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Page added on August 7, 2017

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Saudi Arabia Builds Cities in the Sand to Move Beyond Oil

Consumption

After relying on oil to fuel its economy for more than half a century, Saudi Arabia is turning to its other abundant natural resource to take it beyond the oil age — desert. The kingdom is converting thousands of square kilometers of sand into new cities as it seeks to diversify away from crude, create jobs and boost investment.

In the past month alone, the world’s biggest oil exporter has announced two major developments — one covering an area bigger than Belgium and another almost the size of Moscow. That’s on top of plans to build a series of so-called economic cities — special zones in logistics, tourism, industry and finance, an entertainment city and a $10 billion financial district.

“The overall progress with the economic cities has been very slow, even before the collapse of the oil price,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC. “Since then, the pace of development has moderated even further with a number of projects being placed on hold.”

When “Saudi Vision 2030” was announced last April, the 84-page blueprint said the government would work to “salvage” and “revamp” economic city projects executed over the past decade that “did not realize their potential.”

Here’s a look at some of Saudi Arabia’s most ambitious projects:

The Red Sea

The kingdom last week announced plans to turn 50 islands and 34,000 square kilometers (13,127 square miles) — an area bigger than Belgium — along its Red Sea coastline into a global tourism destination. Located between the cities of Umluj and Al Wahj, the project aims to attract luxury travelers from around the world and will be developed by the Public Investment Fund, the country’s sovereign wealth fund. Construction is expected to start in 2019 and the first phase completed by 2022. The development cost of the project wasn’t given.

Visitors will have access to the ancient ruins at Mada’in Saleh, a relic of the same ancient civilization that built the city of Petra in Jordan. A promotional video for the project with dramatic music showcases white sand beaches and flocks of birds soaring over turquoise waves.

Bringing sun-seekers to Saudi beaches could transform a tourism industry that relies almost solely on Muslim pilgrims visiting holy shrines in Mecca and Medina. The country’s restrictions on alcohol and dress, however, could make it a hard sell for foreign tourists. The government will need to “get through the cultural and legal hurdles,” said Crispin Hawes, London-based managing director at Teneo Intelligence. “If you can’t change restrictions on alcohol and dress, that market effectively disappears.”

Mada’in Saleh

Photographer: Vivian Nereim/Bloomberg

Al Faisaliyah

The kingdom announced detailed plans for the Al Faisaliyah project last month. Located to the west of Mecca, the city will have residential units, entertainment facilities, an airport and sea port. The project will cover 2,450 square kilometers — almost the size of Moscow — and is expected to be completed by 2050. The Makkah Region Development Authority is supervising the project and the PIF is also involved. An investment figure hasn’t been given.

Entertainment City

Saudi Arabia in April announced plans to develop the kingdom’s largest cultural, sports and entertainment city in Al Qidiya, southwest of Riyadh. The project will be developed on 334 square kilometers and will include a safari area and a Six Flags Entertainment Corp. theme park. The country’s sovereign fund is the main investor, along with local and international investors. Construction is due to start next year and the first phase should be completed by 2022. An investment figure was not given.

As part of plans to overhaul its economy, the government is relaxing the rules on entertainment in the ultra-conservative society. Concerts, dance shows and film screenings have drawn thousands of people over the past year. By 2030, the kingdom aims to double household spending on recreation to 6 percent.

“While the current authorities seem to be committed to open up the country to forms of entertainment previously banned, a big test will be the reaction of the more conservative parts of the Saudi society which have already shown great reservations toward the newly founded Entertainment Authority as reflected through social media widespread criticisms,” said Philippe Dauba-Pantanacce, a London-based senior economist and geopolitical strategist at Standard Chartered Bank.

King Abdullah Economic City

KAEC, named after the former head of state, is the kingdom’s first freehold city and is being developed by Emaar Economic City, a company controlled by the Saudi government and Dubai’s biggest property developer Emaar Properties PJSC. Covering about the same area as Brussels, the project has attracted $7.9 billion of investment and secured enough cash and credit to fund its planned spending for the next decade, according to KAEC. The project includes a deep-sea port, a 55 square-kilometer logistics hub, a sports and recreation center and more than 6,500 residential properties.

King Abdullah Financial District

KAFD, as it’s known, was envisaged as Saudi Arabia’s answer to the Dubai International Financial Centre, bringing banks, financial-services firms, auditors and lawyers, as well as the kingdom’s stock exchange and capital-market authority into one area. The project, north of Riyadh, has been slowed by construction delays since work began in 2006 and is more than 70 percent complete. As of last April, not a single financial institution had agreed to take space in the 73 buildings the state is constructing, said Waleed Aleisa, chief executive officer and project manager of the district at developer Al Ra’idah.

The 1.6 square-kilometer district is owned by the Saudi Public Pension Agency and the government is looking at ways to lure banks with incentives that could include tax breaks lasting a decade or more, as well as separate regulation that makes it easier to hire and issue work visas, Aleisa said. Five buildings at the district’s core will be surrounded by dozens of offices, apartments, hotels, conference centers and entertainment venues. On the ground, walkways below street level branch out to connect buildings and provide space that’s 8 degrees Celsius cooler than street level.

