Fahd al Rasheed, CEO King Abdullah Economic City HARDtalk

Welcome to a special edition of HARDtalk from Saudi Arabia, with me,

Stephen Sackur. This country was built on oil-rich is. Now it is

having to cope with the oil price crash. I have come to one of the

world's it construction projects, King Abdullah Economic City. It is

projected to be home to 2 million people, a global city here in the

Kingdom of Saudi Arabia. My guest is the CEO of this place, Fahd

Al-Rasheed. Due to the economic problems, could his dream the about

to turn to dust? Fahd Al-Rasheed, welcome to

HARDtalk, and thank you for inviting me to this extraordinary project.

How do you feel every day when you come onto what must be one of the

biggest voting sites in the world? I love it. There is nothing like

coming to a construction site if you are in the business of construction

and development. I get an adrenaline shot. How much change to UC day by

day, week by week was Mack when our visitors come, they see the big

star. I see the small stuff. I see a piece of 40. I see the difference

every day. -- floor here. It is important to give people a sense of

the scale. It is going to be the same size of Washington, DC. You say

it will have 2 million residents. It is extraordinary to build back from

scratch in the desert. Absolutely. You have to remember 65% of our

population is under 30. Because of population migration, they are some

of the fastest-growing cities in the world. We need new urban centres

like this. We get people to move here by offering jobs. It seems to

me when this dream was hatched, Saudi Arabia was the dominant player

in the oil market. The oil price was going up. There was a sense Saudi

Arabia could do anything wanted. Things are very different now.

KAEC, we like to call it KAEC, when it was launched I King Abdullah ten

years ago, the idea was to prepare for a moment where all prices are

not so high. When the government needs private sector involvement

across the whole economy. And we are here. Despite all of the economic

news about oil prices and the economy of Saudi Arabia sometime, we

signed up 23 new companies in 2015. When you talk about eating an

international hub, you have to persuade people that Saudi Arabia is

a good place to do business, and I am not sure the world believes that

right now. This is more of an image. I will give you example. It takes

the US 60s to get a payment. It takes a story weeks. ! Six years to

get a construction permit. What do you believe is the main priority

right now? You are talking about a port that you say it will be one of

the top ten ports in the world. You are talking about building an

industrial base. What is this city's unique selling point? The

first ten years we focus on global logistics and manufacturing. We

build the port, it will be top ten in the world, and the largest on the

Red Sea by the end of this year. We have attracted 120 companies from

around the world. We know the concept works and will continue into

the future. We are now focused on the residential sector, tourism, and

services by culture and education. Tourism? You think Saudi Arabia will

be a magnet for tourists? I am confident we will have 1 million

people by 2020 visiting the city, and 3.5 million by 2025. Ask me why.

I ask the questions. On this occasion, I will. Why? We are

already the 74th visited in the world because of Hajj. The

pilgrimage. We intend on doubling that. You have laid out some of the

vision for me. Let's go to your office and we can challenge you a

bit more. Saudi Arabia is entering an age of austerity will stop it

seems to me this extraordinary city project is about extravagance, not

austerity. I think it is about fundamentals. If you see what we

have built, it is based on what Saudi Arabia needs of the region

needs. We're talking about ports, we need logistics and transport

infrastructure. We talk about industry. We have energy that we are

using, and we talk about residents. We need to build 4 million housing

units in the country in the next ten years. We're just tapping into the

potential in the country. Think back to when this project was conceived.

It was a different era. Talking about 2005, King Abdullah was on the

throne and it would like Saudi Arabia could be guaranteed to be the

dominant oil producer in the world forever. And that the world would

always be reliant on Saudi oil. That is not true today. That changes

everything, doesn't it? Division of King Abdullah and the government at

the time was to create a new project -- the vision. A new development of

the rabbit sector -- private sector. I think King Abdullah Economic City

was wanted for this moment, when the government can do everything. And

the government needs to rely on the private sector. I think it is

working. In the end, you can't divorce yourself from economic

picture it on the whole. In end, if the Saudi economy is going to slow,

fundamentally because the oil price has plummeted, and it does not look

like it will rise any time soon, then you have a problem. Not only

the regional and Saudi economy, but the global economy. We will grow at

4%. It is also about the original picture. You sit on the Red Sea in

the middle of a region full of turbulence, turmoil, war, and

uncertainty about the future. That is a terrible problem as well. I

think people forget the Middle East has challenges for the last three

years. You can talk about the war in Iraq, Iran, the US and Iraq in the

90s, sorry, the Gulf War in the 90s, the second Gulf War in the beginning

of 2000, an Arab Spring, we are kind of use to it. Saudi Arabia has been

the stable place throughout all that. You have been in the country

and have seen. Does this look like a country in turmoil? I have talked to

a lot of people. They talk about uncertainty and challenges facing

Kingdome unlike any they had seen before. It comebacks to this point

about whether investors will see this as the time to get involved

with a speculative venture such as your new city. I think what you are

seeing today is a different era for Saudi Arabia. An era that will see

reform, a restructuring of the economy, but I think what people are

most worried about is the pace of change. We are seeing today a

dynamic government, that is willing to take and make the hard decisions.

