Dive Brief:
- Saudi Arabia's Crown Prince Mohammed bin Salman has announced a $500 billion plan to build a new megacity from scratch along the Red Sea, according to Bloomberg and others. The city, NEOM, reportedly will take up more than 10,000 square miles of land.
- NEOM will be a technology-forward zone that will incorporate artificial intelligence and the Internet of Things to offer residents a connected lifestyle not currently available in Saudi Arabia, the crown prince said. The government is in talks with companies such as Amazon and Alibaba about what technology options they could bring to the app-driven city.
- The city plan involves a bridge that would stretch over the Red Sea to Egypt, and the development could also stretch to Jordan. The first phase of NEOM is expected to open for business in 2025, with limited operations beginning as early as 2020.
Dive Insight:
The new city is in line with the crown prince's Saudi Vision 2030, an attempt to diversify Saudi Arabia's economy while also developing public service sectors. The country has struggled to find its previous prosperity since oil prices plummeted several years ago, and they continue to stay low.
Reducing the country's dependence on oil is not the only break with tradition recently. The crown prince also has goals to soften Saudi Arabia's conservatism and foster moderate ideologies that are more conducive to a global business model. For example, last month Saudi Arabia ended its long-standing ban on allowing women to drive; the change will take effect in June 2018.
Part of Saudi Vision 2030 involves selling about 5% of state-run oil company Aramco next year through an IPO, which could raise an estimated $100 billion. The sale would help finance NEOM and other non-oil ventures. In addition to diversifying the country's economy, moving away from oil dependence creates opportunities for investing in clean energy. In fact, the crown prince claims NEOM will be powered solely by clean energy, namely wind and solar power.
The crown prince indicated that NEOM will operate independently of the rest of the government, with its own tax laws, labor laws and judicial system. It would be a "free zone" — similar to Dubai in the United Arab Emirates — that doesn't operate under the strict Sharia rules that the rest of Saudi Arabia follows. This is another attempt to lure foreign investors to a country that is well known for its red tape and hesitance to welcome outside businesses.
Building NEOM is an incredibly ambitious venture, especially on the suggested timeline and in light of the limited resources in the desert. Other wealthy Middle Eastern cities, such as Dubai, have proven that rapid growth is possible, but it certainly doesn't work in every instance. Critics are skeptical about whether NEOM will reach completion, based on past attempts to transform the Saudi economy and build cities in the desert. Plus, it will need huge amounts of monetary and technological resources, which could be difficult to secure.
However, the crown prince's current passion for modernizing his country appear to have some momentum. Even if NEOM doesn't reach the desired scale, a smaller city of this type still could be considered a success and could give Saudi Arabia a launching pad toward further oil independence and technological advances.
