Originally published in 2016 on RealClearPolicy
Why is Saudi Arabia suddenly the pit stop of choice for an impressive laundry list of major companies? How is it positioned among the growing number of Middle-Eastern industrial free zones? And should Rust Belt cities like Cincinnati look this way for answers?
If a nation's cities are the products of their ingredients, the Saudi Arabian pantry leaves much to be desired, with a grueling climate, a monopolistic economy built on the extraction of fossil fuels, looming regional threats, and conservative social practices that hinder freedoms, especially for women.
The resulting menu reflects the bleak inputs. Expansive wealth has combined with poor urban design to generate an unsavory cocktail of high-speed pedestrian-hostile highways and walled single-use compounds. Erratic industrial development and heavy utility infrastructure haphazardly dot the desert landscape. For decades, Saudi Arabia’s physical development has emulated American suburbia, prioritizing privacy over community to the extent it’s been organized at all. The nation’s prosperity, driven by oil, yields few private sector jobs. Reform has been slow and modest, and educational advances, primarily for men, have focused on growing computer and technical skills with little attention to intellectual fields.
But, despite all of its downsides, Saudi Arabia is advancing because it has recognized that oil wealth cannot drive the country forever. Much like America’s Rust Belt, Saudi Arabia is confronting the reality that, in the future, the economy needs to find new drivers.
To do this, Saudi Arabia committed to developing several new cities designed to generate opportunities for the country’s exploding young population to stay at home. The intent was to invest existing surpluses to develop new and different kinds of economies to fuel the country’s future. This contrasts with the region’s reputation for lavish “living in the moment.”
Rather than pressing solely for an emergence of finance or innovation that it is ill-equipped to attract, Saudi Arabia has made a tactical decision to leverage its industrial infrastructure, considering the regional advantage of its unique global positioning along the Red Sea at the confluence of busy shipping routes.
One of these cities, the King Abdullah Economic City, is by some measures the biggest development project in the history of the world. KAEC includes an unusual confluence of many modes of industrial transport, matching a seaport with a rail port and highways connecting the Indian Ocean and Suez Canal into the Middle East and Eastern Europe. Smartly, much of its investment has focused on increasing and humanizing its industrial infrastructure, leveraging the location by luring major industrial and shipping outfits to conduct midstream logistics activities here, midway through their global journey.
By increasing the attractiveness of this junction to global companies, KAEC is hoping to trade one heavy industry — oil — for a diverse array of others. Unlike recent Chinese megaprojects designed to passively accommodate inevitable increases in demand around existing economic drivers, KAEC is endeavoring to actively spur the organic emergence of a new economy by making the world take notice: first, of the things that Saudi Arabia’s population is capable of handling today, and later, of more cosmopolitan industries that can only thrive once slowly-materializing social advances have taken root. It's well-understood that, as part of the logical phasing by which most cities historically have grown, short-term industrial growth is the key to driving future gains in white collar fields over time.
KAEC is also the world’s first publicly-traded city. While growth has been slow, the city has stayed afloat through investment by half of the Saudi population and a rising stock price that over the last three years has outpaced the Dow. Its growth is predicated on continued public buy-in of its strategies; its fortunes are intrinsically tied to national transformations.
KAEC is one of many industrial free zones that are all the rage in this part of the world. The Middle East is now dotted with hundreds of them, and their power and attractiveness is leading the world to slowly reshape logistics activities around them. The massive economic shifts that these strategic investments have attracted seem by and large to be working. Another economic zone known as Al Duqm is rumored to be high on the military’s list of landing spots for relocating US military operations in the Middle East; it is a site that a few years ago could barely sustain a small fishing village.
Ten thousand miles away...
On the other side of the world, thousands of miles away in the heartland of the United States, dozens of cities once buoyed by manufacturing are similarly trying to reshape their identities, among them Detroit, Buffalo, Pittsburgh, Milwaukee, Cleveland and Cincinnati. For some of them, a Saudi-inspired back-to-the-basics industrial approach could be part of the answer.
Many of these cities have already identified an increased midstream logistics role brought on by the ripple effect of the planned expansion of the Panama Canal. Chicago, the traditional link between the Mississippi River and the St. Lawrence Seaway, is reducing its water-based industrial volumes as it orients its river toward tourism. This further emboldens the ambitions of cities like Cincinnati to take up the slack — it has recently worked to up the profile of its river port from forty-ninth to ninth-largest by merging with adjacent cities.
A realignment in the nation’s energy transport arteries is also opening the door for smaller inland cities to become energy transport hubs. A decrease in energy from the Middle East, an increase from Canada and the northern United States, and increased local cultivation through renewables, natural gas, and small-scale drilling are broadening the energy transport infrastructure beyond well-established coastal ports.
As America’s manufacturing profile has shifted, freight transport has remained steady between water, rail, ground, and air modes. As a result, cities that link them are well-positioned as potential logistics hubs. New trends in shipping demands also suggest positive prospects for ports that can accommodate water-based deliveries further inland. Cincinnati is particularly well-positioned, because its proximity to the wide Ohio River makes it more attractive than similar cities on smaller rivers.
Despite many reasons for cities like Cincinnati to embrace a logistics-based future, obstacles have stood in the way. For one, trends in modern urban design and economic development do not favor industry. Even though manufacturing makes up 35 percent of the American economy, most planning theory has focused on eliminating or reusing industrial sites for dense urbanism, rather than embracing them for industry, taking humane factors into greater account. The latter would be a logical approach, given that many industrial nuisance qualities have been eliminated. Instead, planners have shunned most industrial activity as inherently hostile to cities, even amid a chorus of advocates for an increase in local production.
Many Midwest mayors have paid lip service to manufacturing, recognizing the need to accommodate the logistics needs of major companies. Simultaneously, however, planners have been empowered to transform large swaths of industrial land into developments full of the urban frills popular on the East Coast. Uniquely positioning cities to spur organic growth seems far less popular than trying to out-duel other cities for a share of millennial and corporate migration to duplicate versions of generic amenities. The limited embrace of industry has come through so-called “innovation districts,” geared at capturing a piece of the creative tech economy, rather than more place-specific heavier logistics.
Today, many hot spots are emerging that will be barometers of the struggle between the industrial opportunists and the urban development hegemony. In Cincinnati, these battles are subtly being waged over sites like Queensgate, a rare swath of intact industrial land at the precious confluence of water, rail, and highway. Its proximity to downtown has won it attention – and made it a prized trophy – in the strategy struggle between those who want to capitalize on a strategic industrial position and those who want to grow Cincinnati’s urban core. As Cincinnati works to attract companies away from flashier cities, it can do both, by embracing Queensgate’s unique industrial potential as an asset.
As Cincinnati looks for an answer, it may consider turning to the unlikeliest of case studies. Somewhere between the character of Midwestern cities and those on the East coast, there may be an answer that lies in the Middle East.