Plans were announced in October 2017 to develop a USD500-billion megacity in Saudi Arabia’s northwestern region. Despite being in an early stage of development, global investors are closely watching, not least because it reveals the determination of the country’s leadership to diversify the economy, open up to foreign participation, and embrace futuristic technologies in the process.
With its 26,500sqkm, the land designated to NEOM is 33 times larger than New York City, or roughly the size of Belgium. The area is set to be structured as an independent economic zone, meaning it could have its own regulations, laws, and taxes.
Links with neighboring Egypt and Jordan would make it the first private zone to span three countries. A 10-km long bridge between KSA and Egypt is meant to connect the Asian and African continents by road. Through this strategic location, the aim is to capitalize on the 10% of global trade passing through the Suez Canal and Mandeb Strait by creating an innovative new business hub at its center. Roughly 10% of the world’s trade passes through the Red Sea, and with 70% of the globe’s population within an eight-hour flight, the IMF endorsed NEOM as a an incentive for regional stability. Jihad Azour, head of the IMF’s Middle East department told Reuters, “It is a signal that greater regional cooperation is back on the table.”
NEOM focuses on nine specialized investment sectors including energy and water, mobility, biotechnology, food, media, entertainment, technological and digital sciences, and advanced manufacturing. The plan is to integrate disruptive technologies and innovations into the city, from autonomous vehicles to robots performing tasks related to security, automated postal services, food delivery by drones, artificial intelligence handling port logistics, and even high-tech care giving. The whole city is to be powered entirely by renewable energy generated locally.
At the Future Investment Intitiative conference in Riyadh, Crown Prince Mohammed Bin Salman announced, “NEOM will be backed by more than USD500 billion over the coming years, by the Kingdom of Saudi Arabia, the Public Investment Fund, local as well as international investors.” Though, a significant part of the needed funds was expected to come from the 5% sale of national oil company Saudi Aramco, which is on hold.
Globally, interest is also building. Japan’s SoftBank announced it is willing to invest USD15 billion. The Russian Direct Investment Fund has said it would commit billions of dollars toward promoting high-tech Russian companies to set up shop in NEOM. Furthermore, large Chinese investments are expected under the auspice of the One Belt One Road Initiative, Beijing’s drive to win trade and investment deals along routes linking China and Europe.
Nadhmi Al-Nassr will oversee the project and is tasked with bringing in private investors to fill in the remaining funds. Amidst awe and skepticism, the world will look to Al-Nassr to create an unprecendented-in-scale city out of the desert sands.
The initiative will be a much needed boost to the country’s construction sector, which was faced with declining demand following the drop in oil prices over recent years. The first contracts for NEOM were awarded in early February 2018, and stocks of local cement companies were among the highest risers in the Middle East. Some of the most critical infrastructure will include seaports, airports, and roads.
Phase I of the project is projected to be completed by 2025, with projections that NEOM will contribute USD100 billion per year to the Kingdom’s economy by 2030. This megaproject will certainly serve as an important showcase for how some of the ambitions under Vision 2030 are being put to practice, whether it relates to privatization, clean energy production, foreign investment, localization, or IT integration.