Buildings and infrastructure contribute over US$360bn to KSA economy, finds Arcadis report

Investment in buildings and infrastructure is playing a key role in supporting Saudi Arabia’s economic diversification agenda

Investment in buildings and infrastructure is playing a key role in supporting Saudi Arabia’s economic diversification agenda, according to the ‘2016 Global Built Asset Performance Index’ released today by Arcadis, the leading global Design & Consultancy for natural and built assets. 

The index, developed in conjunction with the Centre for Economics and Business Research (Cebr), examines the revenue that is generated by buildings, infrastructure and other fixed assets (homes, schools, roads, airports, power plants, malls, railways, ports) in 36 countries around the world that collectively represent 78% of global GDP. 

Built assets make a growing contribution to the KSA economy:

It is estimated that in 2016 built assets will deliver $364bn to the KSA economy. This represents a 47% increase over the last two years, and will see the total contribution from built assets account for 27% of the Kingdom’s total GDP in 2016. This growth in percentage is largely due to the impact of a lower oil price, which has seen the percentage of revenue that comes from exporting natural resources decrease, but also reflects the strong progress that KSA has made in recent years in diversifying into new industry sectors. 

• Fig 1 – Economic return generated from built assets in countries in MENA region 

Derek Sprackett, Head of Business Advisory, Arcadis Middle East said: “Built assets, including transport links, high quality residential and commercial property, and productive industrial centres all make a significant contribution to a country’s economic performance. In recent years, many countries across the Middle East have invested heavily and strategically in real estate and infrastructure as part of their national visions and efforts to diversify their economies. Our research shows this strategy is already paying financial dividends, as well as creating cities and communities where people want to live, work and visit.”

Income from built assets growing rapidly when measured on a per capita basis:

When assessed on a per-capita basis, the financial return that Saudi Arabia secures from its built assets is growing rapidly. In 2016, built assets will generate an average of US$11,332 for every person that lives in the country. This is a 41% increase compared with 2014 although the total figure is lower than other nations within the region. This is primarily because the population of Saudi Arabia is significantly larger than neighboring countries like Qatar or the UAE.

Country Income from built assets per capita (USD) % Change since 2014
UAE $37,861 14%
Qatar $66,316 5%
Saudi Arabia $11,332 41%
Iran $8,243 10%
Egypt $3,820 7%

• Fig 2 – Total economic return secured from built assets on a per-capita basis 

Economic return from built assets to increase significantly over the next decade:

The Arcadis research also examined how the economic return from built assets would evolve over the next decade. For Saudi Arabia the study showed that the revenue contribution that comes from built assets would increase by 15% in this period, reaching a total of US$419bn by 2026. 

Country Projected income from built assets in 2026 (USD) % Change since 2016

UAE $468bn 33%
Qatar $183bn 20%
Saudi Arabia $419bn 15%
Iran $951bn 44%
Egypt $579bn 62%

• Fig 3 – Projected economic return that built assets will generate by 2026 for MENA countries

“Vision 2030 has created a hugely impressive roadmap on how Saudi Arabia will develop over the next 15 years. The challenge now will come in implementing this strategy effectively in a slower economy. To complete the volume of projects being planned, the mechanics that support the delivery process also need to become more efficient. This includes the speed at which projects are procured, tenders assessed, and schemes ultimately started. Without sufficient focus on this, there’s a potential risk of supply constraints, particularly over the next five years when the Kingdom will be competing for talent and commodities with other major programmes being delivered across the region”, added Sprackett.

You can view the full findings from the 2016 Global Built Asset Performance Index here: www.arcadis.com/GBAPI2016.

-Ends-

Notes to Editor:

 1. The US$36.1 trillion figure is based on the collective built asset income of the following 36 countries: Australia; Belgium; Brazil; Canada; Chile; China; Denmark; Egypt; France; Germany; Ghana; Hong Kong; India; Indonesia; Italy; Iran; Japan; Malaysia; Mexico; Netherlands; Philippines; Poland; Qatar; Russia; Saudi Arabia; Singapore; South Africa; South Korea; Spain; Sweden; Switzerland; Thailand; Turkey; UAE; UK; and USA.

2. For this research, built asset performance is measured by two quantities: the total stock of assets, and the total return from assets. The ratio between them is the return on built assets in that economy. If the return, expressed as a share of GDP, is relatively high compared to the average, while the stock of assets is about average for an economy of that size, then built asset performance is above average.

3. To compare the relative value of assets appraised in different currencies, a Purchasing Power Parity (PPP) measure is used to account for the occasionally significant variation between price levels across countries and to correct for currency fluctuations.

4. Cebr calculated the total annual return that comes from built assets by deducting the revenue from labour wages, natural resources and intangible capital from a country’s total GDP. The equation used is as follows:

• Revenue from built assets = Total annual GDP – Revenue from labour wages – Revenue from exporting natural resources – Revenue from intangible capital (IT)

Arcadis is the leading global Design & Consultancy firm for natural and built assets. Applying our deep market sector insights and collective design, consultancy, engineering, project and management services we work in partnership with our clients to deliver exceptional and sustainable outcomes throughout the lifecycle of their natural and built assets. We are 27,000 people active in over 70 countries that generate €3.4 billion in revenues. We support UN-Habitat with knowledge and expertise to improve the quality of life in rapidly growing cities around the world. www.arcadis.com

About Cebr

Centre for Economics and Business Research (Cebr) is an independent consultancy with a reputation for sound business advice based on thorough and insightful research. Since 1992, Cebr has been at the forefront of business and public interest research. They provide analysis, forecasts and strategic advice to major multinational companies, financial institutions, government departments, agencies and trade bodies.  For more information visit www.cebr.com