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Billions Of Dollars Of Unfinished Projects To Be Shelved, Reformed By Saudi Arabia: Reuters


04/17/2017


Billions Of Dollars Of Unfinished Projects To Be Shelved, Reformed By Saudi Arabia: Reuters
With a view to shelving or restructuring them, review billions of dollars' worth of unfinished infrastructure and economic development projects has been ordered by Saudi Arabia's government to its ministries and agencies, reported Reuters citing government sources.
 
Reuters reported quoting the sources that a list of projects that are under 25 percent complete is being compiled by Riyadh's Bureau of Capital and Operational Spending Rationalization, set up last year to make the government more efficient.
 
It has been increasingly difficult for Riyadh to find the money needed to complete their construction ever since the prices of oil started to slide in mid-2014 as almost all of these mega projects are relics of a decade-long boom of high oil prices and lavish state spending. That period of oil boon has now ended and Saudi Arabia has turned to other methods and ways to generate revenues in the wake of very low oil prices.
 
Officials will decide whether to suspend them indefinitely or try to improve how they are conducted after they conduct a study on the feasibility of the projects in light of the government's reform drive, which aims to diversify the economy beyond oil exports.
 
"Some projects could be retendered so they can be executed in partnership with the private sector, possibly through build-operate-transfer (BOT) contracts," said one source familiar with the plan, declining to be named as the matter is not yet public, reported Reuters.
 
Earning a profit before eventually transferring ownership to the government, private investors finance and build projects and operate them for a period of time under BOT contracts. In order to ease pressure on state finances, it is keen to begin bringing the private sector into projects, Riyadh has said.
 
"Other projects could be suspended if they do not meet the current economic objectives," the source said. Recommendations for some projects may be made within days, he added.
 
The government clamped down on infrastructure spending last year, seeking to close a huge budget deficit caused by low oil prices. the efficiency bureau had so far saved the kingdom 80 billion riyals ($21.33 billion), Finance Minister Mohammed al-Jadaan said in February this year.
 
The Saudi Arabia the government is looking for large additional savings this year and this is suggested by the plan to review unfinished projects. The cost of completing all capital spending projects currently underway at about 1.4 trillion riyals, the government estimated in a report at the end of last year.
 
Because of fiscal pressures and changing government priorities, risk of being canceled in Saudi Arabia this year are at least $13.3 billion of government projects, consultants Faithful+Gould estimated in a January report.
 
The report said that while less essential "vanity projects" such as sports infrastructure, some transport systems and perhaps nuclear energy could be cut back, the government is likely to prioritize projects with strong social welfare and business justifications such as power and water generation.
 
(Source:www.reuters.com)