Desert City Dream

Saudi Arabia's Crown Prince Has a Bold Plan to Diversify the Country's Economy

 
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A visitor photographs a scale model of the King Abdullah Economic City in Jeddah, Saudi Arabia.

PHOTO BY DAVID DEGNER/GETTY IMAGES

Saudi Arabia's leaders have been talking about economic diversification for years. But with oil prices stubbornly low for years and the country's young people facing a 32 percent unemployment rate, the oil-producing kingdom is rolling out a new change management strategy to ensure future stability. Mohammed bin Salman, who became crown prince in June, is betting big on projects that break from the status quo. They're part of a 15-year plan of policy changes.

The most audacious project is a US$500 billion megacity with no space “for anything traditional,” Crown Prince Salman said during an announcement in October. The project, called Neom (meaning “new future”), will be powered by renewable energy and span 10,000 square miles (25,900 square kilometers) near the Red Sea—33 times bigger than New York, New York, USA. “Changing Saudi Arabia for the better means helping the region and changing the world. So this is what we are trying to do here,” Crown Prince Salman said about Neom in an interview with The Guardian.

The government has also unveiled project plans for other places around the Red Sea, hoping to turn the area into a semiautonomous tourist destination. But energy will remain a big part of the kingdom's portfolio. The government plans to invest as much as US$50 billion into wind and solar projects, with the goal of producing 10 percent of its power from renewable sources by 2023.

But building Neom is the biggest goal. Social codes, particularly for women, will be subverted there. The project plan calls for a global mix of biotech, advanced manufacturing, media and entertainment organizations—plus plenty of robots to relieve humans of repetitive tasks. Backed by the Saudi government, its sovereign wealth fund and investors, the city would also feature new ways of growing and processing food. The hope is that the city will contribute at least US$100 billion to Saudi Arabia's GDP by 2030.

This is not the country's first attempt at building a megacity from scratch. King Abdullah Economic City, a US$100 billion project announced in 2005, faces delays and lack of investor interest and is home to only about 7,000 people today—a far cry from the 2 million it was built to host by 2035. Meanwhile, a US$10 billion project to build a financial district in Riyadh, announced in 2006, has been hampered by construction delays, cost overruns, bureaucracy and concerns about finding residents. “We keep stumbling upon red tape and government procedures in decision making,” Salman Albaiz, a director at the project, told Reuters.

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“Saudi Arabia does not have a strong record when it comes to fulfilling ambitious projects.”

—Jason Tuvey, Capital Economics, London, England

“Saudi Arabia does not have a strong record when it comes to fulfilling ambitious projects,” says Jason Tuvey, a Middle East economist with Capital Economics, London, England. He notes that Crown Prince Salman's recent efforts to crack down on corruption may actually destabilize the country, preventing private investment and stymieing Neom project plans. And the city's location, close to the Sinai Peninsula where Egyptian security forces have clashed with jihadi groups, raises questions about safety during the construction phase and beyond, as residents move in and businesses set up shop.

Without private investments and international support, Neom—billed in its promotional video as “the blank page you need to write humanity's next chapter”—may remain just that: a blank sheet with undrawn blueprints. —Kate Rockwood

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