GCC Insights: Riyadh seeks to become financial hub of Mideast

Saudi Arabia intends to turn Riyadh into a major centre for financial services on a global level. Officials are thinking big, comparing the planned project to Canary Wharf, London's business and banking district. Known as King Abdullah Financial District, the project would be developed in the heart of Riyadh, with easy access from central business district and airport.

The officials concealed some details of the ambitious project during a conference on future development held in Riyadh last week. Finance Minister Ebrahim Al Assaf revealed that Saudi authorities had been developing ideas for the project over the past two years.

The masterplan is expected to be ready by year-end, with construction getting under way sometime in 2007.

Upon completion, King Abdullah Financial District would house all state entities dealing with financial matters. These include the Capital Market Authority and the Stock Exchange (Tadawul).

Additionally, financial institutions operating in the capital would most likely relocate or open new branches in the new financial district. Industry support providers such as accountants, auditors, analysts, consultants and other firms involved in related activities are expected to operate from the district.

In terms of its size, King Abdullah Financial District would be a mega project by international standards.

The authorities intend to develop the project on a site comprising 1.6 million square metres. By comparison, London's Canary Wharf is built over an area of 345,000 square metres. Authorities are promising to develop the project with modern infrastructure in terms of road network to information technology standards.

An academy dedicated to offering degrees in financial services would be set up in the district. Other schemes include purpose-built conference halls.

The authorities also expect the financial district to create job opportunities for qualified Saudi nationals. Currently, finding jobs for citizens is a daunting challenge in the kingdom. The economy has to generate some 160,000 annually for nationals to cope with demand.

The move to turn Riyadh into a major financial district could not come at a more opportune time. Saudi Arabia was admitted to the World Trade Organisation (WTO) last December.

Under WTO accession terms, the Saudi government agreed to allow 60 per cent foreign equity shareholding for joint ventures in banking. Also, Riyadh agreed to permit foreign banks in the form of a locally incorporated joint stock company or as a branch of an international bank.

Likewise, Saudi Arabia is now encouraging expatriates living and working in the kingdom to invest in the local stock market. As of March 25, some 800,000 expatriates were deemed qualified to invest in the bourse.

It remains to be seen whether King Abdullah Financial District would pose a threat to other regional projects, namely Bahrain Financial Harbour (BFH), Dubai International Financial District (DIFC) and Qatar Financial Centre (QFC).

At the moment, Bahrain serves as the main regional hub for financial services. However, Bahrain is facing challenge from the DIFC, a $2 billion project. Private sector firms led by Gulf Finance House are developing the $1.3 billion BFH scheme in the old harbour of Manama. For its part, Qatar is yet to make serious progress on the QFC.

Riyadh is already the global capital of oil. Now Saudi Arabia wants to add another distinction to Riyadh by making it the main financial services centre in the Middle East.

Yet, the authorities may not have all the luxury of delaying completion of King Abdullah Financial District in a fast-moving world.

The Saudi project must overcome advantages currently enjoyed by established financial hubs in the region.

- The writer is the assistant professor of College of Business Administration, University of Bahrain.