New & Planned Arabian Cities Attract Foreign Investment

Arabia is meeting with some success in its efforts to entice foreign investors to six new economic cities in the kingdom.

The planned cities, first proposed in 2006, are designed to provide jobs for the thousands of Saudi college graduates returning from foreign universities, primarily in the US and Europe.

The Saudi Arabian General Investment Authority announced nearly a decade ago that the new cities would help develop various regions of the country and diversify the oil-based economy. After years of false starts, they are finally starting to take off.

David Dew, managing director of SABB, formerly known as the Saudi British Bank, says the outlook for foreign direct investment in the economic cities is positive, with significant ongoing interest from global multinationals, sometimes in partnership with large Saudi corporations.

“In particular, King Abdullah Economic City [KAEC] has attracted significant investment and already has an operational port capable of handling the largest container ships in the world,” Dew says. Nearly 25% of global trade passes through the Red Sea, and the KAEC port, north of Jeddah, is expected to become one of the 10 largest in the world.

“In addition, KAEC has an extensive infrastructure, manufacturing and logistics framework, including a number of famous global corporate names from the US, Europe and Japan,” Dew says. “We expect KAEC to play an important role in the ongoing diversification of the Saudi economy away from its traditional dependence on oil.”

KAEC offers such enticements as low energy costs and full foreign ownership. US-based food conglomerate Mars opened its first Saudi chocolate factory in KAEC in December 2014. Mars is one of approximately 100 local and foreign companies that have agreed to locate in KAEC’s Industrial Valley. The companies come from a cluster of industries: food, pharmaceuticals, logistics, plastics, building materials and automotive.

In February 2015, Al Salem Johnson Controls laid the foundation stone for an air-conditioner factory and training center in KAEC that will create 1,000 jobs. The company is a joint venture of the Al Salem Group of companies and Johnson Controls of the US.

KAEC’s current population of about 3,000 people is expected to reach 50,000 by the end of 2020, and 2 million when the city is completed in 2035.

Other new cities are planned in Hail, Medina, Jazan, Tabuk and the Eastern Province.