Saudi Arabia is said to be betting its future on mega projects like Neom but the hype around the city touted as “a new kind of tomorrow in the making” will have to navigate big challenges if it is to deliver on the promise, predicts a risk assessment report.
Neom is gigantic in size and vision. Not only will it span 26,500 square kilometres across three countries: Saudi Arabia, Egypt, and Jordan, the project is intended to be “a new blueprint for sustainable life”.
The vision in its scale is grand as the report by Global Risk points out. The mega city with its innovate business hub and an independent economic zone (IEZ) all rolled into one will offer various specialised sectors for global investment including, energy, biotech, food, media and entertainment.
Crown Prince Mohammed Bin Salman is said to be willing to pour more than $500 billion into backing the project with billions more expected from foreign investors. Russian Direct Investment Fund, according to the risk assessment report, has already announced that it would invest billions of dollars in Neom as well as Japan’s SoftBank Group, which has indicated that it will contribute up to $15 billion.
With the first phase expected to be complete by 2025, the early verdict from risk analysts is that “the diverse investment sectors and the associated labour demand are almost utopian in scale”. Investors shouldn’t get too carried away with the dazzling promises analysts warn, citing failed mega projects in the Kingdom that have not lived up to the hype. King Abdullah Economic City, for example, was launched in 2005 on the coast of the Red Sea but more than a decade since its launch, the project is only one-fourth developed or under development.
Among the risks facing Neom, according to the report, are regional tensions and the potential for social discontent. The Kingdom has been embroiled in a number of destabilising policies, from the blockade on Qatar to the clampdown on “corruption”, which critics believe was a ploy to remove all opposition to Bin Salman’s authority.
Internally, with 60 per cent of the population under 30, Saudi has one of the largest youth populations in the world. The youth bulge combined with a lack of jobs opportunities and further cuts in welfare may lead to further discontent in the Kingdom, says the report.
Some of the other risks cited by the report are not often mentioned. According to the risk report, tensions may arise between Saudi and the UAE as a result of Neom. Despite assurances by Bin Salman that Neom will be good for Dubai, the project, according to the report, “by its very nature is poised to be a source of renewed rivalry between the Kingdom and the UAE”. It concludes that Saudi does not possess the advantage in terms of ability to attract investment.
Another source of anxiety, cited in the report, is Saudi relations with Jordan. Tension between Riyadh and Amman has arisen due to their differing stance on the question of Jerusalem as Israel’s capital and the recent detention of the Jordanian-Saudi businessman Sabih Al-Masri. “Deteriorating diplomatic relations,” the report concludes, “risk slowing the progress of Neom’s development”.