A prominent construction firm, Saudi Oger suffered a financial crisis due to overreliance on government contracts and insufficient diversification. The economic downturn and delayed government payments exacerbated cash flow issues, culminating in the company’s collapse and leaving thousands of employees unpaid.
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Saudi Oger, once a prominent construction company in Saudi Arabia, exemplifies a case of strategic management failure that led to its eventual downfall. Founded in 1978 by Rafik Hariri, the company experienced both rapid growth and severe challenges throughout its history.
Rise to Prominence
Saudi Oger quickly became one of the leading construction firms in Saudi Arabia:
- Incorporated in January 1978 with an initial capital of SR 1 million, later increased to SR 750 million.
- Expanded into various sectors including construction, facilities management, real estate development, printing, telecommunication, and IT services.
- Employed thousands of skilled staff and professionals across multiple divisions.
Strategic Expansion and Diversification
The company pursued an aggressive growth strategy:
- Established Oger Telecommunications, providing services in multiple countries.
- In 2008, Saudi Telecom Company acquired a 35% stake in Oger Telecom for $2.56 billion.
- Developed a strong presence in government projects and infrastructure development.
Financial Mismanagement and Decline
Saudi Oger’s downfall was marked by several critical issues:
- Alleged mismanagement and corruption, exacerbated by falling oil prices.
- Failed to pay monthly salaries to employees starting from November 2015.
- Accumulated massive debts, with reports suggesting a need for huge debt restructuring.
Labor Crisis and International Impact
The company’s financial troubles led to a severe labor crisis:
- Approximately 9,000 Filipino workers were left unpaid for 8-9 months
- French government intervened on behalf of 200 distressed French employees
- Workers faced expired residence permits, inability to leave the country, and dire living conditionsClosure and Aftermath
Saudi Oger’s operations came to an end:
- The company officially closed down on July 31, 2017
- Its closure marked the end of a 40-year presence in the Saudi construction industry
- The company’s downfall had significant implications for the Saudi construction sector and international labor relations.
The case of Saudi Oger highlights the risks of rapid expansion without adequate financial controls, the impact of external economic factors like oil prices on the construction industry, and the severe consequences of mismanagement on both the company and its workforce.
