Saudis Scale Back Ambition for $1.5 Trillion Desert Project Neom
Saudi Arabia has scaled back its medium-term ambitions for the desert development of Neom, the biggest project within Crown Prince Mohammed bin Salman’s plans for diversifying the oil-dependent economy, according to people familiar with the matter.
By 2030, the government at one point hoped to have 1.5 million residents living in The Line, a sprawling, futuristic city it plans to contain within a pair of mirror-clad skyscrapers. Now, officials expect the development will house fewer than 300,000 residents by that time, according to a person familiar with the matter. Officials have long said The Line would be built in stages and they expect it to ultimately cover a 170-kilometre stretch of desert along the coast.
With the latest pullback, though, officials expect to have just 2.4 kilometres of the project completed by 2030. As a result, at least one contractor has started to dismiss a portion of the workers it employs on the site, according to a document seen by Bloomberg. Representatives for Neom and the kingdom’s Public Investment Fund, the main entity that owns and is funding the project, declined to comment.
Crown Prince Mohammed intends for Neom, a $1.5 trillion development on the Red Sea coast, to be a showpiece that will transform his country’s economy and serve as a testbed for technologies that could revolutionise daily life. Along with The Line, Neom’s plans include an industrial city, ports and tourism developments. It’s also set to host the Asian Winter Games in 2029 at a mountain resort called Trojena. To be sure, work is continuing on other parts of the broader Neom project and officials have maintained their overall objectives for The Line, people familiar with the matter said.
For instance, another development within Neom that is turning an island in the Red Sea into a luxury tourist destination known as Sindalah is due to open this year. The pullback on The Line comes as the kingdom’s sovereign wealth fund has yet to approve Neom’s budget for 2024, people familiar with the matter said. It shows that the financial realities of the trillions of dollars of investment are starting to cause concern at the highest levels of the Saudi government as it tries to fulfil its ambitious Vision 2030 programme, the overarching initiative tasked with diversifying the kingdom’s economy.
Already, officials have said that some of the projects outlined in that programme will be delayed past 2030.A longer period is needed to “build factories, and even sufficient human resources,” Finance minister Mohammed Al Jadaan said in December. “The delay or rather, the extension of some projects will serve the economy. ”Sprawling metropolis MBS’s ambitions for The Line have captured the attention of city planners and architects from around the world.
Renderings have shown he’s conceived of a city that’s longer than the distance between New York and Philadelphia and is all contained within mirrored structures that would be taller than the Empire State Building. At one point, officials had hoped The Line would welcome its first residents this year. But instead, Neom’s main success so far has been the development of a more than $8 billion project to build solar and wind farms that will be used to create so-called green hydrogen.
The kingdom hopes that it can become one of the world’s biggest producers of such fuel as it looks to reduce its reliance on oil sales. The latest efforts to scale back the reach of the project come as the Public Investment Fund is evaluating a range of options to raise cash, including accelerating debt sales and lining up equity offerings in its portfolio companies, Bloomberg News has reported. The sovereign wealth fund’s cash reserves dropped to $15 billion as of September — the lowest level since 2020, the earliest year for which data is available. In 2022, Crown Prince Mohammed said the first phase of Neom was expected to cost 1.2 trillion riyals ($320 billion) by 2030. Half of that is expected to come from the PIF, which the defacto ruler chairs.
