Publication Date: 
Mon, 2010-11-08 23:44

with some other Arab economies hard hit by the global financial downturn, there
is a mood of quiet optimism in Saudi Arabia and consumer confidence indexes
reveal that Saudi citizens believe they will not be as badly affected as other
countries worldwide.
This sense
of self-confidence seems sustained by bolder strategic economic and social
reforms implemented by King Abdullah, whether in the judiciary, educational or
economic fabric of society.
Buoyed by
several years of budget surpluses, the Kingdom has embarked on structural
economic reforms in both capital infrastructure and human capital development
and the planned mega economic cities are but one manifestation of this mood of
earlier large infrastructure developments, a key element of this strategy has
been reinvigorated regional economic diversification and more equitable wealth
creation for Saudi citizens. This has been translated into the launching of
special economic zones, seemingly alike, but in reality each planned to
specialize in certain niche core activities to leverage on each area’s location
advantages. As of 2009, four economic cities have been launched with two more
economic cities expected in Tabuk and Dammam. The planned infrastructure
expenditures on these mega cities are enormous, totalling some $140 billion in
the first phase. The largest is the King Abdullah Economic City at Rabigh on
the Red Sea coast, with a planned area of 168 million sq meters and $ 80
billion in basic infrastructure cost. It will be the largest government and
private sector integrated development project since the 1980’s when the Kingdom
embarked on creating the Jubail and Yanbu industrial cities. Unlike the capital
intensive projects of the earlier period, Saudi Arabia is now focussing on job
creation and private sector participation from the start, and the King Abdullah
Economic City, upon its completion in 2020, will aim to generate 1 million new
jobs, promote energy and transportation related industries, and establish a new
sea port of 13.8 million sq. m. and handling some 300,000 pilgrims.
The other
planned mega economic cities are also just as ambitious with some $ 23 billion
planned expenditure for Prince Abdul-Aziz bin Musaed Economic City in Hail,
supporting agro industrial and mineral exploitation projects in that region,
and a $30 billion planned expenditure in Jizan Economic City, the southern
region of the Kingdom, concentrating on heavy industries (aluminium, refinery,
steel, power) as well as secondary industries such as fisheries, and
pharmaceuticals and generating 500,000 new jobs. Phase 2 of the project is
expected to be completed by 2013 and the final phase by 2037. The fourth
planned mega economic city is in Madinah and will focus on knowledge-based
industries, create 20,000 new job in this high value sector, attract 150,000
new residents and complete by 2020 at a cost of $ 7 billion.
By 2020, it
is expected that the major phases of the economic cities will have been
completed and the forecasted impact on the Saudi economy are far reaching.
According to the Saudi Arabia General Investment Authority (SAGIA) some 1.7
million new jobs will be created, with the economic cities adding $150 billion
to the Saudi GDP. They will attract over $100 billion of new investments
domestically and from abroad, and their population will be three times that of
Dubai, with an area four times that of Hong Kong.
government of Saudi Arabia is forecasting that from both the private and public
sectors, a staggering $800 billion will be invested in these economic zones and
other mega projects including those being planned by Saudi Aramco and SABIC in
these mega cities.
No other
country in the Middle East can match such grand project expenditures, which
upon completion, will unleash Saudi Arabia as one of the major economic power
houses of the world in league with India, China and Brazil as the undisputed
leaders of the developing world. What is of more significance for Saudi Arabia,
is the potential for the direct and indirect multiplier effect of these mega
projects on secondary local industries and job creation in the wider Saudi
The real
test of success will be the level and scope of private sector participation in
the grand projects, whether from Saudi investors or from abroad. Given
international economic and financial uncertainties, Saudi investors and others
from the Gulf, seem to have been encouraged at the opportunity to share in
local risk as the Saudi government has spent political capital into ensuring
that the second phase of its economic diversification strategy succeeds. It is
not a coincidence that one of King Abdullah’s favorite project- the King
Abdullah University of Science and Technology (KAUST), with an independent
endowment fund of over $15 billion, is also taking shape at Rabigh near the
King Abdullah Economic City. The hope is that an infusion of knowledge,
technology, new skills and job creation unleashes a new dawn of prosperity for
the Kingdom. Dr. Mohamed A Ramady is a former banker and visiting associate
professor, finance and economics at King Fahd University of Petroleum and
Minerals, Dhahran, Saudi Arabia.

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