The Kingdom plans several new industrial cities and has started granting licenses to private businessmen to construct them. In an exclusive interview, Saudi Industrial Cities Commission Governor Abdullah Al-Seif said the commission had started granting licenses for private industrial cities anywhere in the Kingdom. The only provision was that the owner of the land given a license had to abide by certain specifications set by the Ministry of Municipality and Rural Affairs, such as the land not being in a residential or commercial area.

“Licenses have been granted to ease the congestion in government industrial cities and to also speed up the construction of these cities. There is no doubt these cities will be built faster if they are privately owned,” he said.

Al-Seif said that last year the commission had already granted a license for a private industrial city in Riyadh; factories have been built there and are now fully operational. This new industrial city is scheduled to be formally inaugurated in the next couple of weeks.

Part of the commission’s job, since it was established by a royal decree order in 2002, is to provide land and the infrastructure needed for the establishment of such cities by the private sector.

Al-Seif said that on May 5, the commission was given authority over 28 industrial zones in the Kingdom. These 28 include the current eight existing industrial cities — two in Dammam, two in Riyadh, and one each in Jeddah, Makkah, Qasim and Al-Ahsa. “There are four other industrial cities that are semi-developed but they do not yet have fully operational factories. The rest are what we refer to as ‘virgin’ areas — no construction, no factories have been built there yet.” The total area of all industrial land under the authority of the commission in the Kingdom is 550 million square meters.

Finding a place for new industrial cities in the Kingdom was not a problem, Al-Seif said, as the land has already been allocated for the commission. The problem is in developing the zones. “Only nine percent of the current industrial city zones are developed. Ninety-one percent are still not developed. That is where the problem lies.”

He said that following a survey of industrialists’ needs in the Kingdom, it was discovered that the greatest demand for more industrial zones was in Riyadh, Makkah, Jeddah and Dammam. Priority attention is now being directed toward these four by the commission to meet investors’ needs. The government is also seeking to develop an industrial city in Jizan after industrialists and investors expressed the need for one there as well.

At the moment no contracts had been signed for the development of new industrial cities, the governor said. “However, there have been deals signed regarding the development of certain industrial zones — such as at the industrial city in Al-Sudair, located 120 km north of Riyadh — because of strong demand for more industrial sites in or near the capital.”

Announcements have been placed in local newspapers and other outlets calling for bidders to take up projects there. Details of the new proposed projects are expected to be announced in the next couple of months.

Another project expected to be launched soon is the second industrial city in Jeddah. Its launch is expected to coincide with that of Al-Sudair. The total area of the second industrial city in Jeddah is 3,500,000 square meters.

“We have also had negotiations with officials in the Jeddah Islamic Port to prepare a strategic study for an industrial area at the port. Once approved, bidding would begin for the construction of the infrastructure — a water system, electricity, sewerage, and the like.” This will probably happen in two years’ time. At present, of the 3,660 factories throughout the Kingdom, 1,440 are in the industrial cities, Al-Seif said. It represents 40 percent of the total. The commission would like to increase that proportion. That is the challenge.

“We cannot compel an investor to build his factory or operate inside an industrial city as long as he is abiding by the necessary requirements set by the municipality. We can, however, try to persuade him to move telling him that his investment would find a richer ground there, particularly in the many storage facilities that are provided in industrial cities,” he said.

Of the factories located inside the industrial cities, medium- and small-sized units represent a total area of only 500,000 square meters.

Al-Seif said that the expansion of the Jeddah Industrial City and future industrial cities in the Kingdom will primarily involve units producing much the same sort of goods as are seen at present — plastics, electrical materials, construction materials, packaging of foodstuffs, and agricultural equipment; those are the factories that businessmen say they want to build.

“What is new is technology. And as was announced earlier, we expect this to arrive for the first time in the Kingdom through the technology zones by the end of this year,” he said.

Al-Seif puts the number of jobs in the industrial cities at 300,000. As to the percentage of Saudis in that figure, it varies from place to place; SABIC (Saudi Basic Industries Corp.) companies, he said, managed to achieve a 75 percent Saudization rate. The cement, dairy and petrochemical industries in the cities were also noted for having a good rate of Saudization.

“We take pride in our industries. Many of our dairy companies have received Grade A from international committees, even though other well-known dairy companies in countries, such as Britain, Finland, and New Zealand, received less than that.”

Asked about which industrial cities were growing fastest, Al-Seif said that when industrial cities were first constructed across the Kingdom, the first three industrial cities of Riyadh, Jeddah and Dammam were occupied in the first 10 or 15 years.

There is a dire need for more industrial areas in those three cities, he said. The reason why industrialists are not going to other areas could be because there is not enough to attract them elsewhere — not just a lack of proper infrastructure.

He said that for an investor or industrialist to open a factory in a smaller city, the necessary infrastructure — electricity, water, and other essential services — have to be there. But investors also want to be near an airport or seaport, and be close to the consumer.

“How else do you explain the situation in the two small industrial cities built 30 years ago in Qasim and Al-Ahsa? They are no more than 1.5 million square meters in space, yet both cities still have vacant lots and only 65 percent is occupied.”

Riyadh Industrial City and Dammam Industrial City are the fastest growing in the Kingdom. But that, he said, was because of their location and economic importance.

Al-Seif does not think that industries or industrial cities in the Kingdom will be damaged by the accession to the WTO. He sees it as a good move. “I do not think that our main three industries (petrochemicals, dairy, cement) will be negatively affected. On the contrary, they will be positively affected by our joining the WTO. It will increase competition and attract other investors to join in partnership with Saudi investors,” he said.

Joining the WTO would in fact probably speed up infrastructural development for industrial projects. That would mean a boost to the industrial cities. On the other hand, some family businesses would be affected by the WTO membership. There will have to be mergers, he thought.