Creating a robust construction market in Saudi Arabia

Saudi Arabia’s construction industry is undergoing rapid transformation – powered by large-scale projects, strategic reforms and a drive for a long-term resilience. But the industry needs to step up to meet the demands for materials and labour if it’s to meet the pace and scale required.

With GDP growth anticipated to increase from 1.5 percent in 2024 to 4.6 percent in 2025, the Kingdom of Saudi Arabia remains on a strong trajectory of economic expansion. This is driven by ongoing reforms and diversification initiatives that aim to foster sustainable growth and economic transformation. 

The ambition for the Middle East country is clear: the Kingdom aspires to be a top 15 global economy by 2030 and leave a prosperous legacy for future generations. As part of the diversification of its economy, the construction industry plays a significant role in Saudi Arabia’s push to meet Vision 2030. 

“This has caused a boom in the industry. Many giga and mega-projects are being developed, such as NEOM, Red Sea, ROSHN and Qiddiya. Numerous international sporting events are also coming soon.”

However, the industry is facing the challenge of meeting the demand for materials and labour, as the pipeline solidifies and projects move from design to construction phase.

To address these pressures, the industry is adopting several initiatives, including adoption of modern methods of construction (MMC) upskilling the local workforce, improving infrastructure and fostering strategic partnerships. These measures aim to enhance productivity, strengthen supply chains and create a more resilient  labour market.

This insight explores these strategies and initiatives in depth, examining how they can help secure a sustainable construction market and workforce for the future.

Driving sustainability and efficiency with MMC 

Saudi Arabia has been promoting the use of MMC, but the industry has been slow to adopt this.   

The Modern Construction Initiative programme was launched by the Ministry of Municipal and Rural Affairs to facilitate the industry’s transition from traditional construction to modern construction. The programme aims to support investment in advanced building technologies made and developed within the Kingdom. It focuses on utilising local resources as much as possible. 

“One of the key benefits of using MMC is that it reduces the impact on the environment. It supports a circular economy by reducing material waste.”

The raw materials used in MMC are mostly the same as materials used in traditional construction. However, the manufacturing process allows for an increased focus on sustainability as waste is easier to manage in a factory-controlled setting. 

Studies suggest that around 90 percent  less waste is created when using a precise manufacturing process as quantities can be calculated exactly. In addition, there’s an increase in the use of recycled material. Any surplus makes its way back into the supply chain or is stored in optimal conditions for use later down the line.

MMC also improves project delivery times and cost efficiency through standardisation and reduced reliance on on-site labour. This streamlined approach not only accelerates construction but also strengthens the industry’s resilience to supply chain disruptions and workforce shortages. 

Upskilling local talent 

Upskilling the local talent pool is vital to help unlock the resources needed to deliver at scale. One of Saudi Arabia’s Government’s aims is to reduce unemployment among Saudi nationals and provide opportunities across the private sector, including the construction industry. 

“For instance, in 2024, the Ministry of Human Resources and Social Development announced updates to the Nitaqat programme, which is part of the Saudisation initiative aimed at increasing employment opportunities for Saudis.”

Private companies are also stepping up by investing in training programmes aimed at equipping Saudi nationals with the necessary skills for engineering roles. With a 25% Saudisation target for engineering professions, this move is helping to meet growing demand for skilled professionals while reducing the industry’s reliance on expatriates. 

This focus on upskilling strengthens the construction industry and ensures a highly capable workforce that benefits both industry players and the Kingdom’s long-term development.

Supply chain efficiency: infrastructure investments and governance reforms

Saudi Arabia is undergoing a significant transformation in its logistics and transport sectors. This is driven by substantial infrastructure investments and comprehensive governance reforms. 

“The Kingdom has committed nearly US$1tn to infrastructure development by 2030, enhancing road, aviation, maritime and rail network to improve connectivity and facilitate dynamic trade routes.”

Governance reforms are equally impactful. The Saudi Zakat, Tax and Customs Authority (ZATCA) has introduced faster customs processes, including mandatory SABER registration for all imports from 2025 and reduced import service fees starting October 2024.

These reforms are part of the broader National Industrial Development and Logistics Program (NIDLP). They’re creating a more agile and business-friendly logistics environment. For the industry, this means faster access to materials and fewer delays – provided companies are ready to adapt to new systems and regulations. 

Strategic partnerships for construction growth

Across the Middle East region, partnerships with foreign construction companies and local contractors can play a key part in ensuring the supply chain supports the development of ambitious projects. This trend is continuing with international contractors being targeted by giga-projects. 

An example of this is in April 2024, the Discover NEOM China showcase was held in Beijing and Shanghai. A construction-focused forum was included as part of the event which explored the vast number of opportunities available for Chinese construction companies. 

“During the showcase, former CEO of NEOM, Nadhmi Al-Nasr, spoke about how NEOM has already engaged major Chinese companies and how the continued collaboration with China will play a pivotal role in the development of NEOM.”

The Saudi government is also investing and partnering with local contractors to enable the sector to scale up capacity and stimulate growth to benefit current and future projects in the country. 

In 2023, the Public Investment Fund announced US$1.3bn investments in four leading construction companies, including Nesma & Partners Contracting Company, ELSeif Engineering Contracting Company, AlBawani Holding Company and Almabani General Contractors Company. The transaction is part of PIF’s strategy to support and enable key strategic  goals in the Kingdom. 

A model for success

The Kingdom’s ambition is immense, but the road ahead is not without obstacles. However, with strategic initiatives and continued investment, including that from international stakeholders, Saudi Arabia is well positioned to navigate these challenges. 

“By prioritising sustainability, efficiency and long-term growth, the country is building a resilient construction sector that will not only meet its Vision 2030’s goals but also lay the foundation for lasting prosperity.”

Saudi Arabia’s efforts to develop a sustainable and scalable construction market present both opportunities and responsibilities for industry stakeholders. Developers, contractors and investors can align with national priorities by engaging in local partnerships, adopting MMC and investing in workforce development.

In doing so, it can help meet the demand needed while enhancing competitiveness in a market which is defined by rapid transformation, innovation and scale.