BIG PLANS FOR DEVELOPMENT OF MAKKAH REGION:

UNCLAS SECTION 01 OF 02 JEDDAH 000537 SENSITIVE SIPDIS RIYADH PASS TO DHAHRAN E.O. 12958: N/A TAGS: ECON EFIN EINV ELTN PGOV SA SUBJECT: BIG PLANS FOR DEVELOPMENT OF MAKKAH REGION: ECONOMIC SLOWDOWN MAY DELAY PROGRESS REF: A. RIYADH 1850 ¶B. JEDDAH 414 ¶1. (SBU) Summary: Consul General and Pol/EconOff recently toured the "Future of Makkah" Exposition, a temporary exhibition in Jeddah showcasing gleaming urban development and infrastructure projects in the Makkah region of Saudi Arabia and which will close this week amid questions as to the likelihood and viability of some of these plans in light of the worsening global economic climate. While the just-released 2009 budget for the KSA promises large-scale government spending in infrastructure projects, privately financed construction is likely to be delayed, extended, or even cancelled. The rosy outlook evident when the expo was launched in September is now more restrained. End summary. ¶2. (SBU) The Makkah region includes the holy cities of Makkah and Medinah, the major port city of Jeddah, the mountain resort of Taif, and will one day include the King Abullah Economic City (KAEC) where construction is nearing completionon the first usable buildings on a site that is intended, according to the master plan, to one day house a population approaching 400,000. (100,000 is viewed by developers as the approximate "critical mass" required to make the KAEC project take off and become viable.) After decades of haphazard urban planning combined with rapid population growth, the existing cities are under pressure to modernize transportation facilities, improve access and increase accommodations and housing stock. The annual pilgrimage to Makkah highlights the current deficiencies in Makkah, Medinah, and Jeddah, all of which are stressed by the annual influx of approximately 1.5 million hajjis over the course of a 3 month period. In addition, Jeddah's upwardly mobile population has begun to abandon the traffic-burdened city center as it moves northward, leaving behind the poor and working-class expatriate population in the ever-more congested and blighted south Jeddah area. In response, the government has taken the initiative to launch several development and redevelopment projects. HIGH SPEED RAIL ¶3. (U) In May 2006, former Governor of Makkah, Prince Abdulmajeed Bin Abdulaziz, announced plans to build a high speed railroad, the Haramain High Speed Rail (HHR), connecting Jeddah to Makkah and Medinah. The new line will ease Hajj and Umra travel for visitors and also make transit from nearby Makkah to the new Jeddah airport faster for residents of Makkah. The rail project is widely expected to move forward as planned without meaningful delays engendered by economic downturn. The line will also feature a spur to the KAEC, which sits on the coast 100 kilometers north of Jeddah. Coupled with the rail line, a new terminal is planned for King Abdulaziz International Airport in Jeddah. The current airport is seriously outdated and long overdue for expansion. The plan is to construct a completely new structure leaving the current facility operational during construction. Bidding for the project is set for March 2009 with its first phase scheduled for 2012 and the entire project running through 2035. MAKKAH "MAKE-OVER" ¶4. (SBU) The center of Makkah will undergo the most radical transformation with a complete urban redesign to move all Hajj traffic to public transportation or pedestrian corridors. The plan, known as Jebel Omar, is not only ambitious, with its 39 residential and hotel towers and 2400 commercial outlets, but it is also controversial since large areas of the existing city will need to be cleared to accommodate the main construction corridor. Negotiations are in progress with landowners, and building is not expected to get underway for four to five years. An estimated 90,000 to 100,000 people will need to move if the proposed plan goes forward. In the middle of the city, a new King Abdullah Mosque accommodating 45,000 people is slated to be built. Substantial clearing of the area immediately contiguous to the Ka'abah, the holy center of the pilgrimage, has already taken place with more to come. Many of the structures removed from the area were of historic or architectural importance and, according to some in Jeddah, nothing was done to preserve them or even to document these sites prior to their destruction. Some of our contacts have severely criticized these actions, blaming Makkah landowners, who stand to profit from the redevelopment, for acting without concern for the religious history and sanctity of the site. Our contacts, emphasizing Saudi Arabia's commitment to JEDDAH 00000537 002 OF 002 accommodating future Hajj pilgrims, believe it very likely that the Jebel Omar project -- come what may on the global economic front -- will be realized. JEDDAH PORT REHAB ¶5. (SBU) There are several plans which aim at untangling and renewing the congested port area in Jeddah. In the very near term, land fill and deep water dredging should increase port capacity by 1.5 million containers per year and also permit unloading of deep tankers. This added capacity is critical since ships are sometimes forced to wait off shore for several days before there is space to enter the port and unload. The port expansion will also create additional corniche or water-side areas where housing, recreation, hotels, and shopping are planned. Lying just north of the port, a natural coral ring will be used as a foundation for a giant tank -- camouflaged by a doughnut-shaped island recreational area -- in which sea water will be held higher than the surrounding sea level. An underground pipe will lead from the tank to a nearby inland estuary and the water will be periodically released from the tank to flush out the estuary. The entire area surrounding the estuary is also slated for tear-down and rebuilding with new housing, offices, and city services. Some of the revenue generated by the business in the port/estuary area is committed for use in rehabilitating the historic Old Jeddah area which abuts the port district. Much of Old Jeddah is on the verge of collapse and in need of substantial resources for preservation. According to Sami Nawar, General Director of Tourism and Culture at the Ministry of Municipal and Rural Affairs, the project is assured now that a contract has been executed between the city and the partners in the project. However, local residents who will likely be displaced have initiated protests which may stretch out the two-year planning phase by another two or more years. KINGDOM TOWER -- TALLEST BUILDING IN THE WORLD! ¶6. (SBU) The most uncertain of the announced projects is the landmark Kingdom Tower, a private project planned by Saudi multi-billionaire Prince Alwaleed Bin Talal. If built, the forty billion dollar tower would be the tallest building in the world, standing approximately one kilometer high, and towering above what is currently undeveloped flat desert. The area, which lies to the north of Jeddah's tonier residential districts, would be transformed into a second urban center. There is much speculation as to whether the project -- with or without the tower -- will be realized. Many contacts say that Prince Alwaleed announces plans for this land from time to time in order to increase land values then cancels the plans down the road. However, if the project goes forward, Jeddah would have a new, modern, clean, multi-use center for work and play with waterways, public transit, resort beaches and additional residential space. The overall area of seven million square meters would eventually accommodate two million people. Sami Nawar estimates that there is a 60-70 percent likelihood the project will go forward. Others are less optimistic. ¶7. (SBU) Comment: The current economic slowdown will almost certainly delay or deal a death blow to some of the privately financed projects planned for the region. One such project, the Dubai Towers, a group of luxury high-rise apartment buildings on the Jeddah Corniche, has already run into financing trouble, while a similar project called "The Headquarters" is given a high likelihood of moving forward as planned. Conversely, government-funded projects, particularly infrastructure projects such as the Haramain High Speed Rail and the Jeddah Harbor project are now more likely to move ahead given the KSA's emphasis in the 2009 budget on increasing capital expenditures in order to mitigate the effects of the global financial crisis. Timetables may change, but Saudi urban development projects will remain major Saudi government priorities because of its commitment to meet pressing housing and transportation needs for residents and visitors to the holy cities. End comment. QUINN