Deloitte | A Middle East Point of View - Summer 2018 | Real Estate and Construction

12 Deloitte | A Middle East Point of View - Summer 2018 | Real Estate and Construction

Transform KSA Saudi Arabia’s Vision 2030 Saudi Arabia has unveiled a number of mega projects to help transform the kingdom’s economy, including Neom, a city of the future on the Red Sea coast with a total investment requirement of US$500bn, and Al Qiddiya, a 334 sq.km. entertainment district in Riyadh. Their success depends much on whether the kingdom has learnt from previous attempts at economic diversification through other mega projects such as Riyadh’s King Abdullah Financial District (KAFD) and Jeddah’s King Abdullah Economic City (KAEC).

13 Deloitte | A Middle East Point of View - Summer 2018 | Real Estate and Construction

The target for the The need: Stimulate economic for the economic diversification of Saudi growth and create jobs Arabia is to increase the non-oil sector’s economic diversification Saudi Arabia's Vision 2030 sets out an contribution to GDP from 58 percent in of Saudi Arabia is to ambitious economic development 2016 towards a regional benchmark of 69 roadmap that seeks to diversify the percent by 2020. increase the non-oil kingdom’s economy beyond the oil sector’s contribution to sector. It aims to attract foreign A key focus of Al Qiddiya GDP from 58 percent in investment, stimulate economic growth, create the jobs needed to employ the is to create jobs in Saudi 2016 towards a regional kingdom’s rapidly growing labor force and Arabia’s tourism and benchmark of 69 develop a more resilient economy. hospitality sectors while percent by 2020. Data from the Economist Intelligence Unit at the same time (EIU) shows that the oil industry still enhancing the leisure contributes over 40 percent of Saudi Arabia’s Gross Domestic Product (GDP). infrastructure in the As such, oil price declines earlier this Kingdom. decade–from a high of US$115 per barrel in June 2014 to a low of US$29 per barrel in January 2016–led to a substantial The vision: Key projects slowdown in the kingdom’s economy. A number of major infrastructure Real GDP growth in Saudi Arabia declined projects are being delivered through from 3.7 percent in 2014 to -0.7 percent Vision 2030, many of which are being led in 2017. Although oil prices continued to by the Public Investment Fund (PIF). recover in 2018–to over US$70 per barrel Below is a summary of two of these in April–they are well below the highs projects, Neom and Al Qiddiya. reached earlier this decade. Subdued oil prices continue to act as a drag on the The city of Neom is one of the major kingdom’s economy, with the EIU transformational projects being delivered forecasting that real GDP growth in Saudi by Saudi Arabia. With a land area of Arabia will be 1.0 percent in 2018 and 2.0 26,500 sq.km., Neom will be located in percent in 2019. the Northwest region of the country on the Red Sea coast. A combination of the The focus: Economic diversification Greek for new (neo) and the Arabic for Saudi Arabia’s Vision 2030 program is future (mostaqbal), Neom has been being led by Mohammad Bin Salman Bin designed to create jobs in a diverse range Abdulaziz Al-Saud, Crown Prince and of growth industries that include new and Chairman of the Council of Economic and renewable energy, mobility, biotech, Development Affairs. An ambitious technological and digital sciences, economic development roadmap, Vision advanced manufacturing, media and 2030 will be delivered through the entertainment. Japan’s Softbank intends National Transformation Program (NTP). to invest in what will become the world’s The NTP has set out a series of interim largest solar plant at Neom as well as a goals to be achieved by 2020 that include major tech fund in the city. Although the the creation of over 450,000 jobs in the project is in the early stages of non-government sector and the development, total funding requirements strengthening of partnerships with the for Neom are estimated at approximately private sector to increase the private US$500bn. sector’s contribution to GDP. The target

14 Deloitte | A Middle East Point of View - Summer 2018 | Real Estate and Construction

Abdullah Economic City (KAEC). Changing A key success factor for Saudi Arabia’s market dynamics, global economic challenges and, in certain cases, a lack Vision 2030 will be dependent on of alignment with immediate market requirements meant that many of these whether the Kingdom has learnt projects did not reach their full potential with regard to attracting the investment from previous attempts at economic and creating the businesses and the jobs diversification through other mega they were slated to do. To succeed this time around, Saudi projects. Arabia needs to scale and phase the planned mega projects in line with Al Qiddiya is another major tourists from across the region. A key anticipated market demand, clearly transformational project being delivered. focus of Al Qiddiya is to create jobs in differentiate the offer from current and Located approximately 40km southwest Saudi Arabia’s tourism and hospitality planned competing schemes in the of Riyadh, Al Qiddiya will be an sectors while at the same time enhancing region and build a legal and regulatory entertainment district that will include the leisure infrastructure in the Kingdom. environment that enables the foreign theme parks, water parks, motor sports, investment requ ired to deliver these cultural and heritage events, hotel Conclusion projects. resorts, retail and residential A key success factor for Saudi Arabia's development across 334 sq.km. of land. Vision 2030 will be dependent on by Martin Cooper, Director, Financial Al Qiddiya aims to capture demand from whether the Kingdom has learnt from Advisory, Deloitte Middle East Saudi Arabian tourists who currently previous attempts at economic spend their tourism Riyals in Dubai, Abu diversification through other mega Dhabi, Oman and elsewhere in the Gulf, projects, such as Riyadh’s King Abdullah in addition to attracting international Financial District (KAFD) and Jeddah’s King

15