Saudi officials are learning that constructing a city from scratch is turning out to be a real financial headache.
Driving the news: Saudi Arabia is scaling back its ambitions for Neom, a trillion-dollar desert development project aimed at diversifying its oil-dependent economy. One part of the project, a futuristic city called “The Line,” was expected to house 1.5 million residents by 2030 and span 170 kilometres.
- Officials are now backtracking on these ambitions, saying they now expect the city to house fewer than 300,000 people by 2030, and only 2.4 kilometres will be complete.
- Oh, and in case you're wondering, yes, the "M" in Neom does indeed stand for Crown Prince Mohammed bin Salman.
Why it’s happening: The kingdom’s sovereign wealth fund, which is funding half of the project, has yet to approve Neom's budget for 2024. We’d be double-checking our receipts too, if they included funding a new airline and US$1 billion towards launching a golf league.
- The sovereign wealth fund’s cash reserves plummeted to $15 billion as of September 2023 — the lowest since 2020, when the fund initially began reporting the data.
Why it matters: Saudi Arabia wants to signal to the world that it can do more than just push some oil barrels around. It's part of a bigger trend in the Middle East, where countries are eager to become attractive destinations for visitors, residents, and businesses alike.
- Dubai hit a record 17 million tourists in 2023, up 19% from a year before. Business is booming too, with companies like Fairmont Hotels moving its global HQ there.
Zoom out: It’s not uncommon for governments to roll back ambitions on big infrastructure projects. For instance, costs were cited as a factor in scaling back a $77 billion high-speed rail across California and scrapping a ~$253 million pedestrian bridge in London.—MR