SAGIA Opens Doors: The Kingdom Is Hoping Its Six Economic Cities Will Stimulate Growth and Encourage Social Change. but Much Work Remains to Be Done

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IN AUGUST, KING Abdullah marks the beginning of his third year as ruler of Saudi Arabia. In that time, his people's expectations have risen to new levels, in parallel with the ongoing high oil prices. Economic liberalisation has come hand-in-hand with the relaxation of social and political norms. The Saudi media is now filled with previously taboo subjects and after years in the doldrums there is a genuine sense that the country is coining alive. "It is a new vision which is reshaping the kingdom, giving people confidence and making it more attractive on the world scene," explains a Riyadh-based diplomat.

The new direction centres on economic diversification and widening the role of the private sector. Unlike in previous booms, the government is driving a comprehensive strategy to move away from its hydrocarbons-dominated past. The creation of the Saudi Arabian General Investment Authority (SAGIA) was deemed the first step. Set up to target foreign and private investors, it has grown in stature. Its chairman, Amr Dabbagh, is close to King Abdullah and considered a progressive thinker. It has set itself a target of placing the kingdom among the world's top ten competitive investment destinations by 2010.

Under SAGIA's auspices, the kingdom is pressing ahead with a bold initiative to create six economic cities as a means of enticing foreign investment and repatriating Saudi money. In 2005/2006 it launched four integrated cities: King Abdullah Economic City (KAEC) near Rabigh, Prince Abdulaziz bin Mosaed Economic City (PABMEC) in Hail, Jizan Economic City (JEC) and Medina's Knowledge Economic City (KEC). A new one will be unveiled imminently at Tabuk, while a sixth city will be launched at a later stage in the Eastern Province. The government is also considering a city in partnership with Yemen. Each city aims to develop a specific business sector. Industry will be the focus in Jizan. Recreation and tourism will be centred in Rabigh. Hail will enable logistics and agriculture, while Medina will develop knowledge-based industries.

SAGIA estimates the entire programme's contribution to GDP to be about $150bn by 2020, raising the country's GDP per capita to $33,500 from $13,000. "It was an extraordinary response in the first 12 months," says a senior SAGIA official. "As a result, we have received proposals from private developers so they can launch their own economic cities, but we have had to curb some of their enthusiasm."

The cities are also the cornerstone of the government's efforts to resolve the kingdom's worsening unemployment problem, which stands at between 12-20%. According to Dabbagh, the new developments will provide job opportunities for 1.3m people. "Jizan is one of the largest areas in the kingdom and is among the least developed," says Abdullah Basodan, chairman of the board of Western Way for Industrial Development Company, which is building an aluminium smelter in JEC. "It has the largest potential for Saudi people to gain employment so we can draw on that pool."

Likewise, it is hoped the cities will fill the demand for good quality and modern accommodation. The country's youthful population--some 60% are under the age of 20--are increasingly demanding real estate developments similar to the kingdom's neighbours. SAGIA says the cities will house some 4.5m people. "The cities have had a positive impact on the economy and there are major expectations," says Zuhair Hamed Fayez, managing director of Jeddah-based development firm Tamlik. "It's a good way of putting things in motion."

But while the rationale for the cities may be evident, it has not been plain sailing since KAEC was launched in 2005. Until now, very little construction has actually occurred. KAEC is the most advanced. However, other than ground levelling works, a sales centre and a few tenders for residential buildings, progress has been slow. Yet, the developer, Emaar Economic City, expanded the size of the development by nearly four times to cover over 168m sq km, making it the largest project ever undertaken in the Middle East. …