Saudi Arabia has launched Infra-guaranteed financing and surety bonds to assist contractors within the construction industry, as confirmed by Leyla Abdimomunova, head of Real Estate and Construction at the Public Investment Fund’s (PIF) National Development Division.

During an interview with Arab News at the third Private Sector Forum in Riyadh, Abdimomunova highlighted the government's initiative to bolster contractor capabilities through various upskilling initiatives and pre-qualification programs.

This initiative is a vital component of Saudi Arabia's broader economic diversification strategy, where infrastructure development is deemed essential.

Market analysis from Mordor Intelligence indicates that the Kingdom’s construction market is anticipated to grow to $74.11 billion by 2025, with a compound annual growth rate of 5.37%, eventually reaching $96.26 billion by 2030.

Abdimomunova noted that contractors frequently struggle with access to financing and resources necessary for project mobilization, material procurement, and workforce payments.

Traditional banks are often hesitant to finance construction projects due to the inherent risks involved, particularly for smaller contractors.

To mitigate these financial challenges, the National Infrastructure Fund has developed products specifically targeted at contractors.

The Infra-guaranteed financing allows the Fund to guarantee up to 50% of bank loans extended to contractors.

The inaugural package was signed in collaboration with Arab National Bank and Saudi Pan Kingdom Co., marking a significant step in contractor financing.

The surety bond represents another groundbreaking initiative in the Gulf Cooperation Council (GCC), functioning as an alternative to traditional bank performance bonds.

Abdimomunova specified that the first surety bond in the GCC was signed between Walaa Insurance Co. and System Security Solutions Co. for a project with Red Sea Global.

This bond essentially provides contractors with an insurance guarantee to present to clients, ensuring financial protection against potential project issues.

The Real Estate and Construction Department is focused on developing financing products like surety bonds through partnerships with financial institutions and contractors.

Abdimomunova underscored the importance of localizing building materials as the Kingdom embarks on extensive infrastructure projects, aiming for at least 50% of the supply gap to be filled through domestic production.

The National Development Division is currently engaged in collaborations with 270 companies, comprising both local and international firms, to enhance the production of building materials in Saudi Arabia.

According to Abdimomunova, five new factories commenced operations last year, with projections indicating that an additional 20 factories will open over the next two years.

The department also provides assistance to companies in identifying investment opportunities, conducting feasibility studies, and fostering connections with relevant ministries and financial institutions.

Furthermore, efforts to strengthen medium-sized contractors are underway, including a Contractor Prequalification Program in conjunction with the Saudi Contractors Authority.

The platform facilitates registration and pre-qualification of contractors for opportunities with development companies, with approximately 3,000 contractors currently registered and over 300 pre-qualified.

Additionally, contractor upskilling bootcamps are available to enhance the skills of contractors, ensuring they remain competitive in bidding for projects.