King Abdullah Economic City, a $27 billion development on Saudi Arabia’s Red Sea coast, will open its port next year, a port official said.

KAEC construction

The port will have a capacity of 1.5 million containers a year, Hamdi Nadhrah, head of business development at the Red Sea Gateway Terminal in Jeddah, told a Middle East Economic Digest conference in Abu Dhabi.

Red Sea Gateway is the third and newest terminal at Jeddah, the kingdom’s largest port. King Abdullah Economic City is about 120 kilometers (74 miles) north of Jeddah.

To contact the reporter on this story: Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

With massive multi-billion dollar regional developments underway such as Abu Dhabi’s Masdar City and Saudi Arabia’s King Abdullah Economic City, poor project requirements can unnecessarily cause developers and their contractors valuable time, money and jobs, according to a leading project management expert.

“It is ironic that many project managers tell me that they often have too little time to get it right first time, but always plenty of time to do it over again. Study after study shows that it can cost a thousand times more to fix a requirements problem in the execution phase, or even worse after delivery, than if that problem was discovered in the planning phase,” said J. LeRoy Ward, Executive Vice President, at London-based Esi International,

Ward, an industry veteran with more than 35 years experience in project and programme management, is holding free breakfast seminars on writing project requirements later this month in both Abu Dhabi and Riyadh. He will discuss the cost and quality impact of poor project requirements and offer a four step process for improving the procedure, to enable an improved requirements capability.

The two breakfast seminars will take place on Tuesday 18 January 2011 at the Al Khozama Hotel, Riyadh, Saudi Arabia, with the Abu Dhabi event planned on Wednesday 19 January 2011 at the Crown Plaza Hotel, Abu Dhabi.

“Are we forever resigned to the fact that poor project requirements are just a part of life and the cost of doing business?” he asked. “It doesn’t have to be this way. I have a proven approach to writing better project requirements taken from my experience in the field and examples from multiple industry sectors. We don’t have to accept the status quo,” said ward.

According to Ward, the IT sector leads industry in terms of writing clear concise and achievable project requirements, but in reality no industry sector is totally immune from the problem. To be sure, the construction industry has certainly had more than its fair share of deadline problems and mistakes in the form of cost and schedule overruns, quality issues and unhappy customers due to poor project requirements.

Defense firms selected to provide Saudi Arabia with up to US$60 billion (Dh220.35bn) in arms and military aircraft will generate more than $20bn in economic benefits throughout the kingdom’s economy in return.

The boost will come via the nation’s offset rules, which require the contractors to help build ventures in other sectors of the economy.

Saudi Arabia’s five planned economic cities, including the 173 square km King Abdullah Economic City, will become a major target of these investments, according to Grant Rogan, the chief executive of Blenheim Capital Partners, a consulting and financial advisory firm that specializes in defense deals. Other high-interest areas include education, information and communications technology and homeland security.

“”The Saudi Arabian General Investment Authority [SAGIA] has a remit to develop economic cities and they see the potential of offset obligations as an excellent way of achieving national objectives,”" said Mr Rogan.

Offset deals have led to some of the Persian Gulf’s largest infrastructure projects including the Dolphin gas pipeline and Abu Dhabi’s Al Raha Beach development.

The UAE will increasingly look at ways to use offsets to further its strategic goals in the 2030 plan, such as transferring technology and industrial know-how, raising the skills and the employment levels of Emiratis and boosting exports, according to recent official statements.

Boeing is the largest recipient of a record Saudi arms package that includes orders for 84 new F-15 fighter aircraft and 70 upgrades of existing Saudi F-15s.

The U.S. firm will also supply 70 Apache attack helicopters and 36 AH-6M Little Bird light attack/reconnaissance helicopters.

The company will shoulder the largest burden for offset deals.

Sikorsky is also a major player in Saudi Arabia, with orders for 72 Black Hawk helicopters. Other participants include Lockheed Martin, Raytheon and Textron, Mr Rogan said.

One potential development could be the establishment of data centers along the Red Sea, he added. “”One of the four Tier 4 data centers in the world is in Abu Dhabi, and the Saudi’s have aspirations for a capability of their own,”" Mr Rogan said. “”Some of the ideal locations are along the Red Sea.”"

The requirements will trigger opportunities for offset firms such as Blenheim, which Mr Rogan said was in discussions with SAGIA and the defense contractors. “”It is a massive obligation and we are looking at ways to participate,”" he said.

Previously, some offset deals in the kingdom focused on meeting the needs of the military’s maintenance requirements, such as the creation of the Alsalam Aircraft Company and the Middle East Propulsion Company.

In addition, Saudi Arabia could follow its record arms order with equally large air and seaborne packages, including the Patriot and Thaad missile defense systems from Raytheon and Lockheed Martin and ships from General Dynamics and Lockheed Martin. “”You could be looking at a total of $120bn, and it could happen in the next 12 months,”" said Mr Rogan.

SAUDIA Arabia is being literally transformed, but unlike desert mirages, the Kingdom is witnessing the birth of some of the most ambitious economic and social engineering projects in the Middle East through its planned mega economic cities.

