EEC slowed building activity in Saudi Arabia after banks curbed lending in the kingdom
Emaar Economic City, the developer of King Abdullah Economic City in Saudi Arabia, may receive a government loan to help pay for work on the Red Sea coast project.
The government is currently considering the loan, Yahya Hamidaddin, the Saudi Arabian General Investment Authority’s director of Smart Cities Development, said on Wednesday at a conference in Jeddah. The company asked the authority for assistance to arrange the loan, he said, without providing further details.
Emaar Economic City, owned by companies including Emaar Properties, the biggest developer in the UAE, slowed the building of houses, apartments, shopping centers and office blocks in Saudi Arabia after banks curbed lending in the kingdom. The company terminated a $104m contract this month it awarded to Freyssinet Saudi Arabia in 2008.
The investment authority, known as SAGIA, is overseeing the development of four economic cities. These are King Abdullah Economic City, known as KAEC, Knowledge Economic City in Medina, Jazan Economic City in Jazan and Prince Abdul Aziz bin Mousaed Economic city in Hail.
About an hour’s drive from Jeddah, KAEC is designed to house about 2 million people and generate 1 million jobs. The city is part of a $400bn plan announced by the government in 2008 to invest in Saudi Arabia’s infrastructure and make the country less dependent on the oil industry.
Hamidaddin said: “Due to the financial crisis long term financing was harder to get by Emaar Economic City in Saudi Arabia. We originally expected the first phase of office and apartment buildings in the economic city to be completed by the end of 2009 but due to the effects of the global financial crisis, which mainly were felt in 2008, a lack of funding was experienced.”
Hamidaddin said the Riyadh based authority will start operations at the port at KAEC in the fourth quarter of 2011. Emaar Economic City is “putting most of the focus on the port” to attract businesses."For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Does this imply that Emaar is partly funding this KAEC project from its own finances and is it possible to clarify that point? Given the current estimates of Dubai's existing borrowing and as the government owns 32 per cent of Emaar, that can only make matters worse, or is my economic rationale completely off the mark?
When is the payback eventually expected on this 9 million square metre project for Emaar, the overall KAEC contract value is US$ 50 billion according to one website!