黑洞社区

When you clear the long queues at Riyadh airport鈥檚 immigration desk you feel a palpable sense of relief. Getting into Saudi Arabia is a convoluted business: you need a company or a relative in the country to sponsor your visa, only one airline, BMI, flies there direct and there鈥檚 even a special booth at Heathrow where your paperwork is examined before you even get to the check-in queue. Now that you鈥檝e got through all that, that sense of relief soon gives way to a mix of excitement and trepidation as you step through the sliding exit doors into the country.

The trepidation is the result of all the negative stuff everyone is familiar with.

When most people think of Saudi Arabia, they think of public beheadings, flogging and amputations. These things tend to happen only if you do something wrong (a term that includes a range of behaviour that is fairly normal in the UK), but ordinary life there doesn鈥檛 sound like a bundle of laughs, either: drinking is illegal, women cannot appear in public unless they are covered from head to toe in black robes or even drive a car, and westerners have to live in walled compounds protected by armed guards.

The excitement is that, as one booming economy after another crumbles into dust, this is a land of opportunity. So, is it time for companies to revisit this overlooked market to see if the potential rewards outweigh that initial apprehension?

Is it worth it?

The first good news is the Kingdom is not as bad as it sounds 鈥� although it is very much a man鈥檚 world. Riyadh, the capital, is more conservative than other parts of the country, such as Jeddah, and is an undistinguished city, but it is not unpleasant. The dry heat means you can walk around comfortably and, unlike the UAE, the streets are lined with shops. which makes it feel less anonymous. Expats are fairly positive about living there, although some say it鈥檚 boring (see below).

The even better news is that the Saudis have big plans 鈥� and the cash to see them through. Paul Williams, the director of trade and investment at the British embassy, says the government has $400bn in the bank waiting to be spent on construction projects over the next five years, and about $1 trillion worth of projects in the pipeline. And this money is not going to be squandered on speculative development. Unlike the UAE and Qatar, which rely on huge expat populations to create a market, Saudi Arabia is building for its own population. There are 27 million people living there, out of which 21 million are Saudi nationals, and the population is projected to double in the next 30 years.

To support this explosion, the government will need to create homes, universities, schools, and infrastructure. It plans to do this by building six 鈥渆conomic cities鈥� worth 拢69bn, complete with housing, education and employment opportunities. Four of these have already started on site, including the flagship, King Abdullah economic city near Jeddah, which will be the size of Washington DC. The plans also include 2,000 schools, eight universities and 28 power stations and desalination plants. Work has also started on a financial district in Riyadh.

Furthermore, the government plans to build new railway lines linking Jeddah with Riyadh, Mecca with Medina and a freight line for minerals from Riyadh to Hazm Al Jalamid. There are new roads in the pipeline, too, including one linking Damascus and Oman.

It鈥檚 very tribal here. If you are working with Saudis who belong to well-known tribes, they will get things done

Saad Al-Adhami, UKTI

All this work means great opportunities for companies from overseas. According to Phil Dalglish, the country director for Buro Happold in Saudi Arabia, the country could use UK expertise. 鈥淟ocal consultants often hand over designs that lack detail,鈥� he says. 鈥淪ometimes they aren鈥檛 even qualified to do the job 鈥� as a result, we do design audits and find, for instance, that buildings don鈥檛 have enough cooling.鈥� This problem is exacerbated as many contractors don鈥檛 have in-house design teams to work up the detailed drawings needed for construction.

Buro Happold is filling this gap by doing the detailed drawings for installations on the Riyadh women鈥檚 university for El Seif Engineering Contractors, which does not have sufficient in-house capacity. 鈥淚t鈥檚 bread-and-butter stuff at the bottom of the food chain,鈥� says Dalglish, 鈥渂ut it鈥檚 still a valuable exercise, as its all about maintaining relationships.鈥�

The reason why firms like El Seif are under pressure is because only it and three other contractors 鈥� Saudi Binladen Group, Saudi Oger and the Consolidated Contractors Company (CCC) 鈥� are qualified to work on government-funded projects. These firms bid for jobs and, once they win one, act as clients by designing and building it.

Recently, however, two French contractors, Suez Energy and Veolia Water, have prequalifying for government work and have won jobs to design and build water desalination plants.

Bear in mind, Saudi Arabia is not a get-rich-quick playground 鈥� clients know things are tough elsewhere and will work to negotiate the best possible price.

