Facing a depressing prospect on oil revenue front, Saudi Arabia has drawn up ambitious plans to diversify its economy away from crude.
In the last month alone, the kingdom has announced two major developments — one covering an area bigger than Belgium and another that will include an airport and shipping port.
These are in addition to its plans to build a series of economies cities– special zones in logistics, tourism, industry and finance, an entertainment city and a $10 billion financial district.
Some of Saudi Arabia’s biggest projects are:
The Red Sea
The kingdom last week announced plans to turn 50 islands and 34,000 square kilometers — an area bigger than Belgium — along its Red Sea coastline into a global tourism destination. Located between the cities of Umluj and Al Wahj, the project aims to attract luxury travelers from around the world and will be developed by the Public Investment Fund, the country’s sovereign wealth fund. Construction is expected to start in 2019 and the first phase completed by 2022. The development cost of the project wasn’t given.
Visitors will have access to the ancient ruins at Mada’in Saleh, a relic of the same ancient civilization that built the city of Petra in Jordan. A promotional video for the project with dramatic music showcases white sand beaches and flocks of birds soaring over turquoise waves.
Bringing sun-seekers to Saudi beaches could transform a tourism industry that relies almost solely on Muslim pilgrims visiting holy shrines in Mecca and Medina. The country’s restrictions on alcohol and dress, however, could make it a hard sell for foreign tourists. The government will need to “get through the cultural and legal hurdles,” said Crispin Hawes, London-based managing director at Teneo Intelligence. “If you can’t change restrictions on alcohol and dress, that market effectively disappears.”
The kingdom announced detailed plans for the Al Faisaliyah project last month. Located to the west of Mecca, the city will have residential units, entertainment facilities, an airport and sea port. The project will cover 2,450 square kilometers — almost the size of Moscow — and is expected to be completed by 2050. The Makkah Region Development Authority is supervising the project and the PIF is also involved. An investment figure hasn’t been given.
Saudi Arabia in April announced plans to develop the kingdom’s largest cultural, sports and entertainment city in Al Qidiya, southwest of Riyadh. The project will be developed on 334 square kilometers and will include a safari area and a Six Flags Entertainment Corp. theme park. The country’s sovereign fund is the main investor, along with local and international investors. Construction is due to start next year and the first phase should be completed by 2022. An investment figure was not given.
As part of plans to overhaul its economy, the government is relaxing the rules on entertainment in the ultra-conservative society. Concerts, dance shows and film screenings have drawn thousands of people over the past year. By 2030, the kingdom aims to double household spending on recreation to 6 percent.
While the current authorities seem to be committed to open up the country to forms of entertainment previously banned, a big test will be the reaction of the more conservative parts of the Saudi society which have already shown great reservations toward the newly founded Entertainment Authority as reflected through social media widespread criticisms, said an analyst.
King Abdullah Economic City
KAEC, named after the former head of state, is the kingdom’s first freehold city and is being developed by Emaar Economic City, a company controlled by the Saudi government and Dubai’s biggest property developer Emaar Properties PJSC. Covering about the same area as Brussels, the project has attracted $7.9 billion of investment and secured enough cash and credit to fund its planned spending for the next decade, according to KAEC. The project includes a deep-sea port, a 55 square-kilometer logistics hub, a sports and recreation center and more than 6,500 residential properties.
King Abdullah Financial District
KAFD, as it’s known, was envisaged as Saudi Arabia’s answer to the Dubai International Financial Centre, bringing banks, financial-services firms, auditors and lawyers, as well as the kingdom’s stock exchange and capital-market authority into one area. The project, north of Riyadh, has been slowed by construction delays since work began in 2006 and is more than 70 percent complete. As of last April, not a single financial institution had agreed to take space in the 73 buildings the state is constructing.
The 1.6 square-kilometer district is owned by the Saudi Public Pension Agency and the government is looking at ways to lure banks with incentives that could include tax breaks lasting a decade or more, as well as separate regulation that makes it easier to hire and issue work visas.
Saudi Arabia’s first so-called smart city development, the city in Medina will focus on intellectual property, knowledge-based industries, medical, hospitality, tourism and multi-media. It will also have serviced apartments, a hotel and conference facilities, according to the Economic Cities Authority website. Residents of the city, which will cover 4.8 square kilometers, will have access to Mecca and Jeddah via the Haramain High Speed Railway. KEC was listed on the Saudi stock exchange in 2010 after raising about $270 million.
Prince Abdulaziz bin Mousaed Economic City
This is a mixed-use development located on 156 square kilometers of land in Hail in the north of the kingdom. As well as a residential area, the city will also have an international airport, hotels, shopping centers and entertainment venues.
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