King Abdullah Economic City and Jeddah Major Projects

November 2017

Built on a model that combines an integrated 21st century metropolis with a regional trade and logistics hub, King Abdullah Economic City (KAEC) is pioneering the development of large scale civic infrastructure by the private sector and inducing economic development to create jobs. With a total projected investment of US$100 billion and a planned capacity of 2 million people, KAEC is the largest single infrastructure project to date in Saudi Arabia and the world’s largest privately funded new city development. 

On November 7-9, 2017, GII hosted a group of 24 leaders for an Innovation Site Visit to KAEC. The site visit highlighted the innovations that Emaar the Economic City (EEC) is using to keep the massive project moving and coordinated—from concept, to creation of a company, master-planning, construction and, finally, sales. The KAEC team shared insights with a multi-national group of executives from across the value chain, exploring how lessons could be applied to their own projects.

The group also visited the yet to be opened, Norman Foster-designed KAEC Haramain Railway Station and Phase 1 of the King Abdulaziz International Airport expansion. When fully operational, the 453 km high-speed Haramain line will have 5 stations—of which KAEC’s was the second to be completed—and run 7 high-speed trains from Mecca to Medina every hour. Phase 1 of the airport expansion opens in 2018 with an annual capacity of 30 million passengers. Phase 2 will add a further 30 million and the final Phase 3 will bring the total capacity to 80 million passengers annually.

What are the key learnings for new city developers? In his presentation to the group Fahd Al-Rasheed, the group CEO and managing director of EEC, laid out the most important lessons he has learned in a decade of city-building:

  1. Establish a strong value proposition from the start. Any major project needs a legitimate and well-articulated value proposition to have a chance of long-term success. Cities are engines of growth and economic development, but it is a very competitive landscape with over 247,000 cities and towns in the world, each competing for capital and human talent. EEC’s value proposition with KAEC is to generate non-oil-based revenue and jobs for Saudi Arabia by tapping into latent demand within growth industries in the Saudi economy. To achieve this, EEC is creating a vibrant and world-class port city on the important Red Sea trade route, capable of attracting multi-national corporations who want better access to the Saudi and Gulf Cooperation Council markets. The value proposition’s strong alignment with the government’s Saudi Vision 2030 encourages additional supportive investment—like making it one of five stops on the Haramain High Speed Rail.
  2. Follow with fundamentals that provide investor confidence. Identifying critical concerns that give key stakeholders confidence in your vision is a critical foundation. For a KAEC, these took the form of clear regulations in service of economic growth, connectivity to the region and country with good infrastructure, and “rock solid” land titles.
  3. Develop a comprehensive masterplan, leaving room for flexibility. Allowing flexibility in one’s masterplan is essential to deal with the natural evolution and the related economic and political cycles of a major project. For a new city, the plan needs to include both the economic and social infrastructure and the phasing of the project. EEC maintains a 10-year masterplan for KAEC which is reviewed quarterly. Yet, in the previous 10 years, the KAEC masterplan has been revised four times and leadership expects it will go through several more iterations, demonstrating the need for flexibility. For example, an earlier version of the plan included modifications to the coast line and water ways. It was later amended to allow for more natural drainage to protect against flooding.
  4. Assemble a skilled team to tackle all the essential components of the project. Planning, financing, building, and operating a major project throughout its lifecycle requires an extensive range of skillsets. Assembling a competent team with the diversity of talent required to cover the core functions is essential, as is the investment in their ongoing skills development to handle new challenges and roles as they unfold. For example, in the early stages of development, executives needed to structure and manage concessions for retail and commercial outlets—not skills that are common among city planners and developers.
  5. Predict and build according to the project absorption rate. Infrastructure can only be financed, operated, and maintained on a sustainable, long-term basis if it is being utilized. Therefore, understanding and managing the probable absorption rate for new infrastructure is critical to sustaining a multi-phase major project. For a new city, parallel development and phasing is a delicate balance, building enough infrastructure to attract and accommodate anchor tenants (with some excess capacity) while not building too much too early and “blowing your budget.”
  6. Invest early in building core infrastructure to serve your predicted capacity. There are certain elements of a project that are best invested in early, due to the prohibitive cost of retrofitting when the demand arrives. While KAEC’s current potential population is only in the tens of thousands, KAEC has laid hundreds of miles of electrical cables, fiber optic cables, and piping—enough to serve a population of hundreds of thousands. Similarly, the train station and port can accommodate far more traffic than expected at opening, but won’t require expensive replacement or expansion as demand grows.
  7. Invest in your brand. Most successful products wisely invest in development of a strong brand that builds trust and a sense of partnership with investors and customers. For a project that spans many years, or even decades, setting, achieving, and professionally communicating milestones is an important part of maintaining interest and building brand equity.
  8. Invest in flexible technology and innovation but don’t get too far ahead. Technology is a huge enabler of most major projects, especially cities. While it is essential to adequately invest upfront in the technology infrastructure (e.g. tier 3 and 4 data centers), it is important to maintain flexibility and not get too far ahead with regard to committing to one provider or technology because the landscape shifts too quickly. Done correctly, technology and a culture of innovation can help with project delivery, customer solutions, livability, workability and sustainability.  
  9. Adopt the mindset that this is a marathon, not a sprint. Delivering any major project, and specifically a city, takes a very long time. Setting the leadership team’s expectations and managing their endurance is essential to ensure that the team and project have the necessary stamina to reach the finish line. 

 

Insights and events on the world’s most pressing infrastructure challenges, delivered straight to your inbox. Join the GII community:

GII follows McKinsey & Company’s Privacy Policy