Saudi Arabia’s first so-called smart city development, the city in Medina will focus on intellectual property, knowledge-based industries, medical, hospitality, tourism and multi-media. It will also have serviced apartments, a hotel and conference facilities, according to the Economic Cities Authority website. Residents of the city, which will cover 4.8 square kilometers, will have access to Mecca and Jeddah via the Haramain High Speed Railway. KEC was listed on the Saudi stock exchange in 2010 after raising about $270 million.

Prince Abdulaziz bin Mousaed Economic City

This is a mixed-use development located on 156 square kilometers of land in Hail in the north of the kingdom. As well as a residential area, the city will also have an international airport, hotels, shopping centers and entertainment venues.

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20 Comments on "Saudi Arabia Builds Cities in the Sand to Move Beyond Oil"

  1. peakyeast on Mon, 7th Aug 2017 7:58 am 

    I will be amazed if this doesnt pan out to be pure insanity and waste

  2. peaktard on Mon, 7th Aug 2017 8:51 am 

    build it cheap, energy efficient and business friendly. look at big box stores. they’re cash cows but built cheaply

  3. rockman on Mon, 7th Aug 2017 9:48 am 

    “…look at big box stores. they’re cash cows but built cheaply”. The big box stores only generate cast flow if folks buy stuff there. The vast majority of disposable income of the Saudi citizens comes from their oil exports. Decreasing income means empty stores.

    And having a big city doesn’t guarantee economic vitality: just ask the folks in Detroit. LOL.

  4. joe on Mon, 7th Aug 2017 9:48 am 

    Sure. Millions of westerners will be happy to go to the home of terrorism and not drink or be allowed to hug or kiss their wives. Great idea.
    What’s that about mouses and cheese?

  5. Cloggie on Mon, 7th Aug 2017 9:55 am 

    Fata Morgana is a concept mostly associated with deserts.

    https://en.wikipedia.org/wiki/Fata_Morgana_(mirage)

    Saudi Arabia is turning to its other abundant natural resource to take it beyond the oil age — desert.

    Perhaps a better idea than letting Westerners have a dive in the sea in a burka and afterwards lessen their thirst with a glass of cooled camel milk, could be to use the “abundant desert resource” in combination with their abundant cash resource to set up a replacement energy source, namely by plastering the desert full with solar panels and create hydrogen or ammonia or some other fuel conversion utility and serve as the storage medium to even out the coming intermittent global renewable energy base.

    KSA has very predictable and intense sunshine and is close to European markets. Install once, harvest for 30 years.

  6. bobinget on Mon, 7th Aug 2017 11:43 am 

    Cloged,

    Wind power might be a better choice.
    At present, heat destroys solar panel production.
    I’m almost certain, eventually, scientists will USE
    that heat to advantage, so far, not so much.

    Because I have plenty of irrigation water in summer
    I’ve concocted fine spray cooling devices that
    like those used on heat pumps, increase PV electric production as much as 15% on hot days.
    A hot day in Southern Oregon, I’m guessing would be an ideal day in KSA.

    Yes, KSA is indeed shifting away from PV to wind.

  7. Bob on Mon, 7th Aug 2017 12:17 pm 

    Let’s see: SA wants to become a tourist mecca to support itself after the age of oil. But oil is needed to get there by plane, train bus or automobile. SA floggs people for minor offenses, beheads about 1 person a day, home to terrorism, is waging war with Yemen, women have no rights, need to wear head gear, can’t drive, no one can drink alcohol. Does that about make everything clear to you, dear reader?

  8. MASTERMIND on Mon, 7th Aug 2017 12:19 pm 

    People don’t want the truth. They want to feel happy. Imagine if the MSM were to run front page stories about how shale is a joke — how conventional oil and gas are well past peak — how solar and wind are nonsense — how EV’s are bullshit and increase pollution… how we shredded Iraq and Libya and Syria so that we could keep BAU alive and continue to live large for a few more years….This would cause mass hysteria. So since nobody wants truths — and giving them truths would only end badly for all involved… might as well use the MSM to keep the sheeple under control and entertained. See everybody wins! The public get their puff of hopium, the MSM owners get their shot of influence and wealth, and politics get their PR department for free, and doomsters get their laughs and (like everybody else) a few more years of life.

  9. MASTERMIND on Mon, 7th Aug 2017 12:23 pm 

    The deep state killed Simmons! The us government couldn’t be show to be friends with a peak oiler!

  10. bobinget on Mon, 7th Aug 2017 12:40 pm 

    No joke, electric cars are scaring the pants off
    short term oil traders. They needn’t worry.
    In a few months no one will recall what they are saying today. (In the US, we will face shortages).

