More incentives needed for Saudi economic cities

More incentives need to be offered to the private sector to ensure the success of Saudi Arabia's four economic cities which are currently under construction, Merrill Lynch said on Thursday.

Although analysts agree that the mega-projects are among the biggest long-term drivers of the kingdom's economy, more needed to be done to encourage private sector involvement.

In a new report, Merrill Lynch said uncertainties regarding the cities' governance and jurisdiction needed to be clarified in a long-awaited new legislation.

"These projects rely more of private sector involvement than government spending. We believe that there are not enough incentives yet for the private sector to push forward these projects once the basic infrastructure is completed," the report said.

Saudi Arabia is currently building four economic cities - King Abdullah Economic City, Hail Economic City, Madinah Knowledge Economic City and Jazan Economic City - which are expected to host about five million people and generate 1.3 million jobs.

They are also expected to almost double the per capita income in the kingdom.

Infrastructure for all economic cities is expected to be completed by 2025 with private developers and contractors taking the lead from 2014-15.

"Given the huge scale of these projects, we believe the involvement of private sector depends on the long-awaited economic cities act, which will clarify the uncertainties regarding cities' governance, jurisdiction and the life standards," the report added.

Regarding Saudi banks, Merril Lynch added that it believed the loan growth recovery would be gradual in 2010 with 7 percent growth followed by a true recovery in 2011 of 14 percent.