Riyadh: US architecture and engineering companies are pursuing investment opportunities in Saudi Arabia even as the Arab world’s largest economy curbs spending on projects.
The cuts in spending is “a concern for us but not a fear,” Tim Tonyan, Chief Operating Officer of US-based engineering and consulting firm CTLGroup, said in an interview Tuesday in Riyadh. “If you’re going to do business here, you have to learn how to manage those concerns. To our management, the pluses outweigh the minuses.”
Saudi Arabia is ordering a series of cost-cutting measures as the slide in oil prices weighs on the kingdom’s finances. With oil accounting for about 80 per cent of revenue, a drop of more than 40 per cent in crude prices in the past 12 months, combined with wars in Yemen and Syria, has pressured the country’s finances.
The kingdom is also delaying payments to government contractors as the slump in oil prices pushes the country into a deficit for the first time since 2009, three people with knowledge of the matter said earlier this week. Officials have repeatedly said that the country’s economy is strong enough to weather the plunge in crude prices as it did in similar crises, when its finances were under more strain.
Economic growth will probably slow to 3 per cent in 2015, according to the median forecasts of 11 economist estimates compiled by Bloomberg.
Moving forward
Government spending cuts and payment delays haven’t deterred Ted Jacob Engineering Group from looking for opportunities in the kingdom, according to Ron Larsen, the company’s general manager for Saudi Arabia.
“The Saudi government spending cuts concern us along with the instability of the region,” Larsen said during a US trade mission to Saudi Arabia. “The royal family is moving forward with projects and even though there’s a slowdown, they’re not stopping things and that’s a positive and a good indicator for us to still move forward.”
Eleven US companies, including New York-based Alcoa Inc., participated in the trade mission this week.
