Nov. 26, 2019
With the aim of speeding up economic diversification, Saudi Arabia has been regularly announcing futuristic megaprojects for some years now. And, since the launching of Vision 2030 by Crown Prince Mohammed bin Salman, the government's investment in large scale construction has gone up even further.
This makes perfect sense: building new ports, airports, and roads and railroads will stimulate the Kingdom's economy, fostering the development of several non-oil sectors including finance, real estate, construction, and transportation, among others.
Not satisfied with single development plans in one area or another, the Kingdom came up with the idea of building entire cities from scratch in the early 2000s, long before the launching of Vision 2030.
King Abdullah Economic City (KAEC), which was announced by the late King Abdullah bin Abdulaziz in 2005, is one result of such measures. Located on the coast of the Red Sea, at a distance of 100km from Jeddah—Saudi Arabia's main economic powerhouse—and at a reasonable flying distance from all important cities in the Middle East, KAEC is well positioned to fulfill its duty as the future business heart of the country. Or, as the megaproject's official website puts it, to create “a new world city to benefit business, citizens, and the entire Kingdom of Saudi Arabia."
Although the construction work is closely regulated by the Economic Cities Authority (EAC), the UAE-based master developer, Emaar Properties, is entrusted with the task of building the city, and the final bill will likely be in excess of USD55 billion.
It is hoped that even more funding will be directed toward the constellation of projects under construction in the city through direct foreign investment as well as investment by Saudi Arabia's private sector—a process that could also generate up to a million jobs.
Different phases of the KAEC have been inaugurated since 2010, with 2015 marking a high point in terms of the number of projects coming to an end. If all goes according to plan, 2020 will see the completion of the megaproject.
The city comes complete with over 210,000 residential units in the form of apartments and villas and a chic central business district; however, as KAEC is—more than anything—the Kingdom's attempt at economic diversification, the city is designed with an emphasis on fostering industrial and trade activities.
The Industrial Valley, which will be the focal point of manufacturing plants, hosts approximately 2,700 industrial units, focusing in particular on high-end plastic production given the availability of oil-based ingredients in the country.
Located along the coast of the Red Sea and with an ideal access to both the Indian Ocean and the Mediterranean Sea via the Suez Canal, KAEC is also well positioned to become the country's next hub of maritime transportation.
In this context, King Abdullah port was built with private funding and will soon be able to handle 20 million containers per year thanks to the installation of state-of-the-art facilities, including 28 ship-to-shore cranes in 2019.
The port is already active and was announced as the world's second-fastest growing port in 2018 by Alphaliner, a global maritime transportation intelligence firm.
KAEC is not the only futuristic city under construction; there are at least three other equally ambitious megaprojects in progress, such as the Jazan Economic City, that are following KAEC's formula. Meanwhile, it was formally announced in 2017 that over 50 Saudi islands in the Red Sea will be turned into centers of tourism. Recent social reforms and market liberalization are key to the success of these new projects.