Global : Saudi Arabia - Attracting investors to become part of economic growth

The government has done commendable job in making <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Saudi Arabia a key destination for companies intending to set up their industrial units. This includes providing industries with investment benefits, setting up world-class infrastructure and making the entry in the industrial sector lucrative for foreign as well as private investors. One of the major milestone in government effort to woo industrial investments has been Jubail. It has been named the city with the best economic potential in the Middle East by the Financial Times' Foreign Direct Investment (fDi) magazine in the past and it has gone ahead in attracting foreign investment further. The Jubail-II project, which covers an area of 1,950 hectares, is expected to cost SR2.54bn. Jubail-II is expected to attract investment projects worth SR220bn.

 

Attracting investors to become part of economic growth

Since its inception in April 10, 2000, Saudi Arabian General Investment Authority (SAGIA)  has, so far, licensed 3608 projects (upto Mar-2006) amounting to SR292.7bn. Foreign investors, contributed 38.3%, i.e. SR112.2bn of the total licensed investments, whereas the Saudi share amounted to SR180.5bn i.e. 61.7% of the total investments  In Jan-07, Saudi Arabian General Investment Authority announced its target to license investment projects worth more than SR300bn in 2007. The value of licenses issued by the SAGIA in 2006 increased 25% over the previous year. The second quarter 2006 results of the SAGIA released recently indicate the launch of two economic cities along with measures to lure domestic and foreign investments aimed at transforming the Kingdom into a more competitive investment destination. The value of investment licenses issued during Q2 2006 rose thanks to government attempts to improve the economic and investment climate in the Kingdom, stronger confidence in the Saudi economy, as well as joining the WTO. SAGIA's One-Stop-Shop (OSS) issued 505 licenses with a total value of SR72bn, a 107% rise over the same period last year when 219 licenses were issued at an aggregate value of SR35bn.

 

According to SAGIA, strategic trends for 2007 will focus on implementing its six major roles which include :

• Investor services

• Regional development

• Focused marketing

• Attraction of investment to certain sectors

• Support for new projects

• Improvement of the investment environment.

 

Table 1: Total Investments by Sector

(upto 24 March 2006)	No. of Projects	Total Finance (SR bn)
Industrial	1,388	141.4
Service	2,211	150.8
Agricultural	9	0.5
Total	3,608	292.7

Source: SAGIA

 

SAGIA has already signed 17 agreements with major Saudi companies within the framework of SAGIA’s Public Private Partnership Programs to activate the relationship between the public and private sectors. According to the agreements, these companies provide financial support to execute SAGIA's program in exchange for a greater benefit of services provided by SAGIA.

 

Table 2 :Total Finance for Licensed Projects

Activities	No. of Projects	Total Finance (SR bn)	Saudi Share (SR bn)	Foreign Share (SR bn)
Industrial	1,388	141.4	76.5	64.8
Service	2,211	150.8	103.7	47.0
Agricultural	9	0.5	0.1	0.3
Total	3,608	292.7	180.5	112.2

Source: SAGIA

 

Improvement in infrastructure….

In order to improve the infrastructure services in the country, an investment of US$443mn has been envisaged to increase the capacity of the Jeddah Islamic Port (JIP) by 45%.

 

Saudi Railway Organization (SRO) is also planning to establish two more railway lines linking Jeddah and Jizan as well as Taif and Khamis Mushayt. SRO has already signed an SR3.3mn contract with an engineering consultancy firm in order to conduct a feasibility study of the two railway lines. The Supreme Economic Council had approved three railway projects: A 950-km land bridge linking the Kingdom’s east and west; a Makkah-Madinah rail link; and the northern railway linking Riyadh with the Jalamid region.

 

The land-bridge project, which is expected to change the region’s shipping patterns, has reached advanced stages of implementation. The land bridge project involves construction of 950 km of new tracks between Riyadh and Jeddah and another 115-km line between Dammam and Jubail. It is the cornerstone of a massive multi-billion riyal railway expansion project and will be the first rail link between the Red Sea and the Gulf.

 

Airports in Jeddah, Madinah and Tabuk will expanded at a cost of SR30bn in order to meet the growing number of passengers and the requirements of two new domestic private airlines, according to the General Authority for Civil Aviation (GACA). The Civil Aviation Authority has already launched a US$1.5bn expansion for Jeddah's King Abdul Aziz International Airport (KAIA), which is designed to accommodate the world's largest aircraft, including A380s and will increase the airport's annual capacity to 21mn passengers.

 

Economic Cities – Thinking big…

The Kingdom’s ambitious plan to dramatically raise investment competitiveness under its "10 x 10" programme to put Saudi Arabia among the world's Top 10 globally competitive investment destinations by 2010 can be best seen in the “Economic Cities” announced in recent times. According to SAGIA, the four cities are expected to attract investments worth more than SR300bn and create more than a million jobs within the next 10 to 20 years. In the field of balanced regional development, SAGIA, supported by the Custodian of the Two Holy Mosques and the Crown Prince, launched three integrated economic cities in 2006, one each in Hail, Madinah and Jazan. In 2005 KingAbdullahEconomicCity in Rabegh was launched. A study is underway to establish two more economic cities, one in Tabuk and one in the Kingdom’s Eastern Region in 2007.

 

King Abdullah Economic City (KAEC) – Red SeaCoast

§         The Emaar Economic City, the developer, has significantly expanded the size of its largest-ever development in the Middle East, King Abdullah Economic City (KAEC) in Saudi Arabia, by nearly four times to cover an area of over 168mn sq m and unveiled a new master plan.

