Enhancing local capacity for efficient urban economy and Municipal Finance

Saudi Arabia is the world’s largest exporter of oil, and this provides the foundations for its economy: 45% of GDP, 80% of budget revenue and 90% of export earnings. It is currently attempting to diversify its economy into areas such as telecommunications, power generation, natural gas and encouraged private investment to provide more employment opportunities to Saudi nationals, particularly its substantial youth population. Riyadh is the country’s financial, political and commercial centre. It has successfully created prominent financial and industrial sectors with two large industrial parks with the support of the Saudi Industrial Development Fund.

Jeddah, the largest port and gateway to Mecca, has also developed rapidly. It is now preparing a strategic plan to guide its development through extensive infrastructure improvement, enhance its liveability, exploit its potential as a hub in the globalized market and maintain its competitiveness with other emerging ‘economic cities’ in the country. Religious pilgrimages are a major source of tourism economy in Mecca, Jeddah and Medina. Jeddah has diversified its economy to tourism, transport, logistics, education, healthcare, finance and retail and wholesale trade. Economic activities are also concentrated in other cities. Dammam is located close to the country’s oil fields and this has boosted its development. The strategic plans of many cities has taken in consideration such priorities but was not able to develop the most optimum spatial configurations mainly in small and medium sized cities.

In an effort to shift economic growth to the secondary cities, Saudi Arabia is improving the infrastructure of Asir, Hail, Hofuf, Medina, Tabuk, and Taif. It is also investing in the development of new towns. The Knowledge Economic City in Medina (completion 2016-18) will focus on developing commercial expertise, supported by a range of commercial and cultural complexes. In 2015 a renewable energy city in Riyadh, will be completed. The King Abdullah Economic City, north of Jeddah, Jizan Economic City will focus on heavy industries, biotech and pharmaceuticals. In Ha’il, the Prince Abdul Aziz Bin Mousaed Economic City will become a transport and logistics hub. Both are scheduled to be completed in 2016. Plans for two other economic cities, in Tabuk and in the Eastern Provinces, are currently under development.

The challenge remains in the type of education of unemployed youth to qualify them to get employment in a private-led high competitive market for best expertise. Municipalities, are responsible for issuing building and business permits, ensuring food safety and public health, maintaining parks and public space, solid waste management and street lighting. The national ministries provide education, social services and housing. The Municipalities Statute is very restrictive in giving them opportunities to structure their fees for services to be realistic and generate revenue to all the municipalities to improve services at their own discretion or initiate community led initiatives.

The programme is currently critically analysing Saudi Arabia economic development and investment programmes that are regionally distributed with the aim to ensure equal distribution of development gains across the regions. Within cities it has not yet trickled down its effect to Saudi population, particularly the labour force seeking employment. In addition, the programme will propose locally acceptable tools and solutions to enhance municipal finance and introduce participatory budgeting for municipalities who are not able to collect taxes, adapt municipal fees to a reasonable rates particularly for city planning, building permits, land transfer, land-subdivisions and municipal service charges.

The programme is preparing urban planning related economic studies based on consultative discussions with the youth and women networks in cities. With the aim of achieving the right balance between different levels of government, designing new financial mechanisms and exploring new sources of capital, improving systems of revenue collection and improving budget management and transparency. The programme will develop and train municipalities and planning specialists on new mechanisms of land value capture, identifying bankable projects attractive to the private sector and privatization of municipal and revenue collection. The programme will recommend options to generate income including the issuing of permits to business operators, forming public-private partnerships and privatization of the provision of municipal services. Well planned and designed cities can generate better financing, higher levels of wellbeing and better employment opportunities. Programme priorities are: to help cities improve municipal finance, to turn local assets into economic drivers, to promote community empowerment and to focus strongly on youth.