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The world will soon have a new ultimate business destination. The $26 billion King Abdullah Economic City (KAEC ) initiated in 2005, is already making progress in becoming the world’s first ‘Smart City’. Cisco, the global networking leader, has signed up to wire this new city where the broadband speeds will be 10 times faster than the fastest internet speed anywhere on the planet. The city’s six key components — a mega sea port, industrial zone, central business district, resort district, educational zone and residential communities spanning 168 million square feet close to the Red Sea and an hour from the other economic hub of Jeddah – will give the global community a new competitive business and modern lifestyles destination.
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A rendering of the King Abdullah Economic City.
Image: www.kingabdullahcity.com
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The KAEC is part of an ambitious and well planned strategy of turning Saudi Arabia into one the world’s most competitive economies.
One of the key architects of this strategy is his Excellency Amr Al-Dabbagh, the governor of Saudi Arabia General Investment Authority (SAGIA), whose organization is the prime facilitator of the KAEC as well as being the Kingdom's apex body for strengthening inward investments to the country.
Last week, in an outstanding speech to students and faculty of the Columbia Business School and School of International and Public Affairs at Columbia University, his Excellency Amr Al-Dabbagh, presented the new strategic initiatives that will lead the country to be among the top 10 most competitive nations by 2010 – its 10x10 vision.
Charismatic Leadership
A sharply dressed and eloquent speaker, His Excellency Amr Al-Dabbagh impressed the Columbia University students with the depth of his strategic and fact based perspective.
His Excellency certainly has a very distinguished background. Prior to his role at SAGIA, he served as the President & Chief Executive Officer of a large Saudi Arabian conglomerate - the Dabbagh Group.
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Left: Excellency Amr Al-Dabbagh, the Governor of Saudi Arabia General Investment Authority (SAGIA)
Image: Courtesy, Young Arab Leaders Association (YALA) Columbia University
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He has a Bachelor of Business Administration from King Abdulaziz University meanwhile his international business career developed through executive programs in management at the Harvard Business School, the Wharton School, the John F. Kennedy School of Government and the London Business School, as well as through training programs with Merrill Lynch, Coutts & Co., and Banque Worms. In January of 1995, the Executive Board of the World Economic Forum and the Editorial Board of Worldlink Magazine jointly designated His Excellency as one of only 100 “Global Leaders of Tomorrow.”
Below is summary of his Excellency Amr Al-Dabbagh’s comments to the Columbia students and faculty.
SAGIA directing the 10x10 vision
The strategy of SAGIA was initiated in 2004, with the vision to achieve rapid and sustainable economic growth in Saudi Arabia, capitalizing on the Kingdom’s competitive strengths as the global capital of energy and as a major hub between East and West. Its strategy that is already in play is expected to draw investments worth SR300 billion (approx. $80 bill) and create more than a million jobs. Based on this new strategy, three mega initiatives have been launched.
Establishment of a National Competitiveness Center
The first initiative is to establish a national competitiveness center. The role of this center is to assess and support the development of competitiveness in the Kingdom and benchmark against different competitive indicators measured by international standard reports, such as the World Bank Doing Business Report. Among those who advised on this initiative is Professor Michael Porter of Harvard Business School.
The NCC was established in 2006 and is monitoring and supporting the enhancement of competitiveness in the Kingdom through data-driven, objective advice.
Economic Cities – Pockets of Competitiveness
The second mega imitative is to create pockets of competitiveness across the large landscape of country. These pockets of competitiveness are called, economic cities. “In developing the Economic Cities concept, over a thousand of the world’s free zones were surveyed. The sixty most successful zones were selected and meticulously studied to determine key success factors. The result is the Economic Cities concept. An ultimate innovation in Public-Private-Partnerships (PPP), the Economic Cities are comprehensive, fully integrated developments featuring a “live, work and play” design. They are cities and not zones.”
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The Economic
Cities Model
Source: SAGIA's website
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According to SAGIA, six of such cities are expected to add more than $150 Billion to the Saudi GDP and generate more than 1.3 million direct jobs by 2020.
