Spending billions of USD to construct unimaginable projects right in the desert. What is driving Middle Eastern countries to do so?
For many years, the United Arab Emirates and Saudi Arabia have focused on diversifying their assets beyond oil, creating new revenue sources to boost the economies of the Gulf region.
However, this is not an easy task. Despite being oil-rich, arable land and water necessary for development are scarce, making it a significant challenge to generate non-oil revenue from natural resources.
The Gulf countries need to think outside the box and be more innovative, using alternative forms to attract Foreign Direct Investment (FDI). Massive mega-projects are one of those ways.
Massive mega-projects are one of the ways to attract investment.
For many around the world, mega-projects in the Middle East seem no different from a “display of extreme wealth.” But as oil supplies dwindle, is the cost of these billion-dollar projects truly justifiable? What are the reasons behind such colossal and risky endeavors?
Arabian Business outlines several reasons why mega-projects play such a strategic role for the future of wealthy Gulf nations.
Attracting Capital
To diversify their economies, Gulf countries need foreign direct investment. Free zones, tax incentives, and UAE’s golden visa/residency initiatives present excellent opportunities for talent and businesses to relocate to the kingdom. Yet, the UAE needs much more to elevate its status.
According to the UAE’s “Projects of the 50,” the country’s tourism strategy aims to increase tourism’s contribution to GDP to 450 billion AED (approximately 122 billion USD – AED is the UAE Dirham) by 2031. As part of Saudi Arabia’s Vision 2030, the kingdom also expects tourism’s contribution to GDP to rise from 3% to 10%.
If Gulf countries want to compete with Europe and Asia in attracting international tourists, their mega-projects must be distinctive and unique while promoting socio-economic growth.
Downtown Dubai – once a barren, underutilized area – has been transformed into a global tourist destination and one of the most attractive residential development projects in the city. It is also home to the Burj Khalifa, the tallest building in the world, and the Dubai International Financial Centre (DIFC), a leading financial and FinTech hub in the Middle East.
The Red Sea Development – Saudi Arabia’s regenerating tourism destination, combines luxury entertainment with sustainable technology to preserve and protect the ecosystem. Qiddiya in Saudi Arabia is envisioned as the largest entertainment city in the world, three times the size of Disney World in Florida. Dedicated to sports and the arts, this resort city will feature water and snow parks, modern sports arenas, and educational facilities. The estimated sports and entertainment capital is expected to attract around 14.5 million visitors annually, contributing 4.5 billion USD to the GDP.
In another bold move to diversify revenue, boost tourism, and reduce dependence on oil and gas, Saudi Arabia aims to make its mark on the international sports “stage.”
Mega-projects will attract both businesses and entrepreneurs.
When it comes to contributing to the national economy, signing superstar footballer Cristiano Ronaldo for Al Nassr FC can be considered a mega-project in itself. Earning around 200 million USD per year, CR7 is the highest-paid football player in the world.
The signing of the 37-year-old Portuguese superstar is one of many strategic moves to portray Arab nations as more open, globalized, and diverse.
Thanks to other major sporting events, such as the Abu Dhabi Grand Prix and WWE’s first live event in Saudi Arabia in 2023, sports tourism in the Middle East is expected to rise by 30%, generating around 600 billion USD in revenue.
Not only will tourists be attracted, but mega-projects will also draw in businesses and entrepreneurs. These exciting billion-dollar projects are attracting capital and talent from around the world, as well as providing much-needed job opportunities for the predominantly young population of the Gulf.
Connectivity
To meet the demands of urbanization, tourism, and trade, the Gulf region needs to invest heavily in transportation and infrastructure. As a strategic partner in China’s Belt and Road Initiative, the UAE has invested significantly in this area.
Alongside the UAE’s tourism strategy, Abu Dhabi International Airport is being expanded with a multi-billion USD investment. The new terminal will be the first in the world to utilize advanced AI technology and biometric capabilities to serve up to 45 million passengers annually.
Etihad Rail is the UAE’s latest national railway network, designed to connect the seven emirates of the UAE with neighboring GCC countries: Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman.
Etihad Rail is the UAE’s latest national railway network.
The largest infrastructure project the Middle East has ever seen will be a railway stretching approximately 1,000 km across the country, providing a sustainable, safe, and extremely modern transportation network for around 36 million passengers and 60 million tons of cargo annually by 2030.
It is estimated that the railway could contribute around 54 billion USD to the UAE economy over the next 50 years, with about 12 billion USD coming from tourism, business, and investment opportunities arising from greater connectivity.
Worth the Risk
These grand projects are highly risky, but they are crucial for the future of Arab nations – attracting not only tourists but also investors, businesses, and foreign talent.
Creating entire cities and infrastructure from such remote and harsh landscapes is undoubtedly a monumental feat. But to ensure a secure future, Gulf countries must transition from single commodity economies vulnerable to fluctuations to prosperous and sustainable powerhouses.
Building mega-projects is precisely what can help them achieve this.
