Economic Diversification Strategies in Saudi Arabia: The Knowledge Economic City

December 6, 2017 in Infrastructure

The Knowledge Economic City (KEC) is a publicly listed company, created to manage the KEC project in Madinah. The project aims to place Saudi Arabia at the centre of knowledge based industries with a formidable new city design.

The Economic City in Madinah will become a cultural landmark for visitors and a national icon for knowledge based industrial development. It comprises of several compounds, including a technology institute, a centre for Islamic civilisation studies, a museum about the life of the Prophet Muhammad (peace be upon him), a centre for medical sciences, retail centres, a business area, and high end residential apartments and homes. The residential spaces will all be fitted with modern amenities.

The city will offer residents and workers an excellent low-pollution environment with ample access to sports centres, high quality education and comprehensive healthcare services. Comfortable practical housing is available, designed for modern business people and their families.

An institute of higher technology will be constructed, alongside new training centres, scientific laboratories, branches of universities and research centres from the Islamic world. These institutions plan to specialise in telecommunications, multimedia and IT applications.

The KEC is furthering knowledge of Islam with an interactive museum. Visitors can go through the sequence of the holy missions, concluding with the Prophet Muhammad (peace be upon him). Scholars and researchers can study at the Islamic Civilisation studies centre affiliated with the museum to explore the prophetic disciplines of Islamic scripture.

The project began in 2006, as Madinah became host to the third Economic City in the country. The city’s 6.9 million sqm plot is located on the eastern side of Madinah within the holy zone. King Abdulaziz road runs through the site. A main 100m wide axis links it directly to the underground parking and bus loading facilities of the holy mosque. The city is connected to a major highway and to arterial road networks in Madinah, the new airport road, and Al-Jameaat road. The site is only 5km away from the holy mosque and 8km from the International Airport. A high-speed railway station is conveniently located on the eastern side of KEC. This means that there will be a variety of access points for visitors and residents to enter efficiently.

Group CEO Fahd Al-Rasheed talked to Business Insider UK about the economic benefits of Saudi Arabian super cities. He said:

“We are trying to create a new initiative to diversify our economy away from just oil”

There are multiple benefits of a knowledge based economy. It is not dictated by external finite resources like the oil industry. The products and inputs (information, skills etc.) in the knowledge economy are infinite and can be created and used in any location at any time. This principle will keep the KEC powered for a very long time.

In addition, the educational facilities available in the city are largely geared toward generating innovation, inventions, new products, and new modes of managing economic activity, so a flexibility of demand is perfectly viable as times change.

In keeping with other diversified economies, the KEC in Saudi Arabia will compete for business and trade. According to the Business Insider, the country hopes to ‘draw from both Chinese manufacturing and Western tech innovation’. Mr. Fahd Al-Rasheed said:

“The idea is to make [the cities] into a global logistic and manufacturing hub [for the] region. We want to compete with China for manufacturing and India for logistics.”

This means that big companies, and the “best talent irrespective of nationality” will be invited to the city to create jobs. Mr. Al-Rasheed said “those jobs will convert into residents”, which will bring in further money from property. However, tenants are also allowed to be residents without working in the city.

Over 10,000 people have been employed by the KEC already, across four Economic City sites (Hael, Rabigh, Medinah and Jazan.) The Saudi Arabian General Investment Authority expect the annual GDP in Saudi Arabia to grow by 150 billion USD once all the cities are established.

Today, the up and coming KEC is gathering an increasing amount company interest. Al-Rasheed said that while all types of manufacturing, professional services, pharmaceuticals, and tech companies are desirable in the cities, logistics companies are particularly attractive.

In addition to corporate deals, the KEC hopes to make a name for itself as a “major tourist destination”, according to the CEO. He said:

“Yes- can you imagine that? A tourist destination in Saudi Arabia.”

Mr. Al-Rasheed and his development team hope to draw upon a natural market in Saudi Arabia to create opportunities for tourism. He explained:

“We have 10 million Saudis that go abroad to enjoy world destinations, and the idea we have is to make [the cities] a destination for religious tourists”. This refers specifically to the backdrop of Islam in Saudi Arabia.

He added:

“We want to leverage the market we already have.”

The CEO’s statements are acutely relevant to Madinah, the second holy city in Islam. It is the first capital of the Islamic civilization, home of the Prophet Muhammad and his burial place. Based on this rich heritage, history, and past prominence, Madinah captures the love and affection of today’s Muslims as the source of their knowledge and civilization. Consequently, the city has become popular.

Madinah’s population is over 1 million and it has become the fourth largest city in Saudi Arabia, growing ahead of the national average at around 3.4%. This figure is expected to double in the next twenty years. Around 8 million Muslims visit Madinah every year, with a predicted annual number of 34 million by 2024.

The city is in high demand, so attention has turned on infrastructural developments. The holy mosque is witnessing significant expansion efforts: the upcoming one will accommodate nearly a million worshipers at peak times (up from 600,000 in previous years). The airport is upgrading, with an expansion that will turn it into a world-class international hub. Other transport infrastructure is in the process of an upgrade- most notably, the Haramain high-speed railway, which is expected to reach a total of 12 million passengers per year.

CISCO are responsible for the design and implementation of the network infrastructure. They are also working on city services, such as the wiring for high-speed broadband infrastructure.

All urban operations will be managed through Integrated Operations’ Centers, meant to act as the ‘brain of the city’.

Mr. Al-Rasheed talked to Business Insider about the rate of development in the KEC. He said:

“Initially for five years, we had delays building the city because the credit crisis didn’t help…However we have grown around 30% every year for the past five years and really now we are ahead of schedule.”

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With building in progress, KEC has been founded as a Saudi Arabian joint stock company under the Ministry of Trade and Industry decision No. 256/ق dated 15/08/1431 AH corresponding to 07/27/2010 AD.

On 30/05/2010, the Company completed its initial public offering equivalent to amount of 1,020 million Saudi Riyal of its shares in the Saudi Stock Market, with the nominal value of 10 Saudi Riyal per share. The underwriting in the public offering of the shares started on 24/05/2011 AD, where there were (1,97) million underwriters covering 172.6% of the public offering of the Company of (102) million shares.

The Capital Market Authority issued its approval on the final allocation ratios depending on a number of underwriters. In addition, the first firm to audit the company accounts was approved. The articles of association and the founders’ report related to the Company’s foundation expenses were also approved. The first Board of Directors was appointed during this meeting for the next five years, which consists of 11 members. The Company’s shares trading began in the Saudi Stock Market (TADAWUL) on Monday, 28/08/1431H, corresponding to 09/08/2010 AD within real estate development sector having the code (4310).

Now that KEC have a place on the stock market, the support, progress and prosperity can be clearly measured. With multiple job opportunities, potential expansions, and an increase of institutions, the brave, bold business venture is set to bring great things to the people of Saudi Arabia.