Saudi Arabia tries to diversify its economy and solve housing problems by building economic cities. In an analysis of Ernst & Young, chances and risks for foreign investors are evaluated.
Saudi Arabia, the country controlling about 17 percent of world’s proven oil reserves and the largest exporter of total peritoneum liquids, tries to diversify its economy and reduce the country’s dependency on oil and gas. As their oil reserves shrink, they try to build a strong industrial base to sustain economic growth. According to the Ernst & Young report “Economic cities — opening vistas of growth in the Kingdom of Saudi Arabia”, one way to do so is the construction of four economic cities.
Each economic city will specialise on a specific sector and “develop at least one global competitive cluster or industry”, says Ernst & Young. Allowing foreign investors to own real estate, economic cities are seen as a driver of economic growth by opening up the economy and attracting foreign investors. Planning to become one of the most competitive economies by 2020, each economic city will be located on a strategic location and take advantage of low energy prices.
Ernst & Young points out, that investors benefit from the allowance of foreign ownerships, employee sponsorship, low capital requirements, the ease of doing business, taxation, foreign trade regulation, industrial incentives and contract terms.
On the other hand, uncertainties about the global economy may impact private sector participation, developers have often faced a shortage of contracting capacity and the oil price drop may effect governments spending plans.
For more information about the concept of economic cities in Saudi Arabia, details about the four cities being developed and the chances and risk for investors, please see Ernst & Young’s report “Economic cities — opening vistas of growth in the Kingdom of Saudi Arabia”.