Main challenges for Construction Sector in Saudi Arabia
Construction companies in Saudi Arabia are worried pay their workers on time in a sign of growing pressure on the economy of lower oil costs, which are inflicting the government to stop paying is building. In rare move associated in the week, the Ministry of Labor issued a public statement used language spoken in a “great institution” had complained that they had not been achieved months. It was the same set of complaints were true and taken corrective measures. A government in a construction company large Arabia, speaking on condition of anonymity, told Reuters he had been having trouble paying their workers for many months. “It’s not just us, its various construction companies working on government projects”
As the government of Prime bourgeois world oil slows defrayal to reduce a deficit of about $ 100 billion, the construction is proving to be the hardest sectors hit as a result of businesses rely heavily on issues government for income. “The pace of implementation in some existing projects has slowed, so that a project would take six months to complete can now see a timeline of prolonged execution,” said Murad Ansari, an analyst at EFG-Hermes in Saudi Arabia.
“Moreover, government payments have declined. As a result, contractors who normally depend on short-term financing for projects are feeling an impact on their working capital, so your ability to repay the debt is not as strong as it once was. “
The construction represents less than seven point’s% of gross domestic product of Arabia. But in the months returning the sector’s difficulties could have a broader impact as a supplier of surface and blow as banks loaning the company to make additional provisions for possible dangerous loans.
Delayed payments to employees, usually through bureaucratic and inefficient rather than monetary difficulties forms, are a feature of commercial development in Saudi Arabia and therefore the Gulf for years. However, the issue has worsened greatly in the last two months due to the government’s measures of self-discipline, above business executives, speaking on condition of namelessness due to peculiarities of the industry. “Many contractors are awaiting payment by the government. It is a problem of the whole industry,” said an executive of another construction company operating in the kingdom. During the last downturn in the economy of Saudi Arabia in 2009, also triggered by a fall in oil prices, the government raised prepayments builders to support its cash flow and ensure that projects continued without interruption, Ansari said. That is not happening now. The Ministry of Finance has cut advances to companies that perform construction work state to 5 percent of the contract value of 20 percent, the newspaper al-Hayat reported. “The money is not being paid at the top level,” said a banker in the industry. “This has been going on since October and is difficult to know how long it will last.”