system that enables the construction of 15 villas in a day. The precision and quality control offered by their ingenious modular technique aligns seamlessly with the kingdom's commitment to fostering innovation while meeting the demands of its increasing population. These technological advancements are pivotal components of KSA's strategic push towards creating a knowledge-based economy, as envisioned in the transformative Vision 2030 plan.
KSA’s integration of innovation within its construction sector has propelled the nation up the ranks in the Global Innovation Index 2023 (GII), being the second-highest ranked in the Gulf Cooperation Council (GCC). This ascent underscores the kingdom's openness to and effective implementation of cutting-edge construction technologies, marking a strategic pivot towards modernizing its infrastructure. Such advancements signify KSA’s commitment to not just keeping pace with, but leading in the global construction industry, reflecting its proactive stance in adapting to the evolving demands of its dynamic urban landscape.
Overall Score of the GCCs in Global Innovation Index (GII) 2023
Global Innovation Index 2023: Innovation in the Face of Uncertainty." World Intellectual Property Organization, 2023, www.wipo.int/global_innovation_index/en/2023/
4. Saudi Arabia’s Bold Shift Toward a Sustainable and Green Future
The kingdom’s commitment to a sustainable and green future has been the driving force behind many projects currently taking place. With the significant shift to diversify the economy from merely relying on oil, current initiatives like the “Saudi Green Initiative” (SGI), support Vision 2030 and depict the Kingdom’s commitment to sustainability. Some ambitions and plans to increase vegetation in the region include planting over 600 million trees across the kingdom, reaching net zero emissions by 2060, land and sea protection, Green Riyadh, and King Salman Park, located in the heart of Saudi to become the world’s largest urban park, four times larger than Central Park. These objectives drive giga-projects like Quddiyah, Diriyah, and NEOM to use sustainable and regional materials, have green and open spaces, and become energy-efficient. Current mixed-use projects in the kingdom also promote sustainability, providing walkable pedestrian-friendly neighborhoods with green and open spaces to the public, and an increase in micro-mobility around the city to help minimize car usage.
The dedication to sustainable infrastructure is further proven with the new Saudi Arabia Green Building Certification known as MOSTADAM, which, similar to LEED, is a sustainability rating and certification system catered to address the current challenges faced in KSA while following the Saudi Building Code (SBC). With the ongoing global climate changes happening, KSA is playing a vital and leading role in helping reduce climate change impacts regionally and globally, while also diversifying the economy. The figure below depicts Saudi’s sustainable goals to reduce carbon emissions by more than 278 MTPA, to eventually achieve net zero by 2060.
Saudi Vision 2030 Sustainability Goals
5. Supply Chain and Human Resources are the Foundation of the Construction Industry:
Despite the huge capacity and prosperous trend of the domestic construction market, Saudi Arabia still faces potential challenges in terms of resources - machines, materials, and labor.
Based on the investigation from different firms, one conclusion can be presented: the manpower structure of the Kingdom is mainly contributed by neighboring foreigners. This situation will hopefully be mitigated by local training programs and engineering education for KSA citizens in the future, which is advocated by and applied in many local construction companies.
On the other hand, Saudi Arabia's construction industry is currently enduring a stage that urges it to try shifting its reliance on imported machines and materials back to inland manufacturing; this is also considered part of the “Saudization” plan. As published by the authority, the purchase of machines, equipment, and appliances of KSA increased to 29.8% of their whole importing revenue in October 2023. This number is expected to decrease in the future by putting more effort into local manufacturing plants. Moreover, as mentioned by Samur Abdul Samad, CEO of Nesma & Partners Construction Co., more and more firms have begun to have the processing of raw materials in nearby plants (Samad, personal interview). Financially, it could be much more reserved for construction companies to own their local supply chains than relying on importing. Besides, the thriving local supply chain will also create a healthy economic environment with diversification of businesses.
Supply chain and human resources are fundamental elements of a kingdom’s construction. KSA is showing a good pattern, but there’s still a long way to go.