Compared with some other Arab economies hard hit by the global financial downturn, there is a mood of quiet optimism in Saudi Arabia and consumer confidence indexes reveal that Saudi citizens believe they will not be as badly affected as other countries worldwide.

This sense of self-confidence seems sustained by bolder strategic economic and social reforms implemented by King Abdullah, whether in the judiciary, educational or economic fabric of society.

Buoyed by several years of budget surpluses, the Kingdom has embarked on structural economic reforms in both capital infrastructure and human capital development and the planned mega economic cities are but one manifestation of this mood of self-confidence.

Unlike earlier large infrastructure developments, a key element of this strategy has been reinvigorated regional economic diversification and more equitable wealth creation for Saudi citizens. This has been translated into the launching of special economic zones, seemingly alike, but in reality each planned to specialize in certain niche core activities to leverage on each area’s location advantages. As of 2009, four economic cities have been launched with two more economic cities expected in Tabuk and Dammam.

The planned infrastructure expenditures on these mega cities are enormous, totalling some $140 billion in the first phase. The largest is the King Abdullah Economic City at Rabigh on the Red Sea coast, with a planned area of 168 million sq meters and $ 80 billion in basic infrastructure cost. It will be the largest government and private sector integrated development project since the 1980’s when the Kingdom embarked on creating the Jubail and Yanbu industrial cities. Unlike the capital intensive projects of the earlier period, Saudi Arabia is now focussing on job creation and private sector participation from the start, and the King Abdullah Economic City, upon its completion in 2020, will aim to generate 1 million new jobs, promote energy and transportation related industries, and establish a new sea port of 13.8 million sq. m. and handling some 300,000 pilgrims.

The other planned mega economic cities are also just as ambitious with some $ 23 billion planned expenditure for Prince Abdul-Aziz bin Musaed Economic City in Hail, supporting agro industrial and mineral exploitation projects in that region, and a $30 billion planned expenditure in Jizan Economic City, the southern region of the Kingdom, concentrating on heavy industries (aluminium, refinery, steel, power) as well as secondary industries such as fisheries, and pharmaceuticals and generating 500,000 new jobs. Phase 2 of the project is expected to be completed by 2013 and the final phase by 2037. The fourth planned mega economic city is in Madinah and will focus on knowledge-based industries, create 20,000 new job in this high value sector, attract 150,000 new residents and complete by 2020 at a cost of $ 7 billion.

By 2020, it is expected that the major phases of the economic cities will have been completed and the forecasted impact on the Saudi economy are far reaching. According to the Saudi Arabia General Investment Authority (SAGIA) some 1.7 million new jobs will be created, with the economic cities adding $150 billion to the Saudi GDP. They will attract over $100 billion of new investments domestically and from abroad, and their population will be three times that of Dubai, with an area four times that of Hong Kong.

The government of Saudi Arabia is forecasting that from both the private and public sectors, a staggering $800 billion will be invested in these economic zones and other mega projects including those being planned by Saudi Aramco and SABIC in these mega cities.

No other country in the Middle East can match such grand project expenditures, which upon completion, will unleash Saudi Arabia as one of the major economic power houses of the world in league with India, China and Brazil as the undisputed leaders of the developing world. What is of more significance for Saudi Arabia, is the potential for the direct and indirect multiplier effect of these mega projects on secondary local industries and job creation in the wider Saudi economy.

The real test of success will be the level and scope of private sector participation in the grand projects, whether from Saudi investors or from abroad. Given international economic and financial uncertainties, Saudi investors and others from the Gulf, seem to have been encouraged at the opportunity to share in local risk as the Saudi government has spent political capital into ensuring that the second phase of its economic diversification strategy succeeds. It is not a coincidence that one of King Abdullah’s favorite project- the King Abdullah University of Science and Technology (KAUST), with an independent endowment fund of over $15 billion, is also taking shape at Rabigh near the King Abdullah Economic City. The hope is that an infusion of knowledge, technology, new skills and job creation unleashes a new dawn of prosperity for the Kingdom. Dr. Mohamed A Ramady is a former banker and visiting associate professor, finance and economics at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia.

Saudi Arabia has opened its door to foreign campuses by planning to set up the first postgraduate research institute offering foreign-accredited degrees.

The institute will also become only the second mixed-gender university after King Abdullah University of Science and Technology.

Saudi Arabia General Investment Authority (Sagia) has signed a letter of intent with US-based Georgia Institute of Technology to build a Saudi campus to be ready for opening next year, according to press reports.

Grant Rogan, chief executive of Blenheim Capital, a consultant to Sagia, said: “The establishment of a world-class leader in advanced education such as Georgia Tech in Saudi Arabia is significant in the creation of centres of excellence within the Kingdom and the region as a whole.”

Located in King Abdullah Economic City – a residential and industrial hub being built north of Jeddah on the Red Sea – the new campus will focus on supporting an industrial base in the Economic City, particularly the aerospace, electronic and engineering industries.

Georgia Tech will manage the academic standards programme for Saudi students or students from elsewhere in the region who will be able to choose to take courses in other Georgia Tech campuses in the US, Europe and the Far East.

