Why Emaar Properties is going make it big in the Kingdom

Clearly something rather special is happening in the Kingdom of Saudi Arabia. In short, economic reforms, particularly for foreign inward investment, that have followed after accession to the World Trade Organization are bringing early fruit.

It does not hurt of course that the Kingdom is awash with a tidal wave of oil money. That may have just caused a boom and bust in the local stock market but this also remains an opportunity that foreign bankers and now property developers are only too keen to follow. Expect to see many more surprising new entrants to the Saudi market over the next few years.

This is unreservedly good news for the Saudi population. The multiplier effect of foreign investment for local business will be huge, quite apart from the direct employment opportunities for the young and the transfer of technology. As many other countries have learned in the past, opening up to foreign investment is a path to riches and stronger cultures have nothing to fear from foreign influence.

Exporting expertise

Emaar is exporting its successful Dubai real estate development model to Jeddah. Last December the $27 billion King Abdullah Economic City was launched, and this week the $11 billion Jeddah Hills residential community of 20,000 units was rolled out. Even the name Jeddah Hills hails from the success of Emirates Hills in Dubai where Emaar built its very first villa just seven year's ago.

Naturally Emaar has been careful to select the right Saudi joint venture partner in the Al Oula Development Company. And homes in the Jeddah Hills community will go on sale early next year.

What is quite evident is that the Kingdom is undergoing a seismic shift in economic policy that marks a major change and points to a new economic future. Might this be the equivalent of the shift towards capitalism made so decisively by China almost two decades ago which has now transformed this former monolithic, communist state?

Chinese model?

China is an example that the Saudi Arabian authorities like to study. For China has managed to maintain one-party control and upheld its own cultural values while transforming its economy into the workshop of the world.

Saudi Arabia would not wish to become a manufacturing base like China, but by broadening its downstream diversification it is possible to build a far stronger economy based on oil and gas. However, at the same time accepting international banks and even regional property developers will accelerate the creation of modern and dynamic financial and real estate sectors.

There will also be a further overhaul of the Saudi financial sector in the wake of the recent Capital Market Law and the stock market crash. Both the just announced King Abdullah Financial District in Riyadh and a proposed new privately-owned Saudi Arabian Financial Exchange will be a part of this process.

So a lot is happening in Saudi Arabia, and this is probably where the next big opportunities lie for Gulf as well as foreign entrepreneurs.