Importing Statistics of KSA from Nov 2022 to Oct 2023
Indicates Growth Pattern (in million SAR)
6. From Tradition to Transformation: Cultural Integration & Preservation of Heritage Sites
Saudi Arabia has recently initiated numerous campaigns to foster an exemplary model for healthy urban growth. The Saudi Vision 2030 catalyzes sustainable and prosperous country development, emphasizing the importance of local traditions and values and the elevation of awareness regarding heritage values among the population. The ancient societies in Saudi Arabia have constructed remarkable instances of local heritage. However, these valuable cultural assets are presently at risk of deterioration and loss due to neglect. The country's commitment to preserving local heritage and the natural environment is a strategic effort to support its national identity values and strengthen local investments in the tourism sector.
Over the past few decades, the number of visitors has surged to 8 million people, marking a threefold increase, particularly in visits to religious heritage sites. The government has allocated funds to support numerous heritage restoration projects, all under the supervision of the Saudi Commission for Tourism and National Heritage (SCTH).
Saudi Arabia has devised extensive plans to enrich heritage tourism offerings by employing urban planning processes and strategic initiatives. The objective is to adopt a sustainable approach that fosters the healthy growth of the country and its cities.
Saudi Arabia’s Heritage
7. Workforce Dynamics Aligning with the Construction Industry - Saudization
As we explore the workforce dynamics in Saudi Arabia, we can see that the country is undergoing a transformative journey toward Vision 2030. The workforce is a major part of Saudization.
Saudi Arabia's workforce is diverse and comprises a significant number of international workers from countries such as Egypt, Yemen, Pakistan, Turkey, India, Bangladesh, and others. This diversity contributes to a vibrant and dynamic work environment. The government's Saudization policies aim to increase the participation of Saudi nationals in the workforce. To achieve this, employers are required to meet a minimum quota of Saudi employees to reduce dependence on immigrant labor and empower the local workforce. One of the Saudi giga-projects—-the Diriyadh Gate project, aims to achieve a Saudilization percentage of 30 in the safety sector.
GLCM Team visiting Mace DGDA’s PMO Team
However, there are still challenges in the workforce, such as skill gaps and workforce readiness issues. To address this, companies have designed training systems for young Saudis. After graduation, students can seamlessly enter the workforce by committing to projects aligned with Vision 2030 goals.
During our visit to Nesma & Partners Construction Co., they mentioned that they are actively involved in implementing training programs that prepare the younger Saudi workforce for the demands of the job market. In addition, ROSHN commits to supporting female career development. The company offers a helping hand to women returning to the job market to find ideal re-entry positions. This Saudization program exemplifies a proactive approach to increasing Saudi participation in the construction sector.
These ongoing efforts provide a tremendous opportunity for the younger Saudi generation and shape the trajectory of the workforce as the nation progresses toward its Vision 2030 objectives.
8. Top-down Structure: PIF Governing body independently
Saudi Arabia’s centralized approach to the construction market and the construction industry provides a revolution for the long-term planning of the country. The government has aligned the infrastructure projects with socio-economic objectives and goals. Through the strategic integration of the various construction projects and programs, KSA is addressing housing needs (eg: ROSHN’s single-family homes) while setting regulations for standards and quality control. We saw how they mitigated supply chain issues by modularization and standardization of the built structure, whether through material and design, providing top-notch consumer protection and safety standards. The planning seemed to be designed to prioritize public over private interest, especially when it comes to affordable housing, accessibility, and community development. The government oversight through its different policies laid down the line for the projects to give back to the community and one example is Saudization, where the local public will gain valuable knowledge from the foreigners bringing in their expertise.
Saudi Arabia's sovereign wealth fund, the Public Investment Fund (PIF), is essential to the nation's Vision 2030-described economic transformation. In recent years, there has been a notable expansion and reform of the PIF. With its recent expansion and diversification, the fund hopes to rank among the biggest and most significant sovereign wealth funds in the world. The investigation of strategic areas inside and outside the kingdom is part of the PIF's goal to promote economic development and reduce the kingdom's dependency on oil revenue. The PIF has made notable investments in real estate, large IT businesses, and large-scale projects like the future city development NEOM. In many cases, the PIF seeks to invest in entities through various privatization approaches—formal, functional, or material. This enables them to operate independently, managing their projects and programs while being fully functional, owned by both the PIF and, essentially, the government and the public sector.
By taking a holistic view of the nation's needs, the government in Saudi Arabia can create an integrated framework that considers demographic trends, technological advancements, and environmental sustainability, laying the foundation for a well-coordinated built environment that serves the nation's interests for generations to come, especially with the nation’s aspirations for the future in Vision 2030.
PIF’s Investments and Pools of Capital