The decision to initiate a wide-ranging school construction programme highlights the growing Saudi emphasis on delivering the social infrastructure assets, according to recent report by BMI Research
In line with a stated commitment to growing the Kingdom's knowledgebased industries, the Saudi government has announced plans to build and operate a total of 1,600 schools across the country in partnership with private sector lrms. The phase of the initiative involves building 60 schools in Mecca and Jeddah. The lrst phase will deliver a mix of kindergarten and primary, intermediate, and secondary schools for boys and girls.
Saudi King Salman bin Abdulaziz Al Saud, the Council of Economic Affairs and Development and the Ministry of Finance, have approved the project. According to the recent report by BMI Research, in this vein, there is a scope for the ongoing prioritisation of social infrastructure to drive an increase in the share of social infrastructure projects in the country's overall project pipeline in the years to come, which, according to its Key Projects Database, account for a mere 7.5% of the total.
Furthermore, in a country where over 80% of education infrastructure is funded by the state, the decision to tender the initiative on a Public Private Partnership (PPP) basis underscores Saudi government's desire to attract private capital and expertise into the sector - particularly to lessen the lnancial burden on the state.
Having said that, the report maintains the view that the PPP initiative will fall short of government expectations in meeting its ambitious targets in the education sphere, as its effectiveness constrained by the Kingdom's lack of an overarching and consistent legal framework governing the various stages of implementing PPP projects.
Moreover, the government has yet to establish a designated PPP agency as with other markets mentioned above, which further clouds the contract approval process and drives additional regulatory uncertainty in the marketplace. The Saudi education push will occur in the wider context of the Kingdom's economic diversilcation agenda as embodied by the country's '6ision 20 0' agenda, which aims to diversify Saudi Arabia's economic base away from oil and into knowledge-based industries like technology and tourism.
As such, in addition to the aforementioned plan to construct 1600 schools, there has been an uptick in project announcements aiming to move the Saudi economy up the intellectual value chain. Most prominent among these is NEOM, a planned $500bn independent special business and industrial zone. The 26,500sqkm special zone will be in the North West of the country and will extend across the Egyptian and Jordanian borders. The zone will focus on various including energy and water, food, biotechnology, advanced manufacturing, and entertainment. NEOM will be fully automated and will be completely powered by wind and solar energy.
The scheme will be supported by Saudi Arabia and the country's Public Investment Fund, and local as well as international investors. NEOM is viewed as emblematic of broader Saudi economic diversilcation efforts exceedingly ambitious, but unlikely to be realised in their desired form due to operational and regulatory hurdles that have plagued the delivery of similar Saudi mega-projects in the past.
More recently, and more representative of a realistic project, it was reported in February that Us-based Google is considering a partnership with Saudi Aramco to form a technology hub in Saudi Arabia, which would involve the construction of data centres and afford the opportunity for Saudi citizens to bolster their technological expertise.