Construction Sector in Saudi Arabia: Economic Cities worth US$ 69 Billion

Interview with Dr. Ahmed Sindi, General Manager of SATCO

Saudi Arabia is engaged in a strategy to build new economic cities with an estimated value of $69 billion. These should be the pillars of economic development for the kingdom. From the perspective of the private sector, how do you intend to participate in these opportunities?

The Saudi Arabian economy has taken significant strides. The government has invested a lot of money in building a huge amount of infrastructure, such as airports, cities, and the like. Our company, SATCO, being a classified contracting company with a first classification, stands to benefit significantly from the extensive opportunities in construction in particular and also in other divisions of our work. For example, we do operation and maintenance facilities management. When these cities are built, the cities must be operated and maintained and will require significant facilities. This is also something that SATCO has been doing for the past 30 years with excellence, such as what we have done with our clients in the Royal Commission in Jubail and our client in Ma’aden. SATCO possesses significant capabilities and we stand to benefit from these opportunities that are offered by the vibrant Saudi economy.

The kingdom has an acute shortage of housing and the waiting list can be up to 19 years. The population density per household is 6.4% in India; it’s 5.5% in Saudi. So there is an acute need for housing. What in your opinion should be done to address this issue?

I think the government is doing the right thing in sponsoring and paying for significant housing projects. One of the government’s initiatives that SATCO is participating in is that SATCO has won a significant contract by the Ministry of Housing to build 778 villas in the northern region of Taima. It is a large project worth over 400 million Saudi riyals. SATCO so far has been one of the star contractors in terms of performance and delivery for such projects.

I think that King Abdullah’s initiative to provide in excess of 500,000 new villas and domiciles for Saudi citizens is a very laudable objective and I think the Ministry of Housing has taken significant concrete steps to deliver on that.

The Ministry of Housing, in our estimation, will continue such projects. I think that King Abdullah’s initiative to provide in excess of 500,000 new villas and domiciles for Saudi citizens is a very laudable objective and I think the Ministry of Housing has taken significant concrete steps to deliver on that. We know that it’s not without challenges and we know that it’s going to take some time but we here at SATCO participated in such projects. We also think we are going to win additional projects of this nature and these types of projects show the capabilities of companies like SATCO in delivering such projects on time and on budget.

That was a partial answer to the third question related to your residential projects. You mentioned one of them already.

As for the residential projects like the one done by Ma’aden when they built a significant complex in Ras al Khair for its employees, SATCO stepped in and we won a competitive bid to provide total life support including transportation, facilities, management, fixing the grounds, landscaping, and a multitude of other life support functions. We have been doing that very successfully. This is an example of how after completion of housing projects such as with Ma’aden, the government and other projects, they go into the second phase of operation which is maintenance.

A company like SATCO that has in excess of 3,000 employees both skilled and lesser skilled stands a great chance of delivering services on a different level – on a level that is acceptable by clients like the Royal Commission. They have consultants like Bechtel that manage according to world-class standards and SATCO has actually proven on the ground that we can deliver the performance required by the highest standards. These are all opportunities that we think will continue to exist for the foreseeable future in the growing and burgeoning Saudi market. I think a company that is young and vibrant like SATCO stands to gain and further its expansion with such projects in this economy.

Concerning the airport industry, you are a contractor but you are also active in airport maintenance?

SATCO is very active in airport systems. For more than 25 years, we had a contract to operate the luggage carousels in King Khalid Airport. We have extended our skills and we have risen to new challenges by providing GACA, which is the general agency for airports and civil aviation, with a new model of how we can work with them. SATCO has invested in new passenger boarding bridges; we have implemented many of them and have brought in and operated new technology and are transferring these significant assets. So we have provided that government agency with a new model of how the private sector works with the government in private-public partnership in such a way that we were able to improve on the service and deliver performance on the ground in new ways and new structures that maybe were not customary. This is something that SATCO provided in terms of technology, manpower and skills and maybe above all, in terms of the innovative business solution that we were able to provide.

The airport industry is expanding rapidly. There is a new terminal being built in Riyadh. Overall, there is massive growth in infrastructure. What are the implications of this development for SATCO and its future?

Those big infrastructure projects that are catering to a growing economy suggest that demand on air travel and traveling between various parts of Saudi Arabia is going to grow. The government recognized that and has put aside many billions of dollars to improve its international airports and its local airports. SATCO for example is operating the Hajj Terminal in Jeddah along with providing service for a leading Saudi company for the operation of passenger boarding bridges in the Hajj Terminal in Jeddah. We’ve done a larger project in King Khalid Airport.

We are also eyeing other airports to provide similar and enhanced services. Again, that growth is translated into new challenges and new business models being offered and SATCO has re-adapted its skills, core skills, strength in managing and sourcing, technology, and training its own employees to erect those bridges. We know how to handle technology, we know how to maintain it, we know how to operate it, we know how to install it, and we know how to replace it at the end. This doesn’t only apply to passenger bridges but it applies to similar systems that we are targeting.

We have done these services on the ground both in the Hajj Terminal at Jeddah Airport and in King Khalid Airport and we expect to grow this division substantially in the coming years.

What are the challenges and the outlook for Saudi Arabia, particularly in the sectors that you are involved in?

For the short and medium-term growth, we expect the stellar growth to continue. We expect the Saudi economy to continue its stability; we are banking on that. This means more growth for SATCO. It means that we are also going to be very innovative. We will rely on our traditional strength but also we will be venturing into new services that will be resilient when the economy is not in its hyperactive mode. This is where companies that invest in their own skills and know-how and that grow if you will in a very stable way with very stable financial structures and very stable management methodologies will be successful. We’ve been here for more than 35 years and we expect to be here for the long-term serving the Saudi economy.

Is there anything you would like to add?

Usually economies grow in cycles and we are on the up cycle. It is those companies that grow from within and maintain that healthy growth that I think will be resilient when the economy goes into typically a different cycle. We are not only benefitting and poised to use this massive opportunity but also we do it in such a way that we will be in a defensible position when the economy is not in the growth trend. This means that with the leadership of our Chairman and his vision, we have diversified our business line between construction, catering, facilities management, operation and maintenance, airport systems, and other lines of business that we already signed significant international partnerships on. We are putting such structures on the ground and diversifying in such a way really helps the company whether there are good economic times or not-so-good economic times.

With such vision and such diversification, it means the company is poised to take these significant opportunities with strength and also is prepared to stay here for the long-term and remain profitable even when the economic cycle is not as strong as it is right now.