“They can keep saying that, and we can keep proving them wrong.” This was the defiant response of Saudi Arabia’s Crown Prince Mohammed bin Salman in a July 2023 TV documentary addressing skepticism around Saudi Arabia’s flagship construction projects. However, nearly a year later, some doubts are proving accurate.
Saudi Arabia appears to be scaling back plans for Neom, the centerpiece of its Vision 2030 economic diversification program. Vision 2030, spearheaded by Prince Mohammed, aims to reduce the country’s dependency on oil by developing 14 major construction projects, or “giga projects,” worth trillions of dollars. These include an entertainment city near Riyadh, luxury island resorts on the Red Sea, and various tourist and cultural destinations.
Recent low oil prices have impacted government revenues, prompting a reassessment of these projects and the exploration of new funding strategies. An advisor close to the government, speaking anonymously, confirmed that a review is underway, with decisions expected soon. “Some projects will proceed as planned, but some might get delayed or scaled down,” the advisor stated.
Announced in 2017, Neom is a $500 billion plan to build 10 futuristic cities in the northwest desert. The most ambitious, The Line, envisioned two parallel skyscraper walls extending 170 km, housing nine million people. However, sources indicate that developers will now focus on completing just 2.4 km by 2030 as part of the first module.
Initially, The Line was touted as a “carbon-free linear city” featuring parks, waterfalls, flying taxis, and robot maids, with no roads or cars and interconnected pedestrianized communities. The city would also include an ultra-high-speed train. However, it remains unclear how many of these features will be part of the first phase.
Neom’s broader plans include an octagon-shaped floating industrial city and a mountain ski resort set to host the Asian Winter Games in 2029. Ali Shihabi, a former banker now on Neom’s advisory board, explained that the targets were deliberately overambitious. “Even delivering a part of it on time would be significant,” he said.
Funding challenges have come to the forefront as Neom’s cost is estimated at $2 trillion, far exceeding the Saudi government’s federal budget. The Public Investment Fund (PIF), managing assets worth $900 billion, faces cash flow constraints, with only $15 billion in cash reserves as of September.
Tim Callen, former IMF chief to Saudi Arabia and a fellow at the Arab Gulf States Institute, emphasized the difficulty of raising capital for these mega-projects. The government has sold $11.2 billion in shares of Saudi Aramco to boost PIF funds, amid fluctuating oil prices. Despite these efforts, Brent crude prices hover around $80 per barrel, below the $96.20 needed to balance Saudi Arabia’s budget.
The Saudi government has also issued bonds and attempted to attract foreign direct investment, with limited success. “It’s difficult to persuade investors to back overly ambitious projects,” Callen noted. Additionally, Saudi Arabia is investing in tourism, mining, entertainment, and sports, having secured hosting rights for several major international events.
Shihabi expects the government to prioritize projects linked to these events as deadlines approach. In April, Finance Minister Mohammed Al-Jadaan acknowledged that the Vision 2030 plan might need adjustments. “We will change course, extend some projects, downscale others, and accelerate some,” he said at a World Economic Forum meeting in Riyadh.
