Why Saudi Arabia’s $500 Billion City Is Failing

Saudi Arabia, officially known as the Kingdom of Saudi Arabia, is a country in the Middle East that occupies the majority of the Arabian Peninsula. It is renowned for being the birthplace of Islam, with the two holiest cities in Islam, Mecca and Medina, located within its borders.

Saudi Arabia is led by the Al Saud family, with its current ruler being King Salman. The country has been pushing for modernization under the Vision 2030 plan, aiming to diversify its economy, promote cultural and social reforms, and reduce its dependency on oil. However, it also faces challenges related to human rights, including freedom of expression and the rights of women and migrant workers.

Saudi Arabia’s ambitious plan to construct Neom, a futuristic city in the desert, has captured global attention since its announcement as part of the Vision 2030 initiative. Touted as a $500 billion project, Neom was envisioned by Crown Prince Mohammed bin Salman as a beacon of innovation and sustainability, aiming to diversify the economy away from oil dependency. However, despite the grand vision, Neom faces numerous hurdles that could lead to its failure, as recent reports and analyses have suggested.

Financial Strains.
One of the primary reasons for Neom’s potential downfall is the sheer cost of the project. The financial backing required is colossal, with initial estimates ballooning from $500 billion to potentially over $1 trillion. Saudi Arabia’s Public Investment Fund (PIF) has been the primary financier, but with global economic fluctuations, especially in oil prices, the kingdom has had to reassess its spending. Bloomberg reports have indicated that the PIF’s cash reserves have hit a low not seen since December 2020, leading to significant budget cuts for Neom. This financial strain has resulted in scaling back ambitions, notably reducing the expected population of “The Line” from 1.5 million to fewer than 300,000 by 2030, according to Bloomberg. The necessity for Saudi Arabia to borrow money, a tactic not used for a long time, further underscores the financial pressures.

Engineering and Logistical Complexities.
The engineering challenges of building a city like Neom, particularly “The Line,” are immense. This linear city, stretching 170 kilometers and designed to be environmentally sustainable with zero carbon emissions, poses logistical nightmares. The idea of constructing towering structures across such a vast desert landscape, ensuring they are powered entirely by renewable energy, and maintaining a controlled microclimate is not just costly but fraught with technical difficulties. Reports from The Realty Fair suggest that these complexities, combined with the need for innovative infrastructure like high-speed trains within a closed system, are daunting, even for the most advanced construction firms.

Environmental and Human Rights Issues.
Neom’s development has not been without environmental backlash. The project requires significant land clearance, affecting local ecosystems and potentially disrupting the delicate balance of the Red Sea’s biodiversity. Moreover, the forced relocation of indigenous people, particularly the Huwaitat tribe, has raised severe human rights concerns. The Guardian has detailed how the project has led to forced evictions, with some members of the tribe facing threats and violence. Such actions have tarnished the project’s image, potentially deterring international investment and support.

Public and International Perception.
The Neom project has also been marred by a lack of public buy-in and skepticism from international investors. The grandiose promises, like flying taxis and robot servants, have not translated into concrete achievements or widespread enthusiasm. The skepticism is further fueled by past Saudi mega-projects like King Abdullah Economic City, which have not met expectations. Moreover, the international community’s memory of the Jamal Khashoggi incident and concerns over surveillance in Neom, as noted by Business Insider, have added layers of reputational risk that could push investors away.

While Neom was conceived as a visionary project to propel Saudi Arabia into a new era, its execution faces significant hurdles. From financial constraints to engineering complexities, environmental concerns, and human rights issues, the path to realizing this urban dream is fraught with challenges. As the project scales back and the timeline extends, it’s clear that the road to creating a sustainable, innovative city in the desert is much more arduous than initially envisioned. Whether Neom can overcome these obstacles or if it will join the list of ambitious but ultimately unfulfilled mega-projects remains to be seen.