Saudi Arabia’s Economic Overhaul Claims a Victim

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At a Riyadh office of construction giant Saudi Oger Ltd., dust covers the desks, cigarette butts and empty water bottles litter the floor, and the mailbox is stuffed with crumpled envelopes. The parking lot of another Oger facility a mile away is barricaded and filled with trash. And at headquarters, a few blocks farther west, a lone administrator is left to handle the concerns of angry workers.

One of Saudi Oger’s projects

Oger has long been one of Saudi Arabia’s top-two builders, a behemoth behind projects such as the 492-room Ritz-Carlton hotel in Riyadh, the sprawling campus of King Abdullah University of Science and Technology on the Red Sea coast, and a quartet of power plants that supply oil giant Saudi Aramco. But in July, Oger shut down after years of mismanagement and the departure of top executives, leaving behind thousands of unpaid workers—typically immigrants whose residency permits are tied to their jobs—and at least $3.5 billion of debt, according to people familiar with the matter.

Oger’s fall highlights a dramatic reordering of the business climate under Crown Prince Mohammed bin Salman, a 32-year-old who leapfrogged more senior royals to become heir apparent. For decades the economy had been dominated by a small number of favored companies that get state contracts for everything from mosques to government ministries to high-speed rail lines. As Prince Mohammed seeks to wean Saudi Arabia off oil revenue and cut the government deficit, those companies are struggling to stay afloat. “There’s an element of the government allowing this to happen as a demonstration of what the current environment requires,” says Crispin Hawes, a managing director at Teneo Intelligence, a political risk consulting firm in London. “That’s a very public recognition of a change in sentiment.”

Source Credit: Bloomberg
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