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KAEC ... to accommodate two million residents by 2035.

KAEC to sell around 2,500 residential units in 2015

RIYADH, May 24, 2015

King Abdullah Economic City (KAEC), a special economic zone on Saudi Arabia's Red Sea coast, will be selling around 2,500 residential units this year, roughly the same level as in 2014, said its managing director.

KAEC expects to attract about 50 new companies to start operations this year compared to 35 last year, remarked Fahd Al Rasheed.

The city's population is now about 3,000 people; it is expected to roughly double this year and hit 50,000 by end-2020, rising to the ultimate target of two million around 2035.

Although the project is planned and supported by the government, it is being developed by publicly listed firm Emaar the Economic City (EEC), where Al Rasheed is chief executive.

The fate of KAEC is a barometer of business confidence as the Saudi economy copes with a drastic drop in oil revenues this year. The zone is also important for the kingdom's long-term efforts to diversify its economy beyond oil into manufacturing and trade.

So far the government has kept the economy growing robustly by drawing down its reserves to spend heavily, and Al Rasheed said he had not seen any pull-back by companies seeking to set up logistics and light manufacturing operations at KAEC.

"We're not seeing any significant impact on demand from the oil price. Domestic consumption is growing and government spending is strong," he told Reuters on the sidelines of a business conference.

The port, which aims to become a hub for the region, is on track to reach annual capacity of 4 million twenty-foot equivalent units next year from 2.7 million now, he added.

EEC is a consortium headed by Dubai's Emaar Properties and Saudi investors - the kind of public-private partnership with which the kingdom hopes to develop industrial infrastructure in a cost-effective way.

EEC's net income attributable to shareholders rose 72 per cent from a year earlier to SR85.7 million ($22.9 million) in the first quarter of this year, as revenues gained 39 per cent to SR229.6 million.

On June 3, KAEC will hold an conference in Riyadh to attract investment, aiming to draw about 500 companies from around the six-nation Gulf Cooperation Council, Al Rasheed said.

In addition to outright sales, it is open to the idea of discussing third-party arrangements in which it might co-invest with KAEC tenants.

Educated in Saudi Arabia and the US, Al Rasheed joined KAEC in January 2008 after working at national oil giant Saudi Aramco and the Saudi Arabian General Investment Authority.

He said business sentiment in Saudi Arabia was improving, partly because the country was undergoing a process of "de-bureaucratisation and meritocrisation" linked in part to the accession of King Salman in January.

Since he came to power, Salman has conducted two major cabinet reshuffles and streamlined the economic policy-making apparatus by abolishing some committees and councils. The government has moved forward with some sensitive economic reforms, such as a plan to tax undeveloped land.

Changes to the structure of government in recent months indicate the authorities are working towards more efficient government and a smaller bureaucracy, Al Rasheed said.

"The best of the best are being put in ministries and administration, and then being held accountable.”-Reuters

Tags: Saudi | King abdullah | KAEC | residential unit |

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