World Business

Saudi Arabia rolls out red carpet

By Zainab Fattah (China Daily)
Updated: 2010-06-04 10:17

King Abdullah of Saudi Arabia is seen in this handout photo released to the media on Wednesday. King Abdullah Economic City, one of four metropolitan areas under construction in Saudi Arabia, will be the first place where foreigners are allowed to own property as the kingdom seeks new sources of investment. [Memac Ogilvy Via Bloomberg]

DUBAI - King Abdullah Economic City, one of four metropolitan areas under construction in Saudi Arabia, will be the first place where foreigners are allowed to own property as the kingdom seeks new sources of investment.

The city, known as KAEC and named after the head of state, is being built by Emaar Economic City, a company controlled by the Saudi Arabian government and Dubai's biggest property developer. When completed in 2025, the $27 billion project will cover about the same area as Brussels.

"This is the first freehold city in Saudi Arabia," said Fahd Al-Rasheed, Emaar Economic City's chief executive officer. "A lot of people want to invest in the Saudi market and see it as a frontier for real estate investment because of the population explosion here."

KAEC, about an hour's drive from Jeddah, is designed to house about 2 million people and generate 1 million jobs. The city is part of a $400 billion plan announced by the government in 2008 to invest in Saudi Arabia's infrastructure and make the country less dependent on the oil industry. Saudi Arabia's population has more than doubled since 1986 to about 25.5 million, according to International Monetary Fund data.

The other three cities under construction are Knowledge Economic City in Medina, Jazan Economic City in Jazan and Prince Abdul Aziz bin Mousaed Economic city in Hail. Two more economic cities are planned in Tabuk and the Eastern Province.

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The Economic Cities Act issued almost two months ago makes KAEC the first place where foreign nationals and companies are allowed to own property in the kingdom, the CEO said. Regulations putting the act into effect will probably be issued within a few months, he said. The new rules will also cover foreclosures, repossessions and the creation of a land registry.

Developers are expanding in the kingdom after property prices crashed in other Persian Gulf markets, including the United Arab Emirates. Emaar Properties PJSC, builder of the world's tallest tower in Dubai, owns 30 percent of Emaar Economic City and 40 percent belongs to the Saudi government. The joint venture's initial public offering in 2006 drew bids from 10 million Saudi nationals.

KAEC will have the Red Sea's biggest port and an industrial district where French oil company Total SA and US chocolate maker Mars Inc will operate. The city will be spread over 168 square kilometers, more than the Belgian capital's 162 square kilometers.

"Over the next five years, we expect to spend more than $4 billion developing infrastructure and assets in the city," Al-Rasheed said. "This won't be done by us alone; it would be with other partners."