It used to take 12 months and it now takes one month to get things done.

I think people are not used to this pace of change. Neither internally

or externally. You tell me this is very much a private sector project.

But in the end, they have been several occasions, such as 2008 with

the global financial crisis, and again in 2011, when you had to go to

your government and play for emergency loans because you were

running out of cash. This is what we call a private- public partnership.

You cannot build a city without the government. This cannot be the

Kingdome of Saudi Arabia or region. No project of this scale can work

without working with the government. That is precisely the point. Let me

quote you from a leaked memo was in Time magazine a few weeks ago. It is

not highly confidential and gives strict instructions for the stopping

of all new projects, for all public sector purchasers including new

vehicles and other equipment. That is the mindset of the government

today, a government you still ultimately rely on to Beagle

backstop. I think today if you look the private sector and what is

happening, 2015, despite all of the challenges, we signed 23 companies,

ourselves in the residential area where healthy, and over the next ten

years we will develop 40 projects. Our current business plan includes

170 projects, a five times increase in development. Numbers prove it. It

is not about sentiment. I know you like numbers. The marine traffic

index that I looked at for November of last year, it showed on any event

day, you had an average of three or four vessels import, whereas the

port of Jeddah literally as we sit here down the coast, the port of

Jeddah had 44 vessels import with another 42 en route. If you go to

the UAE and a bunch of other ports including Dubai, they are also much

busier than your Newport. -- new board. These numbers don't show the

potential of our port. We have three of the top five shipping lines in

the world moving there. I am confident about the future and we

will continue to build to make this one of the top 20 ports in the

world. So far we have focused on the global and regional economic

context. Let's switch wreckers and talk about -- focus, the climate of

Saudi Arabia in a new city. Is not your biggest problem that the

outside world's perception of Saudi Arabia is that it is deeply

conservative, and repressive, and that is not an atmosphere in which

people want to invest, want to live, and establish new businesses and

lives? If that is the picture, that is the wrong picture. I think Saudi

Arabia for the longest time is seen with a static lens. What I see is a

dynamic Saudi Arabia that is changing rapidly. I don't think we

in the country understand the pace of change. Ten years ago, there was

no woman on a boat. You could not be a CEO if you were a woman.

Definitely not in our Parliament. All of this changed very rapidly.

Today, 20% of our accountants are women. Frankly the biggest change of

all would be if my female colleagues working on the HARDtalk programme

were able to come to my city and drive themselves here, but that is

not possible. You cannot insulate yourself from the deep conservative

in this country. To say collections that have been held, and women

elected... Local council elections. This is nothing to do with who

wields the power. If you look at the power today, there are more

graduates women than men. The world does not understand. I would put it

to you, Fahd Al-Rasheed, you are a particular kind of Saudi. You are

educated in the United States. You have been to business school. You

are open-minded. And you are not representative of the religious

establishment in this country. You were frankly not representative of

the mindset of the ruling family either. I don't think I am

representative of anything except myself. Today, Saudis are not one

form of person. We are very different. Talking about people

graduating, we have 160,000 people around the world graduating. They

will come and change the country in fundamental ways. Let's talk about

the change, then. Let's be specific. You are telling international

investors to come here, live here, make this place their future. Will

there be a presence of the religious police here? I don't think that is

the issue. It is an important issue. For example, a talented young was

this woman what's to come here as part of a team establishing a new

company wants to believe she will have a good life here. Will she be

able to insulator herself from the rules that govern life in Riyadh?

Can she be of a different life? Can she do the things she would do if

you lived in the United States or Europe or many other parts of the

world? You should remember we are still in Saudi Arabia, and Saudi

Arabia today is a dynamic place. We ourselves are struggling between

modernity and tradition. We have the highest use of social media today in

the world. Looking at what the company will be in 30 or 40 years, I

don't know. What would you like to look like in 30 or 40 years?

I think we will have all of this useful energy coming back into the

country. Women are taking their place in society. The Saudi press

only if you will, what it means to be Saudi, is still not clear because

we are by the way a society which has a different strata of people on

income, religion, 30% of the population is not Saudi. So the

country itself is a young country. What it will look like in the future

will be the dynamism. Maybe you're being a bit diplomatic and tactful,

but is your message to the rulers of this kingdom that they need to

accept change? I think they are leading change to be honest.

Really? Yes. You often say in public, you say we are going to be

an island of change. We're going to bring the world to Saudi Arabia and

Saudi Arabia to the world. You compare yourselves here in this new

city to do by. There's a fundamental difference. In Dubai, the

authorities there have accepted all sorts of different lifestyles. They

have attracted Western money, Western tourists, Western business

people, because they have been so flexible. Are you telling me that

you can achieve that here? Dubai is a bit different because of the

model. They have to attract people from all over the world. You say you

want to do that? We do, we want to attract foreign investment

definitely. And we have done so. But my point is we have huge potential

in the country, is huge needs in the country for the Saudi population

that are not addressed. We don't need to attract people to tourism

here... These are not the same people that go to give by. We will

have about 30 million people for Hajj, they are already coming, we

have these as and we want a conservative family orientated

approach. That is exactly the target market. The other target is Saudis

themselves. They also need a destination so we will build zoos,

golf courses, theme parks, hotels for those people. But you're going

to do it in a very traditional Saudi way? I hope so, we have to. You're

in Saudi Arabia, there's a sense of place. On the golf course you're

going to build here, will women and men golfers be able to play

together? Definitely, why not? I don't know why not but I know it's

difficult for women to play golf in this country partly because of the

clothing laws. We will figure that out. We're building a new industry.

