apping three years of strong financial sector growth, Riyadh has unveiled plans for a major new business district to house the kingdom's main banks, bourse and regulatory bodies. The masterplan for the King Abdullah Financial District (KAFD) calls for the transformation of 1.6 million square metres of undeveloped land to the north of the city centre into the largest dedicated financial centre in the region.
At roughly four times the size of Canary Wharf in London, it will outrank several similar schemes under development in the Gulf. 'This is not only a physical project, it is also a tremendous force for the development of the financial sector,' Finance Minister Ibrahim al-Assaf told MEED at the 9 May launch in Riyadh. 'We are planning to make this not only a regional financial centre, but an international centre.'The district will be centred on the high-rise headquarters of the financial sector regulator, the Capital Market Authority (CMA), as well as the Saudi Arabian Monetary Agency (SAMA) and the Saudi stock exchange (Tadawul), which is due to be turned into a public shareholding company before the end of the year (see News, p33). A government-funded financial academy will be set up within the district to train new entrants into the sector. And some 3 million square metres of office space will be offered to local and foreign banks, insurance companies and other financial institutions. The main government sponsor is the Public Pension Agency (PPA) investment returns from the project will be ploughed into civil service and military pension schemes.While the masterplan will dictate the general structure of the urban development, plots of land will be offered within the district to local and international property developers, although the terms for private developers have yet to be worked out in detail. Saudi officials say further incentives to foreign investors, such as preferential free-zone status, have not been ruled out. 'So far, we haven't decided,' says CMA chairman Jammaz al-Suhaimi. 'But we are looking at all possibilities.'Developers say local interest in the project is strong, despite the fact that it only received royal approval on 7 May. 'This really crowns a series of developments, from the insurance law and the capital markets law to the planned listing of Tadawul,' says a CMA official. 'The main difference with Dubai and the other Gulf financial centres is that this is a response to latent demand, not an attempt to encourage it. It's already a huge sector. Licences have been issued for 13 insurance companies, 11 local and nine foreign banks.' Since its establishment in 2003, the CMA has also licensed some 15 companies to engage in securities business, while another 20 applications are being processed.Local investors at the launch proved enthusiastic, although much of the initial interest has inevitably centred on the opportunities for buying prime real estate within the district.Foreign companies are proving more sanguine. 'We will probably wait and see who else takes the plunge,' says one international banker. 'We've got a good office at the moment, so it's a matter of seeing how this works in practice.'In principle, the aim of the KAFD masterplan is to bring a critical mass of financial institutions within a confined area confined in this case by a proposed ring road to the west of Olaya Street, the backbone of the capital. Given the growing congestion problems faced by Riyadh, ensuring easy access to the district from the city centre and the airport to the north will be critical. A light rail scheme with eight stations will loop through the site and link to the public rail network envisaged for central Riyadh. 'Logistics will be a huge challenge, as we are already allowing for about 23,000 cars arriving every morning,' says architect Louis Becker of Denmark's HLT, which helped draw up the masterplan. Oth
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