The construction industry is booming in Saudi Arabia. With Vision 2030 coming up, every project in the Kingdom requires some form of construction. However, entering the Saudi market can be a bit confusing as there are different requirements for different companies, with factors depending on whether you are a foreign-only company or not. We’re here to make it easier for you.
Wondering if it’s the right move to expand in KSA?
According to InvestSaudi.sa, The Kingdom’s GDP per capita is $23,570, and it has 230.8bn FDI Inward stock and 782bn nominal GDP. These figures are the biggest in the region. Additionally, the Kingdom has allowed foreign loans recently which is a huge and welcome development.
The Kingdom wants to be thought leaders on all subject matters – construction is one of those. The construction industry in the Kingdom saw a 2.7% real GDP growth by construction activities in Q1 2021, along with 78 new construction investment licenses in Q1 2021.
There was a total of $300bn total spending in the construction sector in the last 5 years and by 2025, around 400k units will be built using modern construction methods and new technologies. These figures are modest despite the pandemic. However the industry has been growing rapidly despite COVID-19.
It’s great that the construction industry is booming. But why should we move to Saudi Arabia now?
There are many reasons to expand to the Kingdom besides the fact that the industry is constantly growing. They are listed below:
Not convinced? Here are more facts about the construction industry in the Kingdom:
KSA construction market is segmented by the following construction type:
Commercial
Residential
Industrial
Infrastructure
Energy
Utility
After shrinking by 0.4% in 2020, Saudi Arabia’s construction sector is expected to rebound in 2021, increasing by 2.9%. This shrink can be attributed to the pandemic, we are surprised to see how little it shrunk. The industry is expected to recover for the balance of the projection period, increasing at a rate of 4% from 2022 to 2025.
According to industry sources, Saudi Arabia is presently working on more than 5,200 building projects worth USD 819 billion. Approximately 35% of the total value of current projects in the Gulf Cooperation Council (GCC) is accounted for by these projects. However, you will need a Saudi entity to bid and win Saudi projects, according to one of our government contacts. This has been coming for a while now.
The industry is a competitive landscape. Here are 4 major players and the big projects in the Saudi construction industry.
Major players:
Below are some of the Big Projects in KSA:
1. Neom:
This is one of the largest projects where everything is going to be new, like a new city. It’s aptly been described as “New Future”, it will be a tourism destination with smart city technology in Tabuk Province. It will cover 10,230 square miles in north western Saudi Arabia and will $500 billion futuristic megacity
2. The Red Sea Project:
This project is one of the world’s most ambitious regenerative tourism projects, which will be an exclusive experience with unparalleled diversity. An archipelago of 90+ pristine islands, miles of sweeping desert and dramatic mountain landscapes, this project is under His Highness Crown Prince Mohammed bin Salman.
3. Qiddiya:
This new entertainment city will be a disruptive destination and aims to be the capital of entertainment, sports and arts of KSA and the world. It will be home of the most innovative and immersive experiences in:
Sports & wellness
Nature and environment
Parks and attractions
Motion and mobility
And arts and culture
4. Riyadh metro:
The new public transit system will have 6 main lines and will span across 176 KM. With 85 highly equipped stations featuring cutting-edge technology, the Riyadh metro will offer everyone an outstanding experience during a trip in the city.
How do I apply to work on these projects?
The E-Government Procurement project is led by the Saudi Ministry of Finance. The project aims at creating a unified platform across all government agencies. An online portal was created for proposals and bids submissions.
This is known as the Etimad Portal. There are 4 main steps to procure a project:
Assign an account manager in the CoC (Certificate of Classification)
Registration
Update data until 100%
Upload all the company documents on the portal
Once your company is set up in KSA, the account manager is set up in the CoC, this is usually the GM. The CoC links the CoC account to the Etimad Portal. So, when the account manager goes to the Etimad Portal he will be the account manager for that company in the Etimad Portal.
The next step is to update the company information on the portal, which includes company and contact information. There are also attachments that need to be attached such as the CR certificate, which you would have if you have set up your company, CoC, MISA license, among others.
Once the account is completed, tenders can be found and which you can apply for. Some tenders are free while others require a small fee. Additionally, depending on the project, most construction companies need 200-500k Riyals to enter the bid.
Another way to apply for a tender is to be given an invitation by an agency. For example, if you go to the Ministry of Transportation and you give them a proposal, they’ll send an invitation to give your proposed offer.
The Etimad Portal is all in Arabic.
How do you know you are eligible for a project in the Etimad portal?
You get a certificate of classification- which is the classification of a company.
Your classification will depend on a 6 digit activity code. The 6 digit activity code based on what you would do in KSA. There are 450k+ codes. Once the 6 digit codes are given to us by you, AstroLabs are able to see what else is required.
If you’re a construction company or manage construction companies then what you might need is a service investment license from MISA.
The good news with that is usually 100% foreign ownership is allowed and no minimum capital investment requirements are needed.
If manufacturing and building of construction materials, you would need an industrial license which is like a manufacturing license. Foreign ownership is fine and no additional requirements are needed however you might need a warehouse, etc. depending on every activity.
If you need engineering consultancy or something along those lines – you’re going to have to be honest with yourself to see if you need approval from a third party from an engineering business or ministry. Then you need a professional license from MISA which needs 20% local partners, who normally need a certain amount of experience. Might be 7 years in the region or globally.
You got industrial, manufacturing, or service like construction and then professional (so specific consultation). It depends on the business you are working with. If you don’t need third party approval and are happy to provide any activities like high management consultancy which is vague and gives you more scope in setting up a 100% foreign company. So you would get a service rather than a professional license.
Once an activity code is decided, there are 5 categories to choose from based on your financial limits. It’s all in Arabic.
How to apply for certificate:
After your finances are approved, you will receive a license that allows you to enter the big projects. There are limits to enter projects. Certain projects may ask for certain capital requirements.
If you are looking for advice on how to expand in the Kingdom of Saudi Arabia, you can get in touch with us for a smooth and hassle-free transition.