Red Sea Development Co assembling 10bn Saudi riyal debt package for giga-project

Project will contribute about 22bn riyals per year to the Saudi economy, chief executive says

Visitors to Saudi Arabia’s Red Sea Project will be able to sleep in overwater villas on clear blue waters. Courtesy The Red Sea Development Company
Visitors to Saudi Arabia’s Red Sea Project will be able to sleep in overwater villas on clear blue waters. Courtesy The Red Sea Development Company

The Red Sea Development Company is assembling a 10 billion Saudi riyal (Dh9.78bn) debt package in addition to the equity it has received from Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, as the company develops an area for tourists on the Red Sea slightly smaller than Belgium.

"There's no need for the capital from a bond or sukuk issue, between what we’re getting from the PIF, [public-private partnership agreements] and the debt package", chief executive John Pagano said, "although it would not be ruled out", he added.

The Arab world's largest economy is undergoing an economic overhaul as Crown Prince Mohammed Bin Salman, who oversees the kingdom's economic policy, rolls out reforms to cut the country’s dependence on oil under the overarching Vision 2030 agenda.

The Red Sea Project is one of three 'giga-projects' under the economic reform plan, alongside the Qiddiya entertainment zone and the $500bn Neom project. Boosting tourism is a major plank of economic reforms. According to the World Travel and Tourism Council, 10.4 per cent of global GDP is derived from tourism. By contrast, 3.4 per cent of Saudi Arabia's economy is from tourism.

The Red Sea Project is forecast to add 22bn riyals "of steady state contribution" to the economy per year, Mr Pagano said at a press briefing on the sidelines of the Future Investment Initiative in Riyadh. The area aims to welcome its first guests by 2022 and is targeting 1 million visitors annually by the time the project is complete.

At 28,000 square kilometres, the Red Sea project on the western coast of Saudi Arabia is one of the biggest tourism developments ever undertaken in the region.

It includes 200km of coastline and an archipelago of 90 untouched islands and coral reef, dormant volcanoes, desert canyons, mountains and abundant wildlife.

The company plans to leave 75 per cent of the islands undeveloped and by "using pricing to ensure we don't have too many visitors", will aim to target middle class luxury-minded travellers, Mr Pagano said.

The developer worked with the King Abdullah University of Science and Technology to calculate environmental impact. Through that process it identified where to put boat launches, bridges, hotels and dive sites, according to the chief executive, adding that the entire area will be carbon-neutral — save for most of the cars and the aeroplanes that will deposit tourists.

Updated: November 3, 2019 08:41 AM

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