As part of Saudi Arabia’s push to diversify it’s economy, King Abdullah unveiled in 2005 a megaproject known as King Abdullah Economic City (“KAEC”). The idea is to build a brand new, 173 km²/66.8 sqm city on the coast of the Red Sea, around 100 km north of the Kingdom’s hub of commerce, Jeddah. Saudi Arabia is hoping to build a more geographically convenient alternative to Dubai in a bid to capture the commerce dollars, create jobs for its youth, and create a future beyond petroleum.
KAEC is just one of several economic cities planned for Saudi Arabia. You can see a promotional video for KAEC here:
What are we to make of the Saudi version of an international trading city? I will basically echo the comments that I made last month on doing business in Saudi Arabia: the chances that Saudi can make this city work to achieve its expected goals are slim to none. Saudi Arabia is the mega-economy of the Middle East because it is a major hydrocarbon exporter with lots of cash to spend. In practice, doing business there is a nightmare — it has an opaque legal system, bribery is rampant, visas are absurdly difficult to obtain for entering the country, women cannot leave their homes alone, business and government shuts down five times a day during prayer times and during the Islamic holidays of Ramadan and Eid, and the lifestyle is incredibly restrictive — forget about drinking alcohol, eating pork, or engaging in extramarital dating. Saudi’s KAEC experiment will, in my mind, end up with a city of sandcastles.
You might think Dubai would be suspicious of the KAEC project, as it is a challenge to Dubai’s position as a regional and international hub of trade. But the project is actually being constructed by Emaar, one of Dubai’s top construction companies, and the KAEC port is managed by the Dubai-based marine ports operator DP World. (Both are private companies substantially owned by the Dubai government.) Certainly the growth of KAEC is not purely zero-sum — but I find it interesting how Dubai’s institutions and Singapore’s institutions are getting closely involved in many projects across the world that challenge the position of both cities as centers of marine trade. That’s a topic for another post soon to come…