New Saudi Port as Big as Washington DC
Emaar Economic City, a big Saudi real estate firm, has started operations at the country's first privately owned port and will more than triple investment in the facility over the next five years, the company's chief executive said.
"Shipping lines are redrawing their logistics maps, where they stop and where they go. It will impact every port around the world," Fahd Al Rasheed said in an interview on the sidelines of the World Economic Forum in Davos.
Emaar Economic City, a consortium headed by Dubai's Emaar Properties and Saudi investors, is focused on building the King Abdullah Economic City, a special economic zone up Saudi Arabia's Red Sea coast from Jeddah.
The zone is projected to be the size of Washington DC when completed, hosting as many as 2 million people and helping to diversify the country's economy beyond oil into light industry and shipping.
The project is important for Saudi economic policy-making because, although it has Saudi government backing, it is being operated by a company with a local stock market listing and a significant private investor base - an effort to involve market discipline in the project and spread wealth generated by it among the broad population.
King Abdullah Economic City's port, which began operating on Jan. 6, has the potential to become a global logistics hub, handling trade for the entire region, Rasheed said.
"Twenty-five percent of global trade goes through the Red Sea but we've never leveraged it in the region."
A total of 2.5 billion riyals ($665 million) has been invested in the port so far and the amount is expected to rise to 9 billion riyals by 2018, Rasheed said. The port's annual capacity, now 1.3 million twenty-foot equivalent units, is expected to rise to 4 million TEUs in two years, 7 million in 2018 and ultimately 20 million.
Meanwhile, an industrial zone attached to King Abdullah Economic City is expected to be completed by 2020. It has so far attracted 70 firms, with factories operational in pharmaceuticals, building materials, car parts, plastics and packaging, Rasheed said. Companies are offered very low rents and soft loans from the government for capital investment.
"We are now at a stage where we are not only inviting big names to locate in King Abdullah Economic City but we also need third-party developers to co-invest with us to develop faster, especially in housing," Rasheed said.
He added that Emaar Economic City had so far raised $4 billion of capital and attracted an additional $10 billion to the project from other investors and from sales.
"Our cash flow right now is very healthy so we don't project any need to raise funds."
Copyright Reuters 2014.