Saudi Arabia says it is determined to press ahead with plans to build a financial district to rival Dubai’s International Financial Centre and other global finance markets, even though the area earmarked for the development remains an unfinished construction site, 10 years on.
Talk of the so-called King Abdullah Financial District (KAFD) has resumed recently, amid changes at the top of the country’s ruling family. These saw the now 30-year-old deputy crown prince, Mohammed bin Salman, beginning to push an agenda of major social and economic change shortly after having been put in charge of the country’s economy, national defense and the country’s oil company, Aramco, last year.
Last month, the crown prince said he wanted to revive the US$10bn KAFD project, according to various media reports.
One of them, Bloomberg, noted that the development is “about 70% finished” at this point, though it continues to be plagued by delays, cost overruns and what it says has been described by some sources as a failure to understand the needs of local banks.
What’s more, the Bloomberg report noted, work on the site “has largely ground to a halt”, leaving the developer “considering replacing the main contractor”, the Saudi Binladen Group .
Saudi Arabia’s Public Investment Fund, currently being re-imagined as the world’s largest sovereign wealth fund, is envisioned as being a major tenant of the proposed KAFD, and according to a Reuters report published yesterday, is expected as well to ultimately own the project as well.
The KAFD is being built in Riyadh’s Asahafa district by the Rayadah Investment Corp, and as conceived by its creators, upon completion would be designated a “special zone” within the kingdom, with regulations that conform to international norms, and an easier visa regime than the rest of the country, which would be facilitated by a direct connection to the airport.
Nevertheless, some remain sceptical that the KAFD will be completed in the near future, citing such concerns as whether the business model would be condusive enough to lure businesses, such as banks, as occupants, Bloomberg pointed out.
Last month, it reported that the project, which Bloomberg describes as being designed to feature “gleaming towers connected by sky bridges, cutting-edge climate technology, and a monorail that can circle the whole area in 11 minutes”, lacks one important ingredient at the moment: “banks”, and other financial tenants signed up to take space in any of the KAFD’s 73 buildings.
“The one lender on the 1.6m sq m (17.2m sq ft) site north of the city centre is Samba Financial Group, which bought a plot of land and is building its own tower,” the Bloomberg report said.
Bloomberg quoted one source, a consultant with Cluttons, as saying that there would “be demand without a doubt” from would-be tenants, but said he added that that it was “still uncertain as to when the construction will be concluded”, making commitments to leases difficult. The sheer amount of space needing to be filled could also be challenge in itself, the Cluttons source noted.
As reported, Abu Dhabi – one of the other emirates in the UAE besides Dubai – is in the process of getting its own financial centre off the ground, the Abu Dhabi Global Market. Tunisia also had plans for Tunis Financial Harbour, which was seen as being North Africa’s “first offshore financial centre”, to be developed by Bahrain’s GFH Financial Group, but little has been said about the project since the “Arab Spring” uprisings of 2010/2011, which began in Tunisia.
To visit the website of the KAFD, click here.