September 2007
Considered one of Saudi Arabia's most ambitious economic endeavors, the Knowledge Economic City (KEC) in Medina is the single largest private-sector project in the region. When complete, the city will include a grand mosque, community centers, parks, shopping malls, schools, a university and seawater lagoons that stretch over 11 kilometers. Marwan A. Kardoosh recently talked with KEC officials to discuss the big plans.

JB: The Knowledge Economic City (KEC) is the first of its kind in Saudi Arabia and one of three such cities to be initiated by the Saudi Arabian General Investment Authority (SAGIA). What factors are drawing the SAGIA to promote such projects?
KEC: About half of Saudi Arabia's 20 million local population is under the age of 20, and by building the economic cities in rural areas, the government is taking a positive step towards creating employment for its young people, while at the same time diversifying its economy.

JB: The KEC is the third in a chain of economic cities planned for Saudi Arabia. How is the KEC different from already-existing economic cities in the Saudi Kingdom today?
KEC: While the other cities are seeking knowledge-based industries based on their specific themes, KEC is the only one focusing on knowledge-based industries of all kinds. It will focus mainly on information technology, health, education and tourism sectors. Also, its prime location offers major tourism opportunities, with the Seera Theme Park to be a particular attraction. KEC has a much wider role to play by fostering young Saudi leaders and entrepreneurs.

JB: KEC's official statements indicate that the project has prioritized both repatriating Saudi capital back into the Kingdom as well as attracting foreign investments in high value-added industries. Do other economic cities in Saudi Arabia care about these issues? Why does KEC have these goals in mind?
KEC: We are keen to encourage the return of Saudi capital and new local investment to ensure local 'buy-in' for the KEC concept. While foreign investment will be important for KEC, the fact that "local" money is being attracted means more of the financial benefits from KEC will be used for the betterment of the people of Medina and the Kingdom in general.

JB: To what extent is the KEC going to be a public-private partnership, specifically with the SAGIA?
KEC: The project is being promoted by SAGIA, but the actual development is being handled by a private company, Seera Real Estate Development Company, which was specifically set up for this purpose.

JB: To date, which companies have signed on as anchor tenants? What are the costs and benefits of public-private partnerships from an investor's point of view? What are the benefits of having the SAGIA involved in the project?
KEC: We are working on attracting anchor tenants, and we do have a powerful consortium of Saudi companies in the fold, including the Savola Group, Taiba Investments and Real Estate Company, Project Management Development Company (PMDC) and Quad International Real Estate Development. Since November, we have signed deals with several US, Canadian and Malaysian interests. This includes MoUs signed with some of the biggest names in the IT world, such as Intel Corporation, Cisco and CompTIA, with further announcements expected in September. SAGIA's role is to provide a regulatory framework that will attract investors as well as provide incentives, such as tax breaks for prospective investors.

JB: The KEC is slated to include various zones designed to compliment each other: a technology zone; an advanced IT studies institute; an interactive museum on the life of Prophet Mohammad; a center for Islamic civilization studies; a campus for medical research and life sciences; an integrated medical services zone; a retail zone; a business district; residential areas; shopping malls; and a large mosque. How do you intend to manage such a complex project? Will specialization (or the lack thereof) ever become an issue?
KEC: While it may seem to be a complex project overall, each of the elements is closely linked to our overall aim of attracting world-class knowledge-based industries with close synergies. However, the proposed developments should provide a sufficiently diversified base to ensure long-term prosperity for KEC as a fully integrated community.

JB: The establishment of the KEC highlights the global ambivalence over new economy industries that some have touted as a tool to position Saudi Arabian entrepreneurs as internationally respected leaders in knowledge-based industries, while, at the same time attracting talent from the world over. What are your thoughts on that?
KEC: There is no ambivalence on our part. Attracting talent from around the world means accessing the experts who can pass on their knowledge to young Saudis so they can fulfill the role we are trying to create for them in the future. In time, we hope that the role will be reversed, with talent from around the world coming to Medina to learn advanced skills from our experts.

JB: If oil prices were to fall in the near future, do you see SAGIA continuing with its expansionary plans, including investment in the KEC?
KEC: The development is based on the creation of sustainable knowledge-based industries and, as such, will not be affected by oil prices. There is already a growing diversity of economic activities in the country.

JB: Finally, it's great to hear of a project that does not have as its primary goals solely attracting money, but rather good money, where the track record of investors and the transfer of know-how are important prerequisites.  What are your thoughts on that?
KEC: It is very important that we get investors who are committed to the vision of KEC, given our wider role of fostering young Saudi leaders and entrepreneurs. While there will be opportunities for passive investors, we have been encouraged by the level of commitment shown by our already identified IT partners such as Intel, Cisco and CompTIA. This is what makes the whole KEC concept so exciting. The world is coming to Medina, and the knowledge being sown will help make it a better place for all of us.

© Jordan Business 2007