The Saudi Arabian government is to build six 'smart' cities which use huge computing power and smart design to attract inward investment and reduce running costs.

The first project will be built next to the new King Abdullah University of Science and Technology on the Red Sea, and will cover 168 million square metres or roughly the size of Manhattan.

Another five cities are on the drawing board and the government is hoping to house 4.5 million people and bring in billions in GDP by 2020.

"Smart cities will drive value into the city by boosting productivity and cutting costs," said Ahmad A. Al-Yamani, director general for the Smart Cities Office ICT Sector at the Saudi Arabian General Investment Authority.

The opportunity to build in strong IT resources from scratch will have a dramatic effect on costs, according to Al-Yamani.

Installation costs would be much lower than retrofitting an existing city, while running costs would be 35 per cent lower owing to better management by technology. Property values would also get up to a five per cent value boost.

The first city will include industrial, residential, financial and learning centres, along with a marina for leisure and a port to handle shipping traffic. The port already has enough businesses signed up to ensure that it will work to capacity.

The government believes that Saudi Arabia is in a good position to attract inward investment from around the world.

The country takes up 80 per cent of the Middle East and has 70 per cent of the population, and its position puts it within easy reach of Europe, India and Africa.

However, crucially for the IT industry, the country also has very low energy costs.

"To make a car takes twice its weight in fossil fuels, but that rises to 10 times for a PC, and even more for smaller gadgets that are mainly plastic," said Al-Yamani.

"It is these gadgets that are partially to blame for high oil prices. With semiconductor labs, 35 per cent of costs are down to energy costs. We have a significant advantage to offer the industry."