Middle East and North Africa

The Binladen Group's Turmoil—A Mirror of Saudi Arabia's?

By Bruce Riedel
Friday, May 6, 2016, 10:31 AM

The Middle East's largest construction firm, the Saudi Binladen Group, is in trouble. With the Saudi economy depressed due to low oil prices, the Binladen Group islaying off tens of thousands of workers. The company is also the scapegoat for a construction accident last year in Mecca.

Mohammad bin Laden, a Yemeni immigrant from the Hadramaut province, founded the company in 1931. It built much of the infrastructure of the Kingdom over the next eight decades—including highways, airports, and royal palaces. It also expanded the holy mosques in Mecca and Medina several times, enormous projects that made the company an important ally not only of the royal family but also the clerical establishment. King Hussein of Jordan also hired the Bin Laden's to restore and refurbish the Dome of the Rock in Jerusalem when it was in Jordan's territory. Osama bin Laden worked in the company before the family disowned him for his anti-Saudi politics.

The group's biggest project today is the Jiddah Tower. The tower is planned to be the centerpiece of a new urban area outside Jiddah, the Kingdom's main port on the Red Sea. The tower will be the tallest building in the world at one kilometer high. It will have a 7,500 square-foot sky terrace. Construction is underway and the skyscraper is due to be finished in 2020.

But there are not enough new projects to keep the Binladen Group busy. This month it has reportedly laid off as many as 77,000 foreign employees out of the 200,000 in its workforce. Many have not been paid in months and have refused to go home without their back pay. Some vandalized company property in protest. Another 12,000 Saudi employees out of 17,000 are being let go. Many are engineers and skilled professionals. The Binladen Group is saying very little in public about its problems, but the company's debt has been estimated at $30 billion.

Last September 11th, one of the company's construction cranes in the Great Mosque in Mecca crashed during a storm, killing 111 people. The crash embarrassed the king, since he is the Custodian of the Two Holy Mosques in Mecca and Medina and responsible for ensuring they are safe. A stampede during the annual Hajj that killed many more only added to the embarrassment. The government placed travel restrictions on the Binladen Group's executives and banned it from new contracts for an unspecified time period. Despite years of close ties to the House of Saud, the bin Laden's are in trouble with King Salman for the crane incident. It's unclear whether the king will rehabilitate the company.

King Salman and his ambitious favorite son Deputy Crown Prince Mohammad bin Salman recognize the kingdom's economy is in trouble. The welfare state it created during the oil boom years is not sustainable with low oil prices. They have announced creative and ambitious plans to reduce the country's dependence on oil, but they have yet to provide many details. The turmoil in the Binladen Group reflects the larger turmoil in a Kingdom facing unprecedented challenges. The bin Laden's are probably too big to fail, but they bear watching as a harbinger for the Kingdom's own future.