By Chris Sell www.arabianbusiness
The status and future of Saudi Arabia’s relentlessly ambitious programme of economic cities points to the country’s desire to diversify.
In 2005, Saudi Arabia revealed its plan to diversify away from an oil-based economy by launching the first of six planned economic cities. Under the direction of the Saudi Arabian General Investment Authority (Sagia), King Abdullah Economic City (KAEC) would rely on private investment rather than government backing.
Located on the Red Sea Coast, KAEC would precede a further five cities designed to tackle pressing issues facing the kingdom, such as finding employment and housing for a young and expanding population – 70% of the population is under 30 and half is under the age of 15 – and act as a catalyst to attract foreign investment, global trade and commerce.
The massive, multi-billion dollar projects would target various industrial and knowledge-based economies and ensure the kingdom’s future is not entrenched solely with oil. To do this, international developers were brought in to attract regional and international investment, as well as provide the technical know-how. Notably Dubai’s Emaar Properties established its subsidiary, Emaar The Economic City to develop KAEC, while Malaysia’s MMC Corporation was brought in to work with the local Saudi Binladin Group (SBG).
However, such ambitious schemes were seen in more prosperous and less financially-challenging times. Not only huge on a physical scale, each required billions of dollars in private investment, and access to such swathes of capital – even in Saudi Arabia – has understandably been curtailed in the wake of the global financial crisis.
Sagia claim the six cities will contribute US$150 billion to the kingdom’s GDP by 2020. Though this timescale is obviously unlikely, Saudi is seemingly committed to its economic city programme.
Construction Week takes a look at all six projects and assesses the status of each, and the likelihood each will be built, or reflect the pressure of a nervous economy in its final guise. Consequently, the ambitious time lines and masterplans set out for all six city-sized developments bears no resemblance to the current state of progress. Each has come in for criticism as observers question the viability of such schemes.
King Abdullah Economic City
The first and most likely to succeed of all six cities. KAEC bears the king’s name and represent the blueprint for all subsequent cities. Its location, 100km north of Jeddah in Rabigh is designed to capitalise on its Red Sea setting and links to the holy cities of Medina and Mecca. With investment of over $40 billion already announced, the 168km2 project is expected to be completed by 2030. Though sources close to the project have questioned its ability to attract sufficient investment and speed of its progress, the project is going ahead and will certainly be finished. To put it into context, Saudi Arabia is attempting to build a city the size of Washington DC in 15 years.
When finished it is expected to house a population of two million and create one million jobs. It is comprised of six integrated components: sea port, industrial zone, central business district (CBD), waterfront resort area, education zone and residential zones. Emaar EC released the finalised design for the sea port in 2009 and it is planned to be operational by the first quarter 2011. It will consist of a multi-purpose cargo terminal and a 10 million TEU (twenty-foot equivalent units) container terminal, which will be increased in several phases. Late in 2009 Emaar EC also signed an agreement with DP World to develop and operate the port.
An EPC award for the industrial zone – which will feature downstream petrochemicals, pharmaceuticals, research and development activities – is expected in the third quarter 2011. Amr al-Dabbagh, governor of Sagia has claimed the smelter would create 2,500 direct jobs and 7,500 indirect jobs.
Hail Economic City
One of the most troubled economic cities. Hail – also known as Prince Abdulaziz bin Mosaed Economic City, in the northern-central region is being developed as a transport and logistics hub, with the aim of attracting up to $8 billion in investment over 10 years. The original developer, the local Rakisah Holdings was replaced by Kuwait’s Al-Mal Investment Company in 2008, following a number of years of minimal activity. Previously, two firms, KEO International Consultants and Singapore’s Jurong International were understood to be in the running for the contract. However at the end of April it was announced that a possible consultant to draw up the masterplan had been selected.
The contract had been expected to be awarded in November 2008. Covering an area of 156km2 – 92km2 for industrial use and 64km2 for non-industrial space – Sagia claims it will create 55,000 jobs and comprise a population of 300,000 with 1.16 million visitors and an additional 215,000 jobs by 2060. In February the General Authority of Civil Aviation (Gaca) announced it had signed an MoU with Al-Mal to redevelop Hail International Airport to serve the economic city. Hail will also include agriculture and food processing, mining and commerce and infrastructure.
