By Michael Darch

On 13 May, OCRI had the privilege of meeting with Mr. Amr Al-Dabbagh Governor of the Saudi Arabian General Investment Authority (SAGIA). The Governor was on a visit to various cities in Canada to determine how Canada could assist in the massive Saudi project to establish six new cities, yes that is right, build six new cities out of the desert with a population target of 4-5 million by 2020!

The law firm Heenan Blaikie was working with SAGIA on visits to Vancouver, Toronto and Ottawa. SAGIA had mentioned that they were looking at models to accelerate the growth of their technology clusters and Heenan Blaikie introduced them to OCRI. SAGIA researched OCRI on the internet and requested that a meeting be set up on the Ottawa leg of their trip.

We don’t wake up one morning now without hearing about the price of oil hitting yet another high. Most people now cringe when having to fill up the gas tank. Escalating gas prices are finally driving serious development of non-fossil fuel based energy sources.

With the world’s largest proven conventional oil sources, Saudi Arabia should be sitting pretty. And it is, but for how long! Rather than bask in the glory of its fortunate wealth beneath the sand, Saudi Arabia is looking to the future. How does it use the wealth of today to ensure the continuing prosperity of its citizens after the oil runs out.

Their answer was simple, move from a resource based economy to a knowledge based economy while you have the financial resources to do it. With the world’s economy becoming truly global, the geopolitical space of the Middle East only improves. It is a natural logistical hub, its oil wealth makes it a financial hub, therefore the question becomes “how does it become a sustainable economic hub?”

The Emirates are certainly addressing the question with the development of Dubai. “Cities” have been developed within Dubai to support specific sectors of the global economy. Dubai is becoming a hub, but it lacks the population base and the “cities” are more like zones.

Saudi does have the population and unlike the aging demographic of Europe and North America, its average age is 23 and the population is growing. To address future need, it is looking not to expand existing cities, but to create new cities. Building on the theme of sustainability, these cities are being planned to promote balanced regional development, achieve economic diversification, create jobs and upgrade competitiveness. Most countries have to develop their emerging clusters amongst legacy industries and infrastructure. These new cities will have the luxury of building from a clean slate.

And SAGIA did its homework. They brought in the best thinkers on modern economic development such as Michael Porter. They studied over 1000 Free Zones. They have studied the factors that will make them a success in global competition, such as being at the pivot point between Europe, Asia and Africa. They have even examined constraints to global competition. For example, they determined that the minimum population size for a city to be globally competitive is 800,000. Any smaller and you do not have the critical mass for the necessary talent pool and infrastructure. If only our Federal government and the Ontario governments would understand the difference between policies for regional income distribution and policies to strengthen Canada’s globally competitive urban regions while addressing balanced regional development.

SAGIA is also putting a different spin on incoming investment. To most inward investment agencies, that means bring money. Several times throughout the day, we were asked “what is Saudi Arabia’s second largest export?” The simple answer: CASH. Investment to SAGIA is knowledge, talent, know how, cutting edge products, partnerships. To a region like Ottawa: music to our ears.

Another discussion point was taxes. Saudi is building a sustainable model built on talent and intellectual capital. The rush to be the lowest tax regime will ultimately mean that you cannot develop the education, health care and infrastructure to attract and retain the best and brightest.

We did discuss specific ways that OCRI and SAGIA could cooperate. These were in the areas of knowledge transfer, commercialization and market gateways. We look forward to a long and mutually beneficial partnership.

Saudi Arabia and SAGIA may not meet their aggressive targets. But they have worked to understand global economics in the 21st century. It is an interesting model and far better than that of many countries who remain locked in mid-20th century models of domestic regional development while ignoring strengthening urban regions to compete globally. You cannot redistribute wealth that you have let flow to other countries.

(Mike Darch is Executive Director of OCRI Global Marketing)