Foreign Investors Get Keys to the Kingdom

For the first time ever, the Kingdom of Saudi Arabia is opening its doors to foreign investors in an effort to gain additional sources of investment for the government’s economic diversity plan.

The Saudi government announced foreigners were allowed to own property in the King Abdullah Economic City, known as KAEC, which is one of four economic cities included in a $400 billion infrastructure plan the government hopes will extend the country’s economic reach beyond oil.

Oil export revenues currently account for about 90 percent of the country’s total exports and for 40 percent of Saudi Arabia’s total GDP, according to the Energy Information Administration.The Saudis are hoping KAEC will change that by becoming the New York or Tokyo of the Middle East. It’s conveniently located on the coast of the Red Sea, between the Holy Cities of Makkah and Madinah, and is designed to house 2 million people and create 1 million jobs.

A port and a railway are being constructed to link KAEC with existing industries like plastic and aluminum that are already in the area. The city will also feature two new water desalination plants to bring clean water and power to its residents.

KAEC is already attracting attention from the business community. Bloomberg reported this week that French oil giant Total SA and U.S. chocolate maker Mars will have operations there.

The project has sputtered some in recent years as the global crisis hit the region hard but the decision to open up the doors to foreign investors should increase capital flows and move KAEC into the next phase of development.

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About Frank Holmes 263 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

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