But again, it's not about the tactics, it's about the direction.

How can we create a new place in Saudi Arabia that is respectful of

the Saudi tradition that at the same time is modern, but reflects the

local condition and local needs and the target markets we are looking to

serve. One of the key points made by the deputy crown Prince, as he

delivers what he calls his economic transformation model, is to ensure

that more jobs are done by Saudis and fewer jobs are done by

foreigners in Saudi Arabia. I think construction is one area that he's

been looking at. You've taken me on a quick tour of construction,

there's an awful lot going on, but I did notice that many of the workers

I saw an Saudis. Is that going to change? The challenge with this is

that we have opened our economy, unlike most countries in the world,

to foreign workers and they get paid an amount of money that is

reflective of their economic opportunity of their country. That

is the challenge, that is below what a Saudi would make. We will change

that over time by training Saudis. They are now accepting jobs that

they used to not accept to be honest with you. You can look at our port

operations room, today they are all women from villages around us. It

took a year to train them. We are big believers that Saudis when

trained properly and helped to get a job they will do it. It's partly

about a mindset. Are you saying that you believe Saudis in King Abdullah

Economic City are going to be prepared to do the construction

work, to do the garbage collection, to do some of the most basic

labouring tasks which for decades in this country have been done by

overseas expat workers? I don't see a reason why they can't do it. Have

you told this to your Saudi neighbours? It seems to me this

isn't a society right now that accept that. Despite the austerity

the government is now talking about you still get huge subsidies and you

still live off oil resources and I don't think most Saudis feel the

need to do the kind of jobs you are talking about. This is a

generalisation, I know where it's coming from but I know Saudis that

will do any job. Everyday we train them and we have programmes that

train Saudis from the villages around us. Go to the hotels, they

are working different jobs. It's all about the environment you offer. If

you offer the right environment and you select properly then you will

see they will do the job. What about sustainability. We haven't talked

about that. It's an extraordinary view here. Essentially beyond the

fancy housing complex and this beautiful office headquarters,

you've got desert. It does seem odd in a way building a vast new city in

the middle of the desert, adding goodness knows how much carbon

emissions to the atmosphere, when the world's governments have just

pledged themselves to decarbonise in the world, me. How are you going to

justify this project -- the world economy. We are very careful about

building sustainable and. When this project was launched ten years ago,

it looked like Venice, the master plan was beautiful, it had nothing

to do with the environment in which we exist. Then I was in New York

during hurricane Sandy and I saw the full power of nature and what nature

will do to you if you try to actually over engineer and over

cement and over concrete the place. When I came back I said, this is not

going to work. We have to make it and ecological the friendly city so

we removed all the canals, allowed water to flow where it wanted to.

Ideally we focused on conservation a lot. I think conservation is the

most important form of sustainability. It will cut 40% of

our carbon output if we just focus on this area. Now we are saying the

world is changing. We are on our fourth master plan by the way. And

we just agree that KAEC that the master plan we have, is probably the

most modern master plan in the world, should be scrapped. The

reason for this is I don't know yet how the Internet things, the

driverless car, the sharing economy should change how our city will

not. We are building great cities today but they are not 21st-century

cities. We don't understand how a 21st-century city should look.

You've just scrapped your master plan, so that means you have no plan

master plan should not be so exact master plan should not be so exact

about what you do, it should tell you what you shouldn't do. Coming

back to this point about how you reduce emissions and make this as

close to carbon neutral as you can. I was expecting, given we are in

Saudi Arabia, where the sun is almost always shining, I was

expecting to see vast solar arrays to power this place, but I don't see

any investment in solar at all. Solar on its own is very effective

but it's not effective if not coupled with storage. We are

producing new homes for 2017 that will not only have solar panels but

will include batteries as well. That's the idea we have. It's not

about showing you a showy nice area that has lots of solar panels, it's

about conserve, so don't even use what you don't need, and second,

actually introduce technologies that actually work both economically and

technologically. Back in the day of King Abdullah there was talk of six

new economic cities for Saudi Arabia. You're still going. There

are one or two others that are still staggering along but a lot of the

planning has been shelved. You may be the last one standing and you may

not make it either. I believe we will make it first of all. It is

happening, so that's not a question in my mind. However, building a city

isn't easy, I've learned this the hard way. There are 2470 cities in

the world and this is the most competitive space for a city. Each

city has its own path, it really needs to be zooming into why it

needs to exist. Then you need a committed government or private

sector developer to make it happened despite all the challenges. Other

economic cities will actually happen I think. Not all of them are on the

floor at the moment. But they have just taken a different path to

success. I hope I can return, but for now, Fahd al Rasheed, thank you

for being on HARDtalk. Thank you for having me.