By Angus McDowall
RIYADH (Reuters) - The plan to build a
financial district from scratch was viewed by Saudi Arabia's neighbors
as among the glossiest excesses of the kingdom's oil boom profligacy: a
white elephant in the making, unlikely to attract tenants and possibly
never even to be completed.
The creators of the King Abdullah
Financial District (KAFD) envisaged a kind of mini-Dubai, a haven for
foreign financial services and investors as well as local banks and
companies currently doing business from offices all over Riyadh.
But
more than 10 years later -- and a year after it was supposed to be
finished -- most of the 1.6-million-sq-metre district on the edge of
Riyadh is still a construction site, and no businesses have moved in.
Reform-minded
Deputy Crown Prince Mohammed bin Salman said last month he wants to
salvage the $10 billion project. The Public Investment Fund, reimagined
as the world's largest sovereign wealth fund, will be based there and
sources have said it will also own the project.
According to the
prince's "Vision 2030", KAFD will become a "special zone" with
internationally competitive regulations, an easier visa regime and a
direct connection to the airport, steps he hopes will "increase the
chances of ... success".
Another change is to increase the amount
of residential use from the 1.7 million sq meters now designated for
office space. According to a 2015 report by real estate analyst Jones
Lang LaSalle, rents are bottoming out in Riyadh's current 2.5 million sq
meters of office space but prices for residential units are rising.
Potential tenants and investors are both hopeful and skeptical about the plan.
"The
potential is amazing. The inside is impressive. I'd like to live
there," said one Dubai-based expatriate who does business in Saudi and
who has toured the site. "As an urban space it's interesting, with its
design and architecture."
He questioned how successful the
project could be in the current economic climate, however. The main
contractor is Saudi Binladen Group, the biggest construction firm in the
kingdom, which has been struggling since last year.
"It will
not be finished. Decision-making is very slow (on the project, and)
people don't have cash," he said. Like other business people interviewed
for this story, he didn't want to be named expressing an opinion about
such an important royal initiative.
A senior Saudi former banker expressed similar concerns.
"If
the plan does create a genuine free zone and makes things smoother for
newcomers, it'll be 'bingo!'" he said, but added that a recovery in the
oil-dependent economy was key.
Another senior Gulf banker said
his firm had no plans to move into the complex despite its "impressive"
looks, and expressed concern that banks might only be able to rent,
rather than own, buildings there.
MORE RESIDENTIAL SPACE
Inside
the district last week, swallows swooped between palm trees and
sparrows pecked among decorative desert shrubs near the almost completed
conference center. The parts that are finished include sections of its
stone-paved "wadi" walkway and distinctive glass towers. From high in
one tower, swimming pools and children's playgrounds could be seen on
other roofs.
Jacob Kurek, a partner at the firm responsible for
the KAFD masterplan, Danish firm Henning Larsen, said the original plans
were flexible enough to transform space earmarked for offices into
residences or retail space. A direct link to the airport would be easy
to install via Riyadh's new metro, which will have a station at KAFD, he
said.
Other changes, such as a different regulatory regime, visa
exemptions and any blunting of Saudi Arabia's strict social
restrictions, would be more complicated, however.
At the moment,
visas can take many days to arrange and require a complex process of
invitation by a sponsor and plenty of supplementary documentation.
Setting up a business means getting permissions from many government
departments.
Mustafa Alani, a security expert with close ties to
the Saudi Interior Ministry, said visa exemptions could work like the
waiver program in the United States, or like residence permits issued by
free zones in the United Arab Emirates.
"It's not a visa, but
it's not a free walk-in either. There might be a geographical
restriction," he said, suggesting those who enter on the special visas
might be forbidden to leave KAFD, or be limited to the Saudi capital.
According
to rules dictated by Saudi Arabia's powerful conservative clerics,
women must wear an ankle-length cloak in public and are forbidden from
driving. Men and women who are not related may not mingle unchaperoned.
Cinemas, music concerts and dancing are banned and alcohol and pork are
illegal. Businesses must shut for half an hour during each of five daily
prayers.
Saudi Arabia has found ways to accommodate foreigners,
however. Expatriate compounds, hidden behind high walls, protected by
army gun emplacements, to which Saudi nationals are usually forbidden
entry, allow foreigners to dress and behave much as they do in the West.
Such extreme segregation could not work for a project like KAFD, which is also marketed at Saudi businesses and residents.
But
there are other examples of areas that Saudis can visit that enjoy a
special status and do not require strict Islamic dress codes or forbid
gender mixing, like Riyadh's Diplomatic Quarter.
For one Western
business executive now living in Dubai, the social restrictions,
especially those on women, were among the most important factors in any
decision to move to Saudi.
"To me, the visas are nice, but they're not even on the list of the top ten things that need to change," he said.
