Jeddah’s industrial market has benefitted from a surge of investment, driven by efforts to diversify away from oil. In late 2015 the Kingdom’s government announced that 45m sq metres of land in and around Jeddah had been allocated for industrial development, to be overseen by the Saudi Industrial Property Authority (MODON), a quasi-governmental entity established in 2001. At the time of the announcement, MODON had already completed work on 25m sq metres of this total, with the remaining 20m sq metres still in development.
Growing Reputation
While domestic firms account for a large percentage of industrial activity in the Jeddah area, the city has also cultivated a strong reputation among international players. Major multinational manufacturers, such as GE and Unilever, have increased their investments in the Kingdom, while over the same period Jeddah has continued to attract new entrants, such as Zamil Steel, an Indian firm, which was awarded a SR20.5m ($5.5m) contract in July 2015 to build a water tank factory in the city.
This new activity bodes well for the government’s plan to boost the industrial sector’s GDP contribution to 20% by 2020, up from around 10% in 2013. “We are seeing strong and stable performance in the Jeddah industrial market at present,” Imad Damrah, managing director of the real estate firm Colliers International in Saudi Arabia, said in a report in late 2015.
Lay Of The Land
A significant percentage of industrial development has centred on four state-sanctioned industrial cities, the first of which was set up by the government in 1973 on a 12m-sq-metre plot of land south of Jeddah proper. MODON launched the second and third industrial cities near Jeddah in 2009 and 2010, respectively, as part of a push to boost industry-related revenues. In 2012 it began development on Jeddah 4th, also known as Asfan Industrial City, which is located on 5m sq metres of land to the north-east of Jeddah. Firms that set up in one of the area’s industrial cities are privy to a range of incentives, including land subsidies, access to financial facilities and loans, and Customs exemptions for machinery, equipment and raw materials imports.
In recent years MODON has focused on improving access to cargo-transport facilities at all of its industrial areas, seen as a key driver of incoming industrial investment. “In Jeddah specifically, logistics are key right now,” Nidhal Abdulrahman Taibah, vice-president for development at the municipality-established Jeddah Development and Urban Regeneration Company (JDURC), told OBG. “But this is difficult. You need high volumes to justify the commitment of large investments, which is where we come in, as we have access to government lands that can offset the cost and tremendously improve return on investment.”
Untapped Potential
In late 2015 MODON announced a plan to develop four new industrial areas across the Kingdom – one of which is slated for Jeddah, which will be designed specifically to employ local women, who are increasingly seen as a major source of undervalued potential in a tightening economy. The announcement follows the establishment in 2014 of MODON Oasis, a 500,000-sq-metre industrial city operated entirely by women on the outskirts of Al Ahsa, in Eastern Province.
This initiative forms a key component not only of the national government’s plan to boost the contribution of industry to GDP in the coming years, but also of the Jeddah municipality’s efforts to ramp up investment across the sector. Indeed, initiatives currently in progress under the umbrella of both the JDURC and the Jeddah Chamber of Commerce and Industry (JCCI) have a strong industrial component to them. “I believe for the coming years, we need to focus on manufacturing and industrial development,” Nadia Al Amoudi, research and studies manager at the JCCI, told OBG. “These are the areas that will diversify the market, which is a key goal moving forward.”
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