§         The company has modified the KAEC master plan to make substantial additions to its six major components -- the Port, Industrial District, Central Business District (including commercial, mixed-use, retail and financial island), Resort, Educational Zone and Residential (including Corniche and souks). The expansion will help generate more employment opportunities for Saudis, enhance foreign direct investment and boost the Kingdom's economy.

§         Following the expansion, the project has the potential to generate one million jobs for Saudi citizens and will serve as home to two million residents. 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).

§         Covering 13.8mn sq meters, a major increase of 11.2mn sq m from the earlier project, the seaport will be the largest in the region with a capacity of over 10mn 20-foot equivalent unit (TEU) containers per year, which is significantly higher than all other regional ports. Another key component of the port will be a custom-built Haj Terminal.

§         Following the expansion, the Industrial District will cover 40mn sq m -- five times more than previously envisaged. The 4,000 hectares of land will be dedicated to industrial and light-manufacturing facilities, identified as key growth drivers for the Saudi economy, and can now host 2,700 industrial tenants. The Industrial District will have specific initiatives to encourage local entrepreneurs through incubator-like modules. International experts have been consulted to ensure that the Industrial Zone development is in line with best environmental practices.

The Central Business District (CBD) will offer 3.8mn sq m of office space, hotels and mixed-use commercial space. The Financial District, within the CBD, has now been doubled in area to cover 14 hectares of land, which will be the largest regional financial nerve center for the

§         world's leading banks, investment houses and insurance groups.

§         The retail component of KAEC takes a quantum jump following the expansion of the project. From an area of 3.3mn sq m, the total retail facilities will now spread to cover 8.7mn sq m and house over 50,000 shops, nearly three times the earlier estimate.

§         The Hospitality zone will be another strategic component of the new expansion with the number of hotel rooms and suites being increased from 12,000 rooms in 60 hotels to 25,000 hotel rooms in more than 120 hotels. An ideal place to work and live, the KAEC will now have 250,000 apartments and 25,000 villas, a leap from 110,000 apartments and 16,000 villas.

§         Building on the socio-cultural environment demanded of living environments, KAEC will have 550 mosques including several grand mosques in the residential zones. Several schools will be opened to cater for the educational needs of children in each community apart from a university campus for 18,000 students. A sports stadium will also be part of the project, which will have 45,000 seats.

§         The Saudi Arabian General Investment Authority (SAGIA) also plans to establish a plastic valley at KingAbdullahEconomicCity.

 

Prince AbdulAziz bin MousaedEconomicCity  - Hail

§         Saudi Arabia’s PrinceAbdulAzizBinMousaedEconomicCity, which is set to become the largest transportation and logistics hub in the Middle East, is likely to see a total private sector investment of SR30bn  over the next 10 years.

§         Hail’s sound base in agriculture accounts for 70% of the region’s employment in this sector, and 90% of corn, 33% of potatoes, and 31% of barley produced in Saudi Arabia. Total annual production is in excess of 800,000 tons. There is enormous potential in pre-packaged foods, agricultural-related industries, and new technologies for more efficient use of water.

§         Covering an area of over 150mn square meters, the Prince AbdulAziz bin Mousaed Economic City will incorporate a cluster-based development comprising: transportation, logistics and supply chain centers; educational services; agricultural and food processing services; mining and commerce services; housing; and infrastructure.

§         In the area of transportation, logistics and supply chain, an international airport is expected to cater to three million passengers per year, while a railway station will cater to approximately two million passengers annually. Dry ports and operation centers will be capable of handling over 1.5mn tonnes of cargo annually.

§         The region will also benefit from a new international airport and a major expansion of the Kingdom’s railway system, which will connect the main regions. In addition, major new highways are being constructed to link the Kingdom through Hail with Jordan, Iraq and also Madinah.

 

Knowledge Economic City (KEC) - Madinah

§         The project is the first of its kind and the third economic city in Saudi Arabia to be initiated by the Saudi Arabian General Investment Authority (SAGIA) in an aggressive bid to repatriate capital and attract value-added foreign investments.

§         The move is part of efforts hoped to develop the Kingdom’s regions in a hi-tech manner while easing mounting pressure off the country’s three major cities’ infrastructures.

§         The new city, named “KnowledgeEconomicCity” will be developed on a 4.8mn m sq. land while the built up area will near 9mn m sq. attracting SR25bn worth of investments. The project will add 20,000 new jobs to the region.

§         The city will comprise various zones designed to compliment each other; a technology and Knowledge based industry zone; an advanced IT studies institute; an interactive museum on the life of Prophet Mohammad (PBUH); a center for Islamic civilization studies; a campus for medical research and life sciences; an integrated medical services zone; a retail zone; a business district; residential zones including high rises, houses, and fully-serviced apartments; shopping malls; and a mosque with a 10,000 worshipper capacity.

§         Transportation within KEC will be facilitated via a ring road above which rises a monorail connecting the city to neighboring Grand Mosque of Madinah within minutes. This monorail will be tethered to the planned train station thus tapping into the railway access to Makkah, Yanbu, the KingAbdullahEconomicCity as well as the port city of Jeddah.

 

Jazan Economic City – Jazan

·         The new economic city is expected to attract more than SR100bn in investment and create some 500,000 new jobs.

The aluminum complex under construction at Jazan Economic City (JEC) expects to create 12,000 new jobs. One of JEC's anchor investments, the aluminum complex is the largest mineral processing facility to be built in JEC's industrial zone and led by Saudi-based

Western Way

for Industrial Development Co (WWIDC). The plant, when completed, targets production of 1.4mn tons of alumina and 660,000-700,000 ton aluminum per annum. All the alumina will be made from bauxite imported from Greece. Total investment in the complex as well as in the associated plants required to supply adequate power, is estimated at US$4bn.