In the heart of the Saudi Arabian desert, where baking sands meet the Red Sea, a ground-breaking project known as NEOM is taking shape. NEOM isn’t just a new city—it’s a colossal vision for the future, aiming to be one of the most innovative and technologically advanced places on Earth. Founded by Saudi Arabia’s Crown Prince Mohammed bin Salman, known to Western news outlets as MBS, NEOM is aiming to be a hub for cutting-edge technology, sustainable living, and economic diversification. This mega-project isn’t just about building skyscrapers; it’s about creating a whole new way of life – and while doing so, diversifying Saudi Arabia’s economy by removing its dependence on its oil revenues. With its founder envisioning NEOM as a global destination for business, innovation, and tourism, it’s hoping to redefine what’s possible in urban development.

Saudi Arabia’s economy has long been reliant on oil revenues, with the oil sector historically dominating the country’s GDP and government revenue (40% of its GDP and 75% of fiscal revenue in 2023). However, recognizing the need for economic diversification and sustainable growth, Saudi Arabia launched Vision 2030 in 2016. Vision 2030 is a comprehensive strategic framework aimed at transforming the Saudi economy and society across various sectors. At its core, this framework seeks to reduce the country’s dependence on oil, promote private sector participation, and develop key industries such as tourism and technology to drive economic growth. NEOM, announced as part of Vision 2030, exemplifies this ambitious vision.

MBS announced this momentous project during the Future Investment Initiative Conference in Riyadh, in late 2017, and declared that NEOM would operate independently from the ‘existing governmental framework’, with its own tax legislations, labour laws, and an ‘autonomous judicial system’.

The project’s financial backing mainly comes from the Saudi Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund. Under the control of NEOM Company’s CEO Nadhmi Al-Nasr, NEOM project will draw from a pool of a $500 billion commitment over multiple years.

During the second half of 2023, NEOM Investment Fund (NIF) and NEOM Investment Office (NIO)  were created. The former focuses on outbound investment, and the latter focuses on attracting inbound investment. Funded by foreign investment and the PIF, NIF finances NEOM’s ambitious vision of becoming a global hub for business and technology. Since formation, it has entered into a series of technology and ESG driven joint venture arrangements with Western companies. NIO aims to attract foreign and domestic investment to support its innovation initiatives and infrastructure development such as hotels and off-plan property sales.

This gargantuan budget is certainly impressive, but considering its lofty ambitions, may well be needed. Encompassing an area of around 10,200 square miles, NEOM will consist of 10 regions, of which only four have been announced so far, including a 170-kilometre-long city called The Line. Along with The Line, the planned regions include an octagon-shaped port city named Oxagon, a ski resort named Trojena, and an island resort called Sindalah. Moreover, it is not just the sheer size of this project that justifies its budget, but also its location. It is set to border the Red Sea, which means 12% of all the world’s shipping trade will pass it by, on its way to and from the Suez Canal. The region is rich in natural resources such as oil and gas and is optimal for wind farming – a source of energy that Neom will rely on greatly, as it aims to be the first large-scale area powered entirely by clean energy, and to have zero carbon emissions. At the axis point between three continents, Neom will be at most an eight-hour flight away from 70% of the world’s population, making its location ideal for businesses worldwide.

The potential socio-economic impacts of NEOM on local communities and Saudi Arabia as a whole are vast and multifaceted. Firstly, NEOM has the potential to create numerous job opportunities, both directly through its construction and operation phases, and long term through supporting services, such as hotels or other hospitality sector industries. An increase in the job supply causes a fall in unemployment, an increase in the government’s tax revenue and an overall improvement in the standard of living for the local communities, thus stimulating economic growth in the region. Additionally, NEOM’s focus on innovation and technology is expected to attract a skilled workforce from around the world, fostering a culture of entrepreneurship and knowledge exchange, and increasing the region’s labour productivity. Lastly, the project will attract foreign investment, which will boost the local economy and generate more revenue.

The Line, the most impressive and ambitious of NEOM’s regions, is set to create 380,000 jobs, and be home to 1 million residents. MBS announced that the city will ‘preserve 95% of nature within NEOM, with zero cars, zero streets and zero carbon emissions,’ describing it as ‘a blueprint for how people and planet can co-exist in harmony’. The first major urban development in 150 years not designed around roads, The Line is split into three layers – the Pedestrian Layer, the Service Layer, and the Spine Layer.

• The Pedestrian Layer, the overground layer, is designed to prioritize pedestrian movement. It includes walkable streets, parks, public spaces, and amenities that encourage walking and active transportation within the city. This layer aims to create a pedestrian-friendly environment that promotes social interaction and a sense of community.

• The Service layer is essentially the invisible underground layer of infrastructure and utilities, such as power, water supply and waste management, upon which the city will run.

• The Spine Layer, the lowest level, serves as the main transportation artery of the city, accommodating various modes of transportation, such as AI-enabled transport and ultra-high-speed rail. It connects different areas of the city, including residential, commercial, and recreational zones, facilitating efficient movement and accessibility within NEOM.