    One wag printed out, ‘replacing even one percent of the current ICE fleet will use-up out entire stash of copper. Lets say he, it must be a he, is close,
    say 2% of our current fleet. What on earth should a formally tall person from Oregon do?
    Buy copper equities?
    US or foreign?
    How about all that aluminum used to make more fuel efficient cars and revamped grid transmission lines? It’s been aluminum used in those wires
    for years, Not Copper.

    Well, we have lots of copper and aluminum ore.
    (no shortages of ore but electricity to make aluminum, that’s a different horse.
    Since we are determined to export NG, our future, for short term gain, I’m voting natural gas.

    Because Canada has lots of n. gas, it’s currency weak against the dollar, is all the more reason to buy copper and N. Gas equities in Canada.

    In troubled times stick with the elephants.
    “When elephants fight, all the tall grass around gets trampled”.

  11. peaktard on Mon, 7th Aug 2017 12:53 pm 

    bob, the big money alpha apex predators decided that their feeding ground is the tards. copper stocks, no thanks. no money, locked in gold.

    if predators decided to feed on peak oiltards then it’s done.

    thanks for the useless advice though

  12. MASTERMIND on Mon, 7th Aug 2017 1:09 pm 

    I can’t wait to visit a Saudi entertainment hub!

  13. Kenz300 on Mon, 7th Aug 2017 1:32 pm 

    Putting solar panels in the desert.

    What a great idea.

  14. Sissyfuss on Mon, 7th Aug 2017 2:02 pm 

    Making SA an entertainment center is about as realistic as 72 virgins waiting for you after you blow yourself to smithereens.”Okay, who’s
    got the Superglue? I just found three fragments of my Johnson.”

  15. MASTERMIND on Mon, 7th Aug 2017 5:20 pm 

    It’s all horribly unsustainable setting up cities in places where there should only be sand and camels. While the Saudi oil export surplus dwindles towards nothing, the Saudi state keeps inching ever closer to internal collapse. These (soon-to-be-ex) oil-states have not much to offer the world beyond their oil trade fueled money circulation machines. When the party is over the emperor’s clothes amount to nothing. No oil, no food, no ground water, no internal security, no military power to strong arm their international assets, etc. what do these Persion Gulf states have except radical religious views and skyscrapers in the desert? They will be forgotten within years after the oil money runs dry.

  16. Anonymouse on Mon, 7th Aug 2017 11:13 pm 

    I wonder if it every occurred to the towels-heads running ‘house of saud’, or even the writers at jewberg, that none of these ‘sauds’ proposed cities, ostensibly to move arabia ‘beyond oil’, will do nothing of the sort?

    Entertainment – requires discretionary income, and while rather important, is not, of itself, a productive activity.

    The sauds concept of an economic city, and finance city(one and the same really), borrow heavily from their amero-zionst masters. And, as such, are largely based on, well, fraud. The free-world the sauds look to emulate is already over-finalized, and, yes, riddled with fraud and tons of extractive and unproductive behavior. Not clear to me what the sauds expect they can bring to table by building even more such centers in a saturated market…

    Long story short, nothing in the sauds plans will ‘diversify’ their economy, especially since everyone else is,and has been chasing the same rabbit for a lot longer and doing a better, or worse job at it, depending in your PoV. But, if the sauds wish to dig themselves into an even bigger hole than the one they are currently in, I say, have at it. Nothing accelerates collapse better than mal-investments, and the greater the scope and scale of the mal-investment is, the bigger the collapse.

    And no one, outside the suads masters in washindum and tel aviv, deserves a messy collapse than the ‘house of saud’.

  17. Cloggie on Tue, 8th Aug 2017 7:24 am 

    ”Okay, who’s got the Superglue? I just found three fragments of my Johnson.”

    That’s too pessimistic. I think Lonnie’s services centered around his super-soaker will be in great demand in super hot KSA.

    https://en.wikipedia.org/wiki/Lonnie_Johnson_(inventor)

  18. Sissyfuss on Tue, 8th Aug 2017 7:43 am 

    Oh Cloggedstub, I’m sure Lonnie modelled his super soaker after his own magnificent Johnson. And though I be a whitey, I am black from the waist down. If you know what I mean.

  19. Cloggie on Tue, 8th Aug 2017 8:36 am 

    I’m sure Lonnie modelled his super soaker after his own magnificent Johnson.

    You can bet your bottom dollar for that to be true.

    And though I be a whitey, I am black from the waist down. If you know what I mean.

    I don’t, but the good news is that I don’t care.

  20. joe on Wed, 9th Aug 2017 10:45 am 

    Anonymouse, for the Saudis, beyond oil, means the foundation of their revenue streams, they know oil is finished, that the bumpy plateau is here and over the next few decades that oil demand and price will be all over the map, so they want somthing more reliable. Right now the middle east has got by building malls and apartments, building brand new cities for tourists is NOT different. Its a model for failure. Its like the other tourist island crap the other genius Arabs have tried, giant palms and ‘the world’. It’s bullshit. Its interesting to note that they will offer sites like the one Jordan has in Petra. Ironic that the best history that the Arabs can offer is giant graves.

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