Riyadh has drawn up plans to provide billions of dollars in funding to assist private developers at Sudair Industrial City, near Riyadh.

The Saudi Industrial Property Authority (Sipa), which is in charge of industrial zones in the kingdom, has agreed on a financial package with the Saudi Industrial Development Fund (SIDF) to offer low-interest loans to potential developers.

“We have been in talks to establish what type of loans the government can give,” says Tawfig al-Rabiah, director general of Sipa.

Initial proposals from Sipa and SIDF have suggested aid of up to SR500m ($135m) for each project in the city. However, Al-Rabiah says this figure could rise to up to half of the overall project costs. Previous estimates have placed the overall cost of the city at up to $40bn.

“We can get multiple loans if the city is divided into multiple projects, which will be SR500m for each project,” says Al-Rabiah. “But it can be much more than this. It can be up to 50 per cent of the funding needed for the project.

“These are some of the incentives we are trying to align so that the developer will be encouraged to invest.

“We have an agreement with SIDF to provide funding to any project related to development in the industrial area. It can be any [project], provided it is approved by us and the SIDF.”

Al-Rabiah claims the city could still proceed without the funding, although he acknowledges that the financial incentive would be welcomed by developers for a project on such a vast scale.

The loans will be issued with a low interest rate, he says, which will be below that set by the Saudi Arabian Monetary Agency (Sama), the central bank. “It is a very symbolic rate, virtually without interest,” he says.

Located in the Nejd region, north of Riyadh, Sudair will measure 257 square kilometres, making it 70 per cent larger than King Abdullah Economic City near Jeddah, the biggest of six economic cities being planned in the country.

Those cities are being managed under the guidance of the Saudi Arabian General Investment Authority (Sagia) and are all privately funded.

The concept masterplan for the industrial city is expected to be completed in September by Singapore-based Jurong International.

According to Kenneth Lim, business development director at Jurong International, the market and strategic studies have been completed and it will begin the concept masterplan in the near future (MEED 23:3:08).

Sudair Industrial City is designed to alleviate growing congestion in Riyadh and reduce migration to the capital, while providing further stimulus to the kingdom’s economy, which is expected to grow by 5 per cent in 2008 (MEED 15:2:08).

Sipa is in discussions with several international and local developers for projects at Sudair, although no firm projects have yet been announced.

“We have had lots of interest from big international developers,” says Al-Rabiah.