King Abdullah Economic City will have an Educational Zone, which is a part of plan to make Saudi Arabia globally competitive in technology. The zone will consist of a multi-university campus flanked by two research and development parks. The multi-university campus will accommodate 18,000 students and 7,500 members of staff.

The Georgia Institute of Technology is ranked 27th among the top 200 universities in the latest Times Higher Education world rankings, and is consistently ranked in US News & World Report’s top 10 public universities in the United States.

The Delhi Development Authority (DDA) is embroiled in a legal battle with the Commonwealth Games Village developer Emaar-MGF over “illegal constructions” carried out by the developer inside the Village, it is learnt.

The original agreement between the developer and the DDA earmarked 1,168 flats for construction. However, upon a routine inspection in mid-July, the DDA discovered that Emaar-MGF was carrying out construction of 28 dwelling units in the upper basements of some towers. “These dwelling units and studio apartments were essentially being built in an area that was demarcated for development by the DDA. So, a letter was sent to the developer on July 20, asking them to immediately stop all illegal construction,” said a senior DDA official, who requested anonymity. A copy of the letter sent on July 20 was shown to Newsline.

It is unclear whether Emaar-MGF gave a written reply to the letter. When contacted, a spokesperson for Emaar-MGF said via e-mail, “The project has been carried out in accordance with the applicable laws, building bylaws and also the agreement signed between Emaar-MGF and the DDA. We would not want to comment further on this as the matter is sub judice. Also, as and when the honorable court takes a decision the company will abide by it.”

According to the DDA official, Emaar-MGF did not comply with the July 20 letter. “We then issued another letter to the developer sometime in August, telling them to comply with the earlier communication and to demolish the illegal construction. We also said we would resort to legal action if Emaar-MGF refused to comply,” the official added. After that too went ignored, the DDA issued a proper demolition order to the developer.

However, Emaar-MGF instead of demolishing the extra construction filed a case contesting DDA’s order in the Tis Hazari district courts. When asked about the cost of these 28 dwelling units, the DDA official said, “We are not aware of the cost, surely it will run into a few crores.” The DDA refused to make an official statement.

DUBAI: Negative publicity relating to readiness and fitness of the Village in New Delhi is likely to impact the Indian joint-venture of Dubai-based Emaar Properties, a news report here has said, quoting official documents.

Emaar-MGF transferred the Commonwealth Games Village to the organising committee in August, ahead of the event’s start in October, the document’s planned convertible note sale dated September 29 said.

“This transfer was evidenced by an official handover certificate,” the document said.

MGF, along with the Andhra Pradesh Industrial Infrastructure Corporation (APIIC), has been involved in the construction, planning and design of the Commonwealth Games Village in New Delhi, India.

“Although Emaar-MGF has successfully completed and handed over The Commonwealth Games Village to the organising committee of the Commonwealth Games in time for the commencement of the sporting event, there can be no assurance that the guarantor’s [Emaar] operations in India will not suffer reputational consequences as a result of being associated with the project,” it said.

Emaar warned that further negative statements in relation to the Commonwealth Games Village “could have a negative impact on the market reputation of Emaar-MGF or may create an adverse market environment for the company’s operations in India.”

The village development will be transferred back to Emaar-MGF once the games end and properties handed over to company customers who already made purchases in the development and for future sales, according to the document.

Meanwhile, Emaar has also announced the placement and final terms of its offering of USD 450 million worth of Convertible Notes, due 2015, with a potential maximum size of USD 500 million if the over-allotment option is exercised.

The issue was scaled up from the initial USD 375 million size due to strong investor demand.

The company intends to use the net proceeds of the offering to refinance short term liabilities and for general corporate purposes.

DUBAI — Dubai’s giant developer Emaar Properties, which built the world’s tallest tower, will issue up to 500 million dollars in convertible notes, pending approval by shareholders, the company said.

“The company intends to use the net proceeds of the offering to refinance short-term liabilities and for general corporate purposes,” Emaar said in a late-Wednesday statement.

The planned offering would be for 450 million dollars of convertible notes due in 2015, “with a potential maximum size of US 500 million dollars if the over-allotment option is exercised,” Emaar said.

The notes will have a coupon of 7.5 percent annually, and will be convertible into Emaar shares at an initial price of 4.75 dirhams (about 1.2 dollars) per share, it said. They will be listed on the Luxembourg Euro MTF market.

In a Wednesday letter to the Dubai Financial Market, Emaar said that it had set up a wholly-owned subsidiary, Pyrus Limited, incorporated in the Cayman Islands, to issue the notes, which would be guaranteed by Emaar.

Pyrus would lend the proceeds from the notes to Emaar.

Emaar said its board has approved the notes issue, but that it was still subject to “the passing of certain resolutions at an extraordinary general shareholders’ meeting of the company,” which is expected to be held around November 3.

Emaar was the developer behind Burj Khalifa — at 828 metres (2,717 feet), the tallest tower in the world — which opened in Dubai in January.

The glitzy Gulf city state, which partly owns Emaar, borrowed heavily to fuel its rapid development.