<Fahd bin Mohammed Al-Hammadi, Chairman of the Contractors Committee at the Riyadh Chamber and Chairman of the National Committee for Contractors, predicted that the contracting sector in the Kingdom will incur losses estimated at 13% of the volume of projects by the end of 2014 as a result of bearing the burden of the high cost of implementing projects resulting from the cost of the Ministry of Labor decisions that raised the cost of labor in the sector to about 150%.Al Hammadi pointed out in a statement yesterday that the contracting sector also bore the cost of the increases that affected various industrial, commercial and service sectors of the economy as a result of the decisions of the Ministry of Labor, warning that this resulted in an increase in the percentage of stalled projects to about 40%, and an increase in the phenomenon of contractors withdrawing from the contracting market due to these losses.
He pointed out that as a result of the repercussions of this crisis, some banks, sensing the risks facing the sector, tended to reduce the volume of financing for the construction sector, which affected the level of completion of projects and the failure of some contractors or their withdrawal, and expected that the financial statements of about 80% of construction companies in the Kingdom as a result of these issues will witness losses by the end of this year.
Al Hammadi explained that the National Committee had previously predicted these issues and monitored the risks they pose to the contracting sector, which is one of the largest economic sectors, as its market size is expected to reach about 1.13 trillion riyals next year.
He pointed out that the committee put forward proposals and appropriate solutions to this crisis, foremost of which is the establishment of an independent reference body for contractors to encourage and support mergers between small and medium-sized contracting companies to face the intense competition in the market, and encourage the export of the national contracting industry abroad.
He added that the proposals also included calling for the establishment of a fund to finance the sector and fill the gap in bank financing, which contributes to the development of the contracting sector and enables contractors to fulfill their contractual obligations and implement the projects assigned to them on time and with high quality, as well as calling for relaxing the recruitment conditions for small contracting enterprises and reviewing them every three years, excluding unavailable Saudi labor from the Saudization rate, speeding up the decision on visas to recruit labor, adopting the financial and technical envelope method in submitting project proposals, and fragmenting government projects to enable small contractors to compete.
The National Committee submitted a study to the Supreme Council earlier this year containing its proposals to solve the obstacles facing the contracting sector, and those interested in the contracting industry attribute the increase in the cost of implementing projects by 13% to the decisions of the Ministry of Labor, which raised the Saudization rate in the sector from 5% to 8%, in addition to raising the salaries of Saudis, and contracting companies bear the amount of 2400 riyals annually on each foreign worker as a fee for the work license.
Al Hammadi said that contractors are looking forward to removing all obstacles that hinder their implementation of development projects so that they can implement them without delay or obstruction, keep pace with the state's directives and exercise their role as a strategic partner in the implementation of major projects.
He pointed out that the committee put forward proposals and appropriate solutions to this crisis, foremost of which is the establishment of an independent reference body for contractors to encourage and support mergers between small and medium-sized contracting companies to face the intense competition in the market, and encourage the export of the national contracting industry abroad.
He added that the proposals also included calling for the establishment of a fund to finance the sector and fill the gap in bank financing, which contributes to the development of the contracting sector and enables contractors to fulfill their contractual obligations and implement the projects assigned to them on time and with high quality, as well as calling for relaxing the recruitment conditions for small contracting enterprises and reviewing them every three years, excluding unavailable Saudi labor from the Saudization rate, speeding up the decision on visas to recruit labor, adopting the financial and technical envelope method in submitting project proposals, and fragmenting government projects to enable small contractors to compete.
The National Committee submitted a study to the Supreme Council earlier this year containing its proposals to solve the obstacles facing the contracting sector, and those interested in the contracting industry attribute the increase in the cost of implementing projects by 13% to the decisions of the Ministry of Labor, which raised the Saudization rate in the sector from 5% to 8%, in addition to raising the salaries of Saudis, and contracting companies bear the amount of 2400 riyals annually on each foreign worker as a fee for the work license.
Al Hammadi said that contractors are looking forward to removing all obstacles that hinder their implementation of development projects so that they can implement them without delay or obstruction, keep pace with the state's directives and exercise their role as a strategic partner in the implementation of major projects.