They are built with the state-of-the art infrastructure. New generation of technology has been established. For instance, Cisco (NASDAQ: CSCO) will partner in developing a new-generation environment that will attract global information and communications technology (ICT) firms. Cisco is working with Emaar.E.C to launch the first economic city, King Abdullah Economic City, the world's first 'Smart City'.
Every single step of infrastructure is studied carefully and going beyond best practices to facilitate a pro-business environment for domestic and foreign investors. “We are not only benchmarking against best practices, we are setting new standards and going beyond best practices”, the governor said.
The six cities will accommodate a total of 4.8 million collective population and will enhance the GDP per capita from 19.5 to 33.5 per capita by 2020.
Specialization in three sectors
These Economic cities and other areas in the Kingdom act as a host of the third initiative, which is to capitalize and specialize in three major sectors that are correlated to the initial core competencies of Saudi Arabia. These sectors include: Energy, Transportation and Knowledge-based industries.
Encompassing ¼ of the world’s oil reserves, Saudi Arabia is capitalizing on being the world energy capital. After extensive studies by McKinsey & Company, SAGIA has picked 10 industries, which represent the most cost effective areas at which Saudi Arabia can compete globally in. This includes downstream industries such as petrochemicals, water & electricity, and energy-intensive industries such as minerals. “For example, the cost of producing aluminum in Saudi Arabia is 33% cheaper that of the US”. “These are anchor industries. They will help us in developing complement lighter industries and services” the governor said. The total value of investment in the energy value chain is in the range of $300 Billion.
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Another focus under this sector is the plastic industry. Today, Saudi Arabia has only 1% of global plastic market share. SAGIA’s goal is to raise the kingdom global market share of plastic from to 15% by 2020 by doubling the domestic production capacity and encourage foreign relocation to Saudi Arabia to enjoy the cost advantage.
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With regard to the transportation sector, SAGIA will leverage Saudi Arabia’s geographical position as a strategic hub between East and West by working with relevant authorities and players in the region to position the country as an efficient launch pad for goods and services. “Logistics companies are playing a great role in determining the next destination of the manufacturing units around the world”, the government said.
The final strategic sector is the knowledge-based industries. The sub sectors of this initiative include: Education, life science, Health, and Information Technology. To foster life science and information technology, the R&D-driven KAUST University has been launched with a total investment of $25 Billion, the first co-education school in the country. Another initiative within the knowledge based sector is the knowledge economic city that has the role of developing the Kingdom’s technology base. The city will comprise various zones designed to compliment each other. For instance, the city will include a technology and knowledge based industry zone an advanced IT studies institute and a campus for medical research and life sciences.
Progress being benchmarked
The initial outcomes of these initiatives since 2004 can be summarized as follows:
- Saudi Arabia’s ranking in the World Bank report of Doing Business jumped from to 67 in 2005, to 38 in 2006 and to 23 in 2007.
- Saudi Arabia’s ranking in UNCTAD FDI flow is the 20th in the world today and the first in the Middle East in FDI.
- Value of investment licenses in Saudi Arabia increased from SR15B in 2004 to SR200B in 2005, SR251 in 2006 and to SR334 in 2007.
Recently, SAGIA arranged the 2nd Global World Competitiveness Forum in Riyadh that attracted top business executives, international political leaders, selected intellectuals, and academics who share an interest in global competitiveness. Among those who attended last year conference is Bill Gates of Microsoft. The theme of this year’s conference is “Competitiveness as an Engine for Economic Growth”
With measured progress, Saudi Arabia is well on its way to capitalizing on its core competencies in energy and its strategic location to prosper and diversify its economy. Establishing the competitiveness center; launching new economic cities that capitalize on three main sectors: energy, transportation and knowledge based - are all ingredients that certainly bode well for the future of Saudi Arabia’s global competitiveness.
“Believe it or not, today Saudi Arabia is the 23rd most competitive nation in the world” said the Governor. Certainly then, Saudi Arabia becoming one the top 10 most competitive economies of the world is no mirage but a global oasis well in the making.
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The Author, Ayman Mansi, is an MBA candidate at Columbia Business School.
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