As with any large scale project, especially one which deliberately aims to change a landscape and an economy, challenges and drawbacks do exist for this momentous project. Rapid urbanisation can strain existing infrastructures, leading to issues such as housing shortages, lack of access to sanitation, and environmental degradation due to pollution. Take China, for example. China experienced rapid urbanisation in the late 20th and early 21st centuries, leading to numerous challenges. The mass migration of people from rural areas to cities strained infrastructure, causing issues like overcrowded transportation, inadequate housing, and pollution. Urban expansion encroached on agricultural land and natural habitats, exacerbating environmental degradation and biodiversity loss. Economic activity concentrated in cities widened income inequality, as rural migrants faced limited access to education and healthcare. China’s rapid urbanization demonstrates the problems that arise from urbanisation, the same urbanisation that Saudi Arabia is planning, and thus it underscores the need for comprehensive urban planning to address challenges of sustainability, environmental conservation, and social equity.

Furthermore, questions have been raised over NEOM’s legal and financial structure. As mentioned above, NEOM will have its own legislations and legal system, but Saudi Arabia is historically a devout Muslim country which follows Sharia Law, and thus a conflict arises. Sharia law encompasses principles derived from Islamic scripture and tradition, governing various aspects of life. One of the strongest tenets of Sharia law is against the consumption or selling of alcohol. It is debatable whether, in order to attract businesses and tourists from the rest of the world, NEOM will be willing to deviate from the Sharia principles and if so, how far is it willing to relax that restriction? Doing this may well breed animosity amongst the orthodox Muslims within Saudi Arabia, or even the wider Muslim society worldwide, and thereby put the Saudi government under great pressure. This topic will have to be revisited and addressed by MBS and those in charge.

Moreover, the question remains as to how NEOM will become a completely eco-friendly city. It aims to be completely energy, water, and food sufficient, and as such has created ENOWA, a company to oversee its resource management.  It sets out a vision for vertical farming and greenhouses – revolutionary for a country that currently imports approximately 80% of its food. However, critics accuse MBS of greenwashing – making grand promises about the environment to distract from reality. Defenders of NEOM say it is necessary to start afresh and build a smart, sustainable city powered by wind and solar, with water provided by carbon-free desalination plants. “Saudi Arabia needs some creative thinking, because the Middle East is running out of water,” says Ali Shihabi of NEOM’s advisory board. The ‘creative thinking’ he is referencing is desalination, and ENOWA plans to use renewable energy in its plants and to set up a sustainable water supply with zero liquid waste. The only problem? This process is currently still in the design phase,  as using renewable energy to run desalination plants has never been successful. Another of ENOWA’s ambitions is to build a self-contained, low-cost grid of renewable energy, integrated seamlessly into the architecture of the community. With the help of AI, residents will be able to return excess generation back to the grid, ensuring a sustainable cycle for all. Since no real plans for how this will work have been unveiled yet, the world watches with bated breath at NEOM’s next steps in its grand plan.

As with the other megaprojects in the world, NEOM will only be viable in the long term if its cash flow is stable. Foreign investment will only come if the project is viable and guaranteed to stay that way – and thus the root of NEOM’s challenge is money. Unofficial analyses suggest that NEOM’s actual expenses may be as much as triple the projected figure. If so, is the PIF willing to fund NEOM all the way through its decades-long development lifecycle? Even if the PIF is currently a cash machine for NEOM, one must then ponder “at which point will NEOM be required to stand on its own two feet financially”? As we saw earlier, NEOM is already starting to attract its own investment and monetise its own brand. This indicates the start of the project’s attempt to become self-sustaining.

There have been many campaigns and roadshows in Riyadh, Dubai, Bangkok, Singapore and a few other major cities to promote NEOM and attract investors. It is believed that more will follow as the construction works are making progress. At the end of 2023, NEOM’s London office opened its door for business, followed by the launch of NEOM’s New York office in early 2024. These changes are aimed at NEOM making its presence felt in the heart of the Western world, with the goal of making itself known, understood, and respected as a phenomenon which is here to stay.

Despite all the enthusiastic signals from Saudi Arabia to the rest of the world in showcasing NEOM as the centre of the attention and the future of sustainable city planning,  the less attractive aspects of the Kingdom’s government are not far away for potential investors and dwellers in NEOM; people are still shaken by the event of Jamal Khashoggi’s death. He vanished one year after the launch of the Vision 2030 and shortly before the official announcement of NEOM. In much the same vein, activist Abdul Rahim al-Huwaiti, who opposed the displacement of the Huweitat tribe to make space for NEOM, was killed in a conflict with Saudi Security Forces in early 2020. These cases are just two examples of the risks of working in a non-democratic society where the law can be overruled by the decrees of the ruler, and thus the Western investors may be hesitant to place their money under the control of an unaccountable government. Only time will tell whether the lure of profitable investment opportunities outweighs the risks of doing business in the Kingdom of Saudi Arabia.

References:

The Economist – Saudi Arabia’s Investment Fund:

The Economist – The Line

Author(s):

Mark Somers