Until now, of all six cities, Hail was identified as the most likely to stall or face significant re-modelling as those close to the scheme question its ability to attract sufficient investment. However, enabling works are ongoing and bids are expected to be submitted in Q3 2010 with an award due at the end of the year. It is expected to be completed in 2025.
Knowledge Economic City
Knowledge Economic City (KEC) in Medina was the third city to be launched back in June, 2006. The developer, Seera City, is a consortium comprised of the Savola Group, PMDC, Taibah Investment & Real Estate Development Company, Quad International Real Estate Development Company and the King Abdullah Foundation. The 4.8 km2 site is expected to take 10-12 years to complete and will have a built-up area of nine million square metres. In July 2009, US-based consultant Aecom was appointed as the project manager for the $8 billion city. An IPO (initial public offering) has been expected for a number of years but as yet there is no time frame for this. The city is expected to feature a technological and administrative college, theme park, Islamist civilisation studies centre, residential area and biological sciences and health services. KEC plans to create 20,000 jobs in its new industrial, academic, cultural and commercial sectors and will also benefit from the upgrade to Prince Mohammed Bin Adbulaziz Airport. Up to 30,000 residential units and 150,000 inhabitants are planned.
Bids for the construction of first stage residential projects including a gated villa community and apartments are to be submitted in the third quarter 2010. Bids for the second stage are expected to be submitted in the fourth quarter 2011.
Jizan Economic City
Developed by a consortium led by SBG and the MMC Corporation, the group has been awarded a 30-year license to develop the site on the Red Sea coast, 60 km north of Jizan. It will be spread over 117 km2. It is set to contain a port, aluminium smelter, steel plant, copper processing plant, oil refinery, fish processing and agricultural factories as well as a commercial business and cultural centre. An IPO is expected to be launched in mid-2010 by SBG and MMC Corporation to raise funds to part-finance the projects within the city. While the project is currently underway, there has been some delay to the power plant due to some development changes to the aluminium smelter.
The EPC winner, CPI Power Engineering Co (CPIPEC) is in the process of re-submitting the budget. Parsons Brinckerhoff International and Mott MacDonald are consultants on the scheme. The industrial zone is set to account for more than two-thirds of the overall project, with the aluminium refinery expected to create 12,000 jobs. In July 2009, construction work began on the power sub-station on a 40,000 m2 plot, and is expected to take 24 months. Within the industrial zone, the detailed design of the port has been completed and is undergoing final review.
The tender award for the construction of the harbour is on hold while the tenants requirements are finalised. Other aspects of the city, such as the residential and CBD districts are still in the early design stages with a tentative timescale of Q1 2012 for an EPC award. Following a number of delays, Saudi Aramco was awarded the contract to build the Jizan refinery and will be completed by 2015.
Although their locations have been announced, the final two economic cities have not been officially launched by Sagia unlike KAEC, KEC, Prince Abdulaziz bin Mosaed and Jizan, although some details have been released, allowing a clearer understanding of their possible function and scope.
Tabuk Economic City
Sagia is currently carrying out a study in-house for the economic city in the northern region of Saudi Arabia. The development will have residential and commercial districts, resorts, medical city, colleges and universities. It has an estimated investment value of $30 billion and a tentative date for an initial EPC contract has been mooted as the first quarter 2011, with completion earmarked for the end of 2020. This could clearly change however.
Ras al-Zour Economic City
Also known as Ras al- Zour Resource City, it will be developed in the Eastern Province on the Gulf Coast and, as befitting its location will be dedicated to downstream industries. The site will capitalise on the existing export port at Ras al-Zour and surrounding mineral deposits, notably Al-Jalamid phosphate mines in the north and Al-Zabira bauxite mines in the northeast. Moreover the site is already the location of an aluminium smelter complex and a phosphate and fertiliser complex being developed by the Saudi Arabian Mining Company (Ma’aden).
Like Tabuk, there is no specific timeline apart from an EPC contract due in Q1 2011, and a proposed completion date of Q4 2020. It has an estimated value of $25 billion.