Riyadh vs Dubai: Saudi district gears up for foreign firms

RIYADH: Dangling off sun-dappled skyscrapers, construction workers put finishing touches to a long-delayed financial district in Riyadh that is taking centre stage as competition heats up with Dubai to attract foreign firms.

The King Abdullah Financial District (KAFD), a multi-billion-dollar project announced in 2006, is gearing up to "launch" in the coming months, formally declaring it open for business, multiple sources told AFP.

The mammoth development in the heart of Riyadh is preparing to capitalise on a government ultimatum to foreign firms -- those seeking state contracts in the biggest Arab economy must have their Middle East headquarters in the kingdom by 2024.

The ultimatum issued in February is seen as a direct challenge to Dubai -- a Gulf city that has long ruled as the region's business hub -- and comes as Saudi Arabia scrambles for investment to diversify the oil-reliant economy.

Central to that effort is KAFD, a 1.6-million-square-metre (over 17-million-square-foot) development filled with glass skyscrapers, a tree-lined walkway designed to resemble a riverbed and a mosque shaped like a desert rose.

"It's a sleeping giant getting ready to wake up," a consultant close to the project told AFP.

Billed as a special economic zone, the project is going all out to lure tenants.

KAFD will offer companies incentives, such as zero percent corporate tax for 50 years, a 10-year waiver from the state's "Saudization" policy to reserve jobs for Saudis and "preferential" treatment in government contracts, according to a document seen by AFP.

The incentives shared confidentially with several companies are subject to change closer to the launch, consultants privy to internal discussions say.

White elephant

Long dismissed as a white elephant, the project has been beset by construction delays and cost overruns.

But after lying dormant for many years, construction cranes hovering over the site -- which stands out in Riyadh's relatively low-slung skyline -- have been feverishly active in recent months.

On top of the undisclosed billions already spent on KAFD over the past decade, the kingdom's Public Investment Fund signed construction contracts worth eight billion riyals ($2.13 billion) earlier this year, two sources close to the project told AFP.

They said the PIF, which owns the project, expects to see "high demand" when it is ready.

KAFD's management declined a request for comment.

Saudi Arabia is looking to bring up to 500 international companies to Riyadh after the February ultimatum, local media reported, with many expected to be based in KAFD.

Indian hotel startup Oyo and venture capital firm 500 Startups told AFP they were setting up their regional headquarters in KAFD.

Meanwhile, some Saudi firms, such as banking giant Samba, have already begun operating from KAFD.

But finding long-term tenants to fill the massive project remains a struggle.

A public document outlining Crown Prince Mohammed bin Salman's Vision 2030 reform plan acknowledged that KAFD was planned "without consideration of its economic feasibility", and "even achieving decent occupancy rates will be very challenging".