King Abdullah Economic City (KAEC), a special economic zone on Saudi Arabia’s Red Sea coast near Jeddah, expects its inflow of new corporate tenants to speed up this year as the economy proves resilient to low oil prices, KAEC’s managing director said.
The fate of KAEC is a barometer of business confidence as the Saudi economy copes with a drastic drop in oil revenues this year. The zone is also important for the kingdom’s long-term efforts to diversify its economy beyond oil into manufacturing and trade.
So far the government has kept the economy growing robustly by drawing down its reserves to spend heavily, and Fahd Al Rasheed said he had not seen any pull-back by companies seeking to set up logistics and light manufacturing operations at KAEC.
“We’re not seeing any significant impact on demand from the oil price. Domestic consumption is growing and government spending is strong,” said on the sidelines of the World Economic Forum in Jordan.
KAEC expects to attract about 50 new companies to establish operations this year, versus 35 last year, and thinks it will sell around 2,500 residential units in 2015, roughly the same level as in 2014, Mr Rasheed said.
The port, which aims to become a hub for the region, is on track to reach annual capacity of 4 million twenty-foot equivalent units next year from 2.7 million now, he added.
The city’s population is now about 3,000 people; it is expected to roughly double this year and hit 50,000 by end-2020, rising to the ultimate target of 2 million around 2035.
Although the project is planned and supported by the government, it is being developed by publicly-listed firm Emaar the Economic City (EEC), where Mr Rasheed is chief executive.
EEC is a consortium headed by Dubai’s Emaar Properties and Saudi investors – the kind of public-private partnership with which the kingdom hopes to develop industrial infrastructure in a cost-effective way.
EEC’s net income attributable to shareholders rose 72 per cent from a year earlier to 85.7 million Saudi riyals in the first quarter of this year, as revenues gained 39 per cent to 229.6m riyals.
On June 3, KAEC will hold an conference in Riyadh to attract investment, aiming to draw about 500 companies from around the six-nation Gulf Cooperation Council, Mr Rasheed said.
In addition to outright sales, it is open to the idea of discussing third-party arrangements in which it might co-invest with KAEC tenants.
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