The Red Sea Development Company, a subsidiary of Saudi Arabia’s sovereign wealth fund commonly known as the Public Investment Fund of Saudi Arabia, is reported to have started discussions with potential local lenders to acquire a fund which amounted to USD 3.5 billion. The fundraising will be used to further support the development of the Kingdom’s most ambitious tourism initiative, known as the Red Sea Project.
The loan, that is currently being sought after by the Red Sea Development company, is the company’s first massive borrowing. The loan is presumably to be backed up by the Public Investment Fund of Saudi Arabia and may have a tenor which lasts for 15 years. Details regarding the financing may still change, but the company expects to gain the desired loan by the end of 2019.
This is a massive project of transforming the mountains, desert, and archipelago of Saudi’s Red Sea coast into a global tourist attraction and destination. The project will cover a massive area of 28,000 square kilometers, about the size of Belgium, which spans over 90 islands along the Red Sea coast. A USD 500 billion futuristic entertainment, sports, and a cultural city called Neom will also be built within the area and will be a luxury destination with high-end villas and five-star hotels for affluent local and international tourists.
The Red Sea Project is intended to capture the growing trend of global tourism, which is noticeable not only in many of the world's most famous tourist destinations but also in the neighboring countries within the region. Other than capturing international visitors, the Red Sea Project also attempt to grab a share of outbound tourism spend of the Saudi population, which is valued as much as USD 16.5 billion.
It will serve as a Special Economic Zone, therefore it will have its own regulatory framework and a distinct law to be implemented. This means that the Red Sea Project will have more flexibility to operate as an entertainment hub and tourist destination than any other area in the kingdom. It is hoped that the implementation of the Special Economic Zone will encourage commercial activities as well as investment opportunities within this mega project.
It is anticipated that by the end of 2020, the first phase of the Red Sea Project’s construction will be finished. The first phase will include the construction a Coastal Village that includes 10 resident apartment buildings. Those apartments will be home to 14,000 residents when they first open in 2020. The contracts for the development have been signed and the construction is currently undergoing. The overall development of the Red Sea Project is expected to be fully-complete in 2030. The development will contribute as much as USD 1.6 billion to the kingdom’s GDP and create 70,000 jobs for Saudi population.
The Red Sea Project is one of many Saudi Arabia’s initiatives included in the Saudi Vision 2030. The development of the Red Sea coastline is part to transform the national economy towards a more diverse economy and to cut the kingdom’s reliance on oil resources. High investments will be put towards the development of this project and it exhibits prominent opportunities that could be seized by both local as well as international businesses.