Saudi Arabia’s Historical Mud City Seeing Boost In Tourism FDI

(Bloomberg) --The Saudi company tasked with building a mega cultural heritage project in the heart of Riyadh is close to securing $400 million from foreign investors, indicating progress in the kingdom’s efforts to draw private funding into the tourism sector.

Companies from Italy, Colombia and the United Arab Emirates are the latest to make commitments to co-develop hotels and villas at the site, Diriyah Co. Chief Executive Officer Jerry Inzerillo said in an interview on the sidelines of the Future Investment Initiative confab in the Saudi capital.

“What we’re now seeing is not just Gulf investment, Saudi investment but foreign investment,” he said. “People are starting to believe that what we said we were going to do is actually happening.”

Initial agreements were struck at FII and follow on from at least $4 billion in contracts that the firm has awarded since July. Diriyah is a mud-built city in the birthplace of modern Saudi Arabia that’s set to feature hotels, homes, restaurants and cultural sites.

It’s ramping up to meet deadlines set under Crown Prince Mohammed bin Salman’s Vision 2030 economic diversification agenda. The site is among few of the so-called giga projects that have opened to the public since Vision 2030 was launched more than eight years ago. Red Sea Global has also launched new ultra-luxury hotels on the Red Sea and Neom recently opened Sindalah Island, though only to select guests.

The openings come as the kingdom faces low oil prices and budget deficits that have led to funding cutbacks on some Vision 2030 work. Diriyah, a $64 billion project backed by the sovereign wealth fund, hasn’t yet been a victim of budget cuts and remains on time, Inzerillo said.

“We haven’t seen a penny taken out of the budget,” Inzerillo said. But there are challenges with “very complex” supply chain issues across all of the mega projects in Saudi Arabia, he added. “We’ve all been scrambling. It’s a giant issue.”

Earlier this week, Saudi Finance Minister Mohammed Al-Jadaan cited human resources and execution as key challenges to the economic overhaul. Plans are being synchronized and re-calibrated to help alleviate issues and prevent overheating in the economy, he said.

“We are not complacent. We are doubling down, making sure that we do the right thing,” Al-Jadaan said on the main stage at FII.

Tourism is one area he said is going better than expected. Saudi Arabia aims to draw in 150 million tourists a year by 2030 — from about 109 million last year — and plans to spend almost $1 trillion on the sector in the next decade. It wants to see $80 billion in private investment by 2030.

Those figures count both foreigners visiting the kingdom and Saudis traveling internally. Those coming for the pilgrimage to Mecca, conferences and events as well as business reasons are counted as tourists.

Speculation often swirls that Saudi Arabia will eventually lift a ban on alcohol to help it meet its self-imposed targets.

“The laws say that right now there’s no alcohol and all of us, all the CEOs abide by that law,” Diriyah’s Inzerillo said. “Now having said that, we’re building all these hotels. We have all the tourism coming. We’ll see.”