Speeding towards future growth

Saudi Arabia is concentrating more on its non-oil exports and drawing
international attention to its economic cities.

 
King Abdullah Economic City is Saudi Arabia’s largest proposed economic city

Saudi Arabia’s economy is booming and along with any boom comes development plans for the future. Seeking integration with the world economy,
Saudi Arabia continues to increase its non-oil export options, while encouraging a more conducive environment to foreign investment.

With ambitions to provide jobs for 1.3 million people, and a living environment for 4.5 million people, Saudi’s projected economic cities are indeed drawing international attention, as well as investment.

According to Saudi Arabian Government Investment Authority (SAGIA),
the proposed economic cities are expected to add SR563 billion (US$150 billion) to Saudi Arabian GDP by 2020, while offering opportunities to investors on the
Kingdom’s comparative advantage: low-cost energy. The government will take on the role of regulator, facilitator, and promoter, with the private sector providing capital, developers and landowners.

Upon completion, it is envisioned that Saudi’s economic cities will have three times the population of Dubai, a GDP equivalent to that of Singapore, and an area four times the size of Hong Kong.

In total, six new economic cities are planned: Jizan Economic City, Ras al-Zour Resource City, Prince Abdulaziz bin Mosaed Economic City, Tabuk Economic City, Knowledge Economic City, and King Abdullah Economic City.

In addition to promoting Saudi Arabia as an industrial base, the new cities
will take on more abstract goals, such as promoting learning and understanding of technology with the Knowledge Economic City in Madinah, and the education zone at King Abdullah Economic City (KAEC).

Saudi Arabia’s largest proposed economic city, King Abdullah Economic City (KAEC) will play a crucial role in the country’s growth. KAEC will be centrally located between Makkah and Madinah, and the commercial hub of Jeddah. It spans 168 sq kilometers, approximately the size of Liechtenstein. KAEC consists of six components: the Seaport, the Industrial Zone, the Educational Zone, the Central Business District (including the Financial Island), the Residential Districts and the Resorts.

The KAEC Seaport is positioned to be one of the world’s major ports, it terms of expected traffic and capacity. With a capacity of 20 million TEU, 30 container berths, and an area of 14 million sq metres, it will be the largest port in the Red Sea.

Designed to serve global trade routes between East and West, the Sea Port will have fully automated loading and unloading operations, as well as the ability to handle Panamax- class vessels. The Sea Port will also have GPS and GIS systems for regulating inbound and outbound shipping traffic.

In addition to creating 15,000 direct and indirect jobs, the KAEC Sea Port will also be expected to contribute an average of SRO10 billion (US $2.67 billion) to Saudi’s annual GDP At 63 million sq metres, the Industrial Zone will encompass almost a third of KAEC’s total area. Promoting unprecedented incentives for industrial investors, such as facilities to operate custom-built plants and factories, as well as ready made multi purpose assembly and production lines, SAGIA expects immediate returns on private investment.

“The ultimate objective of the economic cities is the establishment of 10 global industries in which Saudi Arabia will be number one or two,” says Fahd Al Rasheed, the Deputy Governor for Special Economic Cities. “This is a very lofty task but we can do it because we are only going to select industries that are based on our two competitive advantages, energy and location. We are talking about things like petrochemicals, steel and aluminum processing and phosphates.”

The jobs created will be in industrial and light industries (330,000); research and development (150,000); business and office (200,000); services (115,000); hospitality (60,000) and education and community services (145,000).

One area ripe for investment in the Industrial Zone will be the processing of downstream petrochemicals, i.e. those derived from oil production operations. Other opportunities present themselves in the planned “Plastics Valley”, which will use raw materials readily available in Saudi Arabia to produce high-end plastics that are in high demand throughout the world such as those used in the automotive, biomedical, construction and food packaging industries.

The presence of a world class port nearby will allow KAEC’s Industrial Zone to become a hub for global investors in light industries. Because of Saudi Arabia’s location in the heart of the Middle East, raw materials sourced from one part of the world will be able to “meet-halfway” with know-how and expertise from around the world. KAEC’s industrial complex should yield limitless opportunities, whereby value-added goods and products will be assembled, manufactured, and packaged locally, destined for distribution throughout the region, efficiently and cost effectively.

Dedicated to business and commerce, KAEC’s Central Business District will be essential in the Saudi economy’s drive to expand its range of business activities, particularly in finance and investment-related disciplines. Modern architecture and infrastructure will be the hallmarks of the Central Business District, which will offer 3.8 million sq metres of office, hotel and mixed-use commercial space. Designed to attract the world’s leading banks, investment houses and insurance groups, KAEC is aspiring to become the regional base for their global operations.

Along a 2.5 kilometre long stretch of pristine beachfront, the Resorts Area will cover an area exceeding 3.5 million sq metres. Currently, it is providing investors the opportunity to add 22,500 rooms, suites and serviced apartments to Saudi Arabia’s tourism infrastructure, while adding a vibrant new segment to the country’s hospitality industry.

Among the tourist draws at the resort will be championship-standard 18-hole golf course, complete with training facilities and driving range. Additionally, an equestrian club, yacht club and a broad range of water sports will be provided, taking full advantage of the Red Sea’s unspoiled beaches.

The Residential Area has 51 million sq metres of luxury apartment space, and over 150,000 units. The bulk of this is associated to 108,000 units in low rise buildings. A further 56,000 units are available in mid and high rise structures in the more central areas of the City. The most exclusive apartments, however, are those found in the towers of the Central Business District and Financial Island. The 5,000 apartments in this exclusive category provide a total build up area of 881,000 sq metres.

KAEC’s Educational Zone will be a multi-university campus designed to accommodate 18,000 students, and 7,500 faculty and staff members. Determined to become a leading centre of higher education regionally and globally, KAEC’s Educational Zone will offer enticing incentives to draw in researchers, innovators, and think-tank institutions.

Universities in the zone will focus on “new economy” specialisations, such as communications and information technology. Medicine and pharmacology will also feature prominently in the Educational Zone, with facilities including a medical college with its own teaching hospital.

CASHING IN

The Kingdom’s oil revenues continue to remain high, estimated at SR618.7 billion
(US$165 billion) in 2007 and foreign assets currently at SR942 billion (US$251 billion). Saudi Arabia is giving much consideration to its future direction.