Cities In The Sand: How Collapse In Oil Price Can Boost Turkey’s Construction Companies

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Cities In The Sand: How Collapse In Oil Price Can Boost Turkey’s Construction Companies

In a move to diversify away from crude, create jobs and boost investment in post-oil era, Saudi Arabia embarked on an ambitious project to build a series of economic cities, special zones in logistics, tourism, industry and finance, an entertainment city and a $10 billion financial district. Unless it is overshadowed by Turkey’s position in the Gulf Rift lead by Saudis against Qatar, SAUDI VISION 2030 can salvage Turkey’s shrinking international contracting share.


Saudi Arabia has been an eminent figure in shaping and moulding the Middle Eastern region into one of the world’s most important energy hub. Geographically, economically, and culturally, the Kingdom is the heart of the Arab and Islamic worlds. Oil is an integral facet of the nation’s history, with oil-based revenues accounting for an overwhelmingly significant portion of Saudi Arabia’s economy.

Today, Saudi Arabian oil exports constitute 25% of the proven world reserves. The nation’s wealth and economic strength has developed enormously as it took full advantage of the insatiable demand for fossil fuels, and quickly grew into a global powerhouse. The country’s construction sector contributed around 8% of Saudi Arabia’s total gross domestic product (GDP), making it the largest construction market in the Middle East. Around 67% of construction investment is direct from the government with large-scale projects in the sector for the coming years set to reach $800bn, according to recent reports.

Saudi Arabia had, through the careful and cunning exploitation of domestic resources, shifted from an inconspicuous society to a dominant country whose immense wealth and a seemingly ceaseless supply of oil was the envy of the world. However, the collapse of the global oil price since the summer of 2014 slowly impacted the Kingdom’s public finances –given that it depends on oil sales for 90% of state revenues. The Kingdom’s budget deficit for 2015 swelled to 15% of its GDP.


In the foreword of 86-page blue print announced in April 2017, it says “All success stories start with a vision, and successful visions are based on strong pillars”.

The first pillar described in the document is Saudi Arabia’s status as the heart of the Arab and Islamic worlds which defined as a “gift more precious than oil”.

The second pillar of the vision is our Saudi Arabia’s determination to become a “global investment powerhouse”.

The third pillar is described as transforming Saudi Arabia’s unique strategic location into a global hub connecting three continents, Asia, Europe and Africa, praising the Kingdom’s geographic position between key global waterways as an epicenter of trade and the gateway to the world.


As OPEC’s most significant member and one of the largest crude oil producers in the world, Saudi Arabia typically exerts considerable power over global energy market trends. Yet for the last year, the oil giant has been largely reacting to events outside of its control: surging U.S. shale production, uncertain demand and a persistent supply glut that has kept prices at or below $50 a barrel.

In 2016, the Saudi economy expanded by 1.4 percent, slowing notably from 4.1 percent in 2015. This represents the slowest growth rate since 2002, when overall GDP expanded by 0.1 percent. A smaller increase in oil production, by 2.4 percent, meant a slower oil sector growth at 3.4 percent. Meanwhile, annual growth in the non-oil private sector was nearly flat at 0.1 percent. Based on our outlook for the current year, we forecast overall economic growth to slow further to 0.2 percent in 2017, owing to negative growth in the oil sector, while non-oil sector growth should accelerate but remain weak.

Seeing what’s coming, the ambitious Saudi Crown Prince promises in Saudi Vision 2030 that they are determined to reinforce and diversify the capabilities of Saudi economy, turning their key strengths into enabling tools for a fully diversified future.


Turkey has embraced the year 2016 with an ambitious outreach; the prospect for a strategic partnership with the Saudis. In his two-day visit to Riyadh in December 2015, President of Turkey, Recep Tayyip Erdogan met King Salman of Saudi Arabia, as well as other prominent figures of political and economic scene.

This was the third and the last visit by Turkish President to the Arabian Peninsula in 2015, yet the most fruitful one. Two countries decided during that visit to indulge in a “Strategic Partnership” which will be nursed by a ‘High Level Strategic Cooperation Council’ with economic, energy, foreign policy and defense aspects.

Economic and commercial cooperation with Saudi Arabia constitute a major pillar of Turkey’s relations with the latter. By the end of 2016, the trade volume between Turkey and Saudi Arabia has reached 5 Billion USD. Saudi Arabia also has an important place in Turkey’s construction sector.

The construction projects Turkish constructors have undertaken in Saudi Arabia since 1972 amount to 17 Billion USD. Saudi Arabian firms also have various investments in textile, food, banking, foreign trade, real estate and tourism sectors in Turkey. 

Data reveals that Turkey, in the last version of the Gulf Rift, is literally “caught in the middle”. Another fact we need to deduct from this conundrum is that Turkey’s taking side with Qatar is absolutely political, rather than trade or economic reasons.

If managed well, the mega projects in SAUDI VISION 2030 could very well boost Turkish international contracting, already in a stalemate.

But, when politic reasoning overrides economic rationale in bi-lateral relations, companies should take a step back and start reviewing their current and future plans.


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