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Red Sea resort an essential element of Saudi Vision 2030

We are witnessing the rapid urbanization and modernization of Saudi Arabia’s Red Sea coast, and the return of the Hejaz to its former pre-eminence as a trading, cultural and leisure hub of the Arabian Peninsula.

Last week’s multibillion-dollar plan to develop a huge part of the coastline, between the towns of Umluj and Al-Wajh in the northern section of the Hejaz coast, is a logical extension of a strategic plan for the whole Red Sea region begun in 2005 with the launch of King Abdullah Economic City (KAEC).

It was further emphasized by Al-Faisaliyah project, a huge initiative that aims to extend the city of Makkah down to the Red Sea coast, filling the 150 or so kilometers of desert in between with mixed-use conurbation, transport and logistics facilities. Just this week, the project was said to be “off to a positive start.”

At the southern end of this development strip lies the city of Jeddah, the Kingdom’s second-largest, which is itself being constantly developed and modernized.

That all adds up to a massive program of infrastructure and construction investment in a part of the country that, since the advent of the oil era in the 1930s, has perhaps had to wait in line behind the Eastern Province. The understandable argument was that the east had the oil and the revenue, so it deserved the investment.

But long before the oil era, the Red Sea coastline — straddling one of the busiest commercial routes in the world at the southern end of the Suez Canal — was the dominant economic and trading zone of the peninsula.

The Red Sea Foundation, a non-profit think tank set up to promote trade and development in the region, cites UN statistics to the effect that 10 percent of global maritime trade passes through the Red Sea. The population of the 28 countries that border the sea, or use it as their primary shipping corridor, will double to 1.5 billion by 2050, many of those people of the aspiring middle classes.

Fahd Al-Rasheed, chief executive of KAEC, says the Red Sea region is one of the fastest-growing emerging markets in the world, but also one of the most underinvested. That neglect appears to be over. The resort project announced this week is enormous in scale.

Bigger than Belgium, it will comprise 50 islands and 34,000 square kilometers in a global upmarket tourism and leisure mega-development. Think Dubai’s highly successful Palm Jumeirah multiplied by nearly 6,000.

Long before the oil era, the Red Sea coastline — straddling one of the busiest commercial routes in the world at the southern end of the Suez Canal — was the dominant economic and trading zone of the peninsula.

Frank Kane

It will add some SR15 billion ($4 billion) to the Saudi economy and create 35,000 jobs, according to the official announcement, with the first phase due to start in two years and be completed by 2022. But there are still several questions left unanswered.

The project will be funded by the Public Investment Fund (PIF), the Kingdom’s proto-sovereign wealth fund that is expected to be the main beneficiary of the funds from the initial public offering (IPO) of Saudi Aramco next year. No final estimate of cost has been given, but you would have to assume it will be in the tens of billions of riyals. So one question is: How much of PIF’s Aramco windfall will be spent on the resort?

Another is: Where will demand come from? The Kingdom currently attracts some 18.7 million visitors per year, the vast majority of them pilgrims on their way to the two holy sites in Makkah and Madinah. This is projected to rise to 31.5 million in 10 years, but even that big increase will not be enough to fill the huge resort development further up the coast. A whole new tourist market must be created if the resort is to succeed.

So another issue is: How will the resort be administered and governed to cater for that new tourism market? High-rolling global leisure-seekers expect certain international standards of leisure and facilities. They will of course want to see the unique desert sites of Mada’in Saleh, the UNESCO World Heritage Site said to rival Petra in Syria, but they will also want to relax in accustomed comfort.

The official announcement said laws in the resort would be “on a par with international standards,” with a “semi-autonomous” structure, and would ease visa arrangements. That will require a significant degree of cultural adjustment by the existing inhabitants of the planned resort region, and of the Kingdom, which the two-year lead-in is presumably intended to address.

The transformation of the Saudi economy sought by Vision 2030 will necessitate some profound social and cultural changes. But if one by-product is the renaissance of the vibrant Red Sea coast, this is yet another reason why the changes will be worthwhile.

Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai