The launch of the Gulf’s newest megaport is the latest milestone for the one of the world’s most ambitious property projects, Saudi Arabia’s King Abdullah Economic City. As blue-chip firms move in, chief executive Fahd Al Rasheed says that he’s struggling to keep up with demand
Two years ago, when Arabian Business first visited the King Abdullah Economic City (KAEC) project, based an hour north of Jeddah, a lone dredger was still bringing up hundreds of tonnes of sand from the sea bed in order to create the enormous deepwater manmade port. Fast forward to 2014, and the King Abdullah Port (KAP) boasts eight huge cranes, can serve two colossal container ships at the same time, and is the kingdom’s first privately funded and owned port.
It’s perhaps the most important milestone yet for one of the world’s most ambitious megaprojects. Announced in 2005, the KAEC masterplan involves building an entire city from scratch on a piece of land that is roughly the size of Washington DC, with investment in the project estimated to be as much as $100bn by the time it is fully completed.
For the man who runs King Abdullah Economic City, Fahd Al Rasheed, the port’s infrastructure, and its strategic location on the Red Sea, make it a game changer, both for the city, and for Saudi Arabia. “It’s a gift that keeps on giving in terms of demand, it’s unbelievable,” the chief executive says. “We already have capacity for 1.3 million containers in operation and we’re planning four million in the next two years and seven million by 2017.
“You’re talking about 24 percent of global trade going through the Red Sea, and this is a trend that’s never been addressed by a Red Sea port. We think King Abdullah Port is good for Saudi Arabia because it will lower logistics costs and increase our competitiveness across the board, while also changing the logistics map globally.”
Al Rasheed admits that it was a risk to build the port — which has had $665m worth of investment pumped into it so far — without guarantees from the big global shipping lines that they would serve the facility. Now, he says, shipping lines are “rewriting their networks” to include the port, which is arguably in a far more convenient location than Dubai’s Jebel Ali.
But the opening of King Abdullah Port is just part of the KAEC story. Encircling the port is the city’s Industrial Valley, while further afield are areas set aside for residential communities, tech clusters, universities, hospitals and so on. On the eastern side of the city will be its second major link to the outside world, the Haramain Station. When that is opened at the end of next year, the city will become one of four stops on Saudi Arabia’s latest high-speed rail network, linking the megaproject with Jeddah, Makkah and Madinah. Nearby is the King Abdullah University for Science and Technology (KAUST), while to the north lies the PetroRabigh petrochemicals plant — the largest of its type in the world.
There is much work to be done before that second link comes into play. KAEC already has some 70 companies now in the process of setting up bases onsite — including multinationals like Mars, Pfizer and Danone as well as local family giants such as Abdul Latif Jameel and the Naghi Group — and is now working hard to attract mid-sized firms, as well as companies not in the specific sectors it has targeted before. That’s in line with a similar push from the Saudi Arabian General Investment Authority (SAGIA), which provides licences for foreign companies in the kingdom, and which saw a new governor, Abdullatif Al Othman, take over two years ago.
“Certainly, with the new governor, there’s a lot more focus on certain sectors,” says Al Rasheed. “We’re very focused on life sciences, we’re very focused on fast moving consumer goods [FMCG], as well as plastics and logistics. We believe the Industrial Valley story is very strong — in fact we are developing more than half of it in the next two years.
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