What it takes

According to Saad Al-Adhami, senior trade and investment officer for UK Trade & Investment, the Saudi Arabian general investment authority is 鈥渧ery keen鈥� to get companies to come to Saudi Arabia. This organisation manages investment in infrastructure, including education and the construction of the economic cities.

However, companies that are interested need to commit properly to the country 鈥� Al-Adhami says that simply having an office in Dubai will not do. 鈥淚t鈥檚 better to have a presence here, as it shows commitment to the country,鈥� he says. 鈥淪audis are very proud of their country and see it as a negative if it is being covered from Dubai 鈥� they see it as being treated as second best.鈥�

Although companies can now set up there even if they are 100% foreign-owned 鈥� a process that takes about six months 鈥� Al-Adhami advises that the best way in is to form a joint venture with a Saudi company. 鈥淚t鈥檚 best to partner with someone on a specific project,鈥� he says. 鈥淚t鈥檚 very tribal here. If you are working with Saudis who belong to well-known tribes, they will get things done.鈥�

I鈥檓 at an embassy do seven weekends out of 10. In terms of a social life, it鈥檚 not as liquid as other places, but it鈥檚 still good

Andy Isherwood, Rider Levett Bucknall

Al-Adhami specialises in matchmaking Saudi and foreign companies and says this usually works very well. 鈥淲henever we introduce a British company the Saudi partner is always very welcoming,鈥� he says. 鈥淲e seldom receive negative feedback. They are always ready to meet UK companies because of the amount of work they have.鈥�

They certainly seem busy. For instance, Derek Kemp, the executive director for operations for El Seif, is frantically fielding requests from colleagues and answering phones and can only spare a few minutes to chat to 黑洞社区. He says El Seif has bid to build the Riyadh women鈥檚 university with CCC, which will stretch his company to the limit. 鈥淚f we get anything else of that size we will seek someone else to form a joint venture,鈥� he says. He has been inundated by individuals seeking work, but wants to collaborate with an established company. 鈥淚f you recruit a whole team, there is a risk, as 25% of them could turn out to be no good,鈥� he says. 鈥淚f you bring in a fully set-up operation there are benefits, because it would take time for a team to bed down.鈥�

Forming a joint venture makes particular sense for contractors because of the effort involved in creating a presence in a country. 鈥淎 consultant can put a couple of guys in an office, go out knocking on doors and ship it back to another location if they get work,鈥� says Dalglish, 鈥渂ut a contractor can鈥檛 do that. It needs equipment, a substantial team, workers, visas and accommodation. It鈥檚 a big commitment.鈥�

It seems that many consultants are adopting the approach that Dalglish describes. Rider Levitt Bucknall has just set up an office (see below), Faithful + Gould and engineer WSP recently arrived and fellow engineers Halcrow and Hyder are taking on work. Buro Happold, meanwhile, is so well established that it is frequently asked to act as lead consultant on smaller schemes, which means appointing the architect.

Dalglish says he has been approached by several firms hopeful of getting work, including 3D Reid, and Skidmore, Owings & Merrill.

But as yet, no UK contractor has taken the plunge and set up in Saudi Arabia. There are reports of joint ventures, and Kemp says he has had 鈥渢aps on the shoulder鈥� from overseas contractors. Kier is involved in developing and operating a phosphate mine with Al-Qahtani and Commedat and Mace is moving staff to the country. There are rumours that Dubai contractor Arabtec is setting up wholesale in Saudi Arabia.

Some Saudi contractors have abandoned hopes of working with UK firms and turned to other countries instead. Saad Mahmod, director of contracts and development at the Absal Group, which works mainly on fit-out contracts and in steel fabrication, spent many years living in the UK and has great respect for British contractors. Yet even he grew sick of waiting. 鈥淎s most of the experience is in the UK, I naturally turned to UK contractors, but even though things were booming I had no positive response,鈥� he says. Instead, he is working with a Malaysian and a Turkish contractor to assist the company鈥檚 move to mainstream contracting.

But now, it seems, UK firms are crawling back. 鈥淢y email is full now with messages from those companies in the UK that I talked to two years ago,鈥� he sighs. 鈥淭hey don鈥檛 have a clue what鈥檚 going on here. It鈥檚 only an hour-and-a-half away from Dubai, but it might as well be 16 hours. It鈥檚 not too late now but it could be in six months.鈥