Fifty years ago, Sudair, in the Nejd region north of Riyadh, was a far more significant population centre than the Saudi capital. But since then, mass migration to Riyadh has swollen the city’s population to almost 5 million, while Sudair’s has fallen to a mere 100,000.

In an effort to stem migration and reduce congestion in Riyadh, the Saudi Industrial Property Authority is drawing up plans to develop the kingdom’s newest industrial city in Sudair, which is set to become the largest project in Saudi Arabia. The new city will measure 257 square kilometres, making it 70 per cent bigger than King Abdullah Economic City (KAEC), at 168 sq km, and is valued at $40bn. It is expected to be finished in 20 years.

Masterplan development

The concept masterplan is being developed by the Singapore-based Jurong International and is expected to be completed in June. The prequalification documents for the construction packages are being prepared by the US’ CRA and will be completed by May.

Tawfig al-Rabiah, director general of the Saudi Industrial Property Authority (Sipa), says contracts will be awarded through open competition, to ensure transparency. Sipa is encouraging foreign companies to enter bids, with the prequalification process taking two months, followed by bidding in August or September.

The site is well placed to attract investment as it is intersected by key services.

The North-South railway will run through the site from Buraidah to Riyadh. Saudi Aramco’s east-west oil pipeline also runs through the industrial area, and there is an established road network linking Sudair to Al-Qassim in the north.

With six economic cities already announced, it is surprising that the kingdom plans to launch a further industrial city. But there are key differences to this project that distance it from projects such as KAEC, and not only geographically.

Besides its size, the government appears keen to play a more supportive role in the city’s development, offering long leaseholds and subsidised services. And the fact that key infrastructure links are already established, linking it to other areas of the kingdom, is an incentive for investors.

Al-Rabiah is keen to emphasise the dif-ference between this project and other industrial cities being developed in the kingdom, such as KAEC.

“There are two differences,” he says. “This is much bigger than the economic cities and there is even stronger support from the government, plus we are considering a long lease of 99 years. That makes it very attractive.

“As opposed to the economic cities, the developer does not need to pay for the land. It is already there, which makes it easier. The services are [also] already there - the roads, the crude and the rail.”

Speaking at MEED’s Arabian World Construction Summit (AWCS) in Abu Dhabi on 11-12 February, Al-Rabiah said the project was still at an early stage, but should be launched in the next five months.

The bulk of investment will come from the private sector. The project’s sheer size means it is not feasible for a single developer to carry out the work. It is expected that a consortium of local and international companies will be formed to operate as a single entity.

The project will be split into zones covering sectors including education, commercial, residential, industrial, leisure and entertainment. Industries that are favoured include telecoms and electronic components. There is also talk of using ready-built factories on the site.

It is hoped Sudair will provide further stimulus to Saudi Arabia’s ambitions to diversify its economy. In 2007, the World Bank, in its annual Doing Business report, recognised the Saudi Arabia as one of the world’s top reformers, with the kingdom being advanced 15 places to rank 23 out of 178 countries as one of the easiest with which to do business.

According to the World Bank, Saudi Arabia rates the best of any Middle East country, and is ahead of mature economies such as France and Austria. The kingdom is aiming to be among the top 10 most competitive countries globally by 2010, and is increasingly focusing on building a knowledge-based economy.

Providing materials

But will an industrial city of such a size have an adverse effect on the economic cities? “Not really,” says Al-Rabiah.

“We are in different regions and are far away from any economic city. In fact, the success of the economic cities is crucial to us and we want to integrate this project with the economic cities.”

It is hoped that Prince Abdulaziz bin Mosaed Economic City at Hail, for example, with its emphasis on logistics, will be able to provide materials and minerals from other sites through the railroad running from the north.

This will ensure the two cities are able to operate in tandem, and in a beneficial way.

Sipa, previously known as the Saudi Organisation for Industrial Estates & Technology Zones, was established in 2001 to promote and develop high-quality industrial estates, business and technology parks on public and private industrial land, and encourage the private sector to become involved in the development, operation and maintenance of industrial estates and technology zones. It manages the kingdom’s 14 existing industrial estates.

In February, the organisation reached an agreement with the Gulf Automobile Manufacturing company to set up the kingdom’s first car production facility, with capital of SR375m ($100m). The plant will be set up in the eastern city of Dammam, before relocating to the new industrial city in Sudair, where 3 million square metres will be allocated for the facility.

In the first phase, the factory will have a capacity for 15,000 cars, which is expected to increase to 300,000 cars in the second phase.

The kingdom currently imports vehicles worth SR22bn a year.

This is exactly the sort of industry Al-Rabiah says he wants in Sudair, to engender further growth. Encouraging industry is essential to the success of the city, which aims to attract non-polluting sectors such as telecoms and electronics in particular.

The government is providing other incentives. There will be no customs paid on all materials imported for industrial projects, and 50 per cent project funding in the form of a loan from the government. Essential infrastructure such as electricity will be subsidised by 12 halalas (three cents) for a kilowatt of energy.

“We want the developer to develop these industrial areas and lease it for a low rate,” says Al-Rabiah. “That is one of the incentives we will give. So the rate will be one of the lowest, if not the lowest. It is government land so we cannot afford to have any risks.”