Saudi Arabia Scales Back On $500 Billion Neom Project Amid Financial Concerns

Saudi Arabia has revised its aspirations for the Neom desert development project, a cornerstone of Crown Prince Mohammed bin Salman's economic diversification plans.

'The Line' is the most significant sub-project of Neom Project. It aims to redefine the concept of urban development and what cities of the future will look like. 

Saudi government's initial goal of accommodating 1.5 million residents in 'The Line' by 2030 has been downsized. Officials now anticipate fewer than 300,000 residents within the same timeframe, signalling a significant adjustment in scale.

Originally envisioned as a sprawling city contained within mirrored skyscrapers stretching 170 km along the coast, The Line's projected completion by 2030 has been scaled back drastically. With expectations now reduced to completing just 2.4 km of the project by the same deadline, at least one contractor has begun dismissing workers.

Crown Prince Mohammed envisions Neom, a $500 billion development on the Red Sea coast, as a transformative centre piece of Saudi Arabia's economy, showcasing cutting-edge technologies and diversifying economic sectors beyond oil. The plan for the city is to cover 10,000 square miles of Saudi Arabia's Tabuk province, near its borders with Jordan and Egypt.

The city will exist entirely outside the confines of the current Saudi judicial system, governed by an autonomous legal system that will be drafted up by investors.

Despite the adjustment in The Line's scale, work continues on other facets of the broader Neom project, including the development of Sindalah, an island in the Red Sea set to become a luxury tourist destination opening this year. However, challenges persist as the sovereign wealth fund evaluates Neom's budget for 2024 amidst declining cash reserves and concerns over the financial viability of Vision 2030 initiatives, reports Bloomberg.

The ambitious vision for The Line, conceived as a sprawling metropolis contained within mirrored structures taller than the Empire State Building, has garnered global attention.

While initial projections aimed for The Line to welcome its first residents this year, Neom's main achievement thus far has been the development of renewable energy projects, including solar and wind farms, aimed at producing green hydrogen.

As the Public Investment Fund explores options to raise cash, including debt sales and equity offerings, the financial realities of Neom's trillion-dollar investment become increasingly apparent.

With cash reserves dropping to $15 billion as of September 2022, the sovereign wealth fund faces mounting pressure to ensure the long-term sustainability of its ambitious projects.