Saudi Arabia to scale back plans for Neom city

Saudi Arabia to scale back plans for Neom city
Saudi to scale back mega project, The Line. / CC: Neom
By bnm Riyadh April 10, 2024

Saudi Arabia has allegedly revised its plans for the ambitious $500bn Neom project, a futuristic city being developed in the northwest of the country, due to concerns over financing. 

Initially, the government aimed to house approximately 1.5mn residents in "The Line", a cutting-edge urban area within Neom, by 2030, which would squeeze people into a giant skyscraper initially stretching deep into the desert. 

Neom is envisioned as a vast, eco-friendly urban development initiative, integral to Crown Prince Mohammed bin Salman's Vision 2030 to shift the Saudi economy away from oil dependency. The project aims to operate on renewable energy, support sustainable tourism, and incorporate advanced technologies, including robotics, to assist its inhabitants in daily life, with a strong commitment to environmental conservation.

However, according to a Bloomberg report citing unnamed sources, The Line’s target has been scaled back to fewer than 300,000 people by the same deadline.

The Line, powered by the Saudi Arabian Public Investment Fund (PIF), envisioned a unique linear city stretching approximately 170 kilometres across the Tabuk province desert, featuring two parallel, 500-metre-tall skyscrapers. Yet, current projections have adjusted the completion expectation to just 2.4 km of The Line by 2030 due to financial hurdles and general difficulties in building the project, the US media report noted.

This adjustment in scale has reportedly led to at least one contractor reducing its workforce on the site, although Neom's management has not officially commented on these developments. Despite these changes, the project's core goals remain unchanged.

The reconsideration of Neom's scope coincides with financial challenges faced by Saudi Arabia's sovereign wealth fund, which is the principal backer of Neom. The fund's cash reserves have significantly decreased, prompting it to explore alternative financing methods such as debt issuance and public stock offerings of its assets and releasing funds from Aramco, the state oil producer. 

This scaling back occurs amidst broader challenges, including the admission by Saudi Finance Minister Mohammed Al Jadaan that building the infrastructure and workforce for Neom might take longer than anticipated, suggesting a phased approach might benefit the economy in the long run.

Still, while the Line appears to be scaled back, other projects appear to be moving forward, another report by local development blog Nemnna reported.

The local blog noted that other developments which are part of the wider Neom projects, including Sindalah in the Red Sea and Trojena, a winter ski resort destination, are actively recruiting new employees as the two first projects.

“As the only blog covering NEOM and the broader collection of giga-developments across Saudi Arabia, we can confidently say that Saudi Arabia is not scaling back NEOM but likely diversifying with projects, as we have previously pointed out above,” Nemmna added. 

Project announcements are still coming thick and fast, with Neom recently announcing Gidori, its latest foray into tourism on the Gulf of Aqaba.

The development will feature an 18-hole championship golf course, 200 private villas and homes, an 80-room boutique hotel and residential apartments. Amenities include a beach club, hiking trails, cycling paths, dining and retail.

The major issue so far has been bringing in as much talent as possible to get the several mega projects off the ground in time for the Vision 2030 deadline, which is only six years away.

To counter this problem of a lack of workers, Saudi Arabia announced in March it would create a skills university in Pakistan to train people for the upcoming Neom sites.

 The new educational complex is set to be entirely funded by the Saudi kingdom’s outsourcing budget, which would see thousands of future specialists trained in Pakistan before being shipped out.

At the end of March, Crown Prince Mohammed bin Salman (MbS) earlier ordered the transfer of an 8% stake in Aramco to the Public Investment Fund (PIF), taking the fund’s stake to 16%, which is currently valued at around $333bn.

The $124bn share transfer means that the PIF will be the recipient of almost $19bn of Aramco’s total quarterly payout, which is anticipated to be at least $20bn. It follows the announcement in August that a 4% stake in Aramco would be transferred to PIF subsidiary Sanabil Investments.

The PIF which owns Neom now has assets under management (AUM) of around $900bn, and appears to be on track to achieve MbS’ stated goal of investing SAR1 trillion ($267bn) by 2025.