Very little, it would seem, is entirely off the table when it comes to the Saudi megaproject Neom. A new, Neom-focused airline reportedly under consideration may offer direct international flights to the remote location. Such an airline would be the third Saudi carrier – Saudi Arabia’s second carrier, RIA airlines, is expected to launch at the end of the year. Upon arrival, visitors might be able to take to the skies again in a $350 million five-star hot air balloon hotel, if a project proposal linked to the Sustainable Hospitality Challenge moves ahead. A beach resort within Neom is planning to serve champagne, wine, and cocktails, despite alcohol being officially banned in the country.
The latest plans for the Neom megaproject revolve around three regions: Trojena (a luxury mountain tourism destination), Oxagon (a floating industrial city), and The Line (an over 100-mile-long linear urban development with parallel mirrored skyscrapers running on 100% renewable energy). There are 14 sectors earmarked as priorities for the megaproject, and a heavy technological dimension permeates these plans. Neom represents just one of 24 key projects featured on the Saudi Vision 2030 website, reflecting the sheer scale of the Saudi leadership’s developmental ambition.
Of all these projects, Neom is among the most ambitious and daunting. According to its website, Neom is “an attempt to do something that’s never been done before.” Saudi planners are trying to anchor Neom’s lofty aspirations to reality with concrete international events, such as the Neom Beach Games 2022, from October 19 to December 9, and the 2029 Asian Winter Games, which Saudi Arabia won the bid to host. Despite a growing events pipeline, many concept announcements related to Neom may not materialize as planned.
Rapidly Evolving
Indeed, Neom has already changed substantially from its early conceptualization. In the immediate aftermath of the project’s 2017 announcement, planners hyped the incorporation of Egyptian and Jordanian territory as part of a massive special economic zone. These extraterritorial components have largely faded away. Nearby Egypt and Jordan will nevertheless serve as key Middle Eastern markets for Neom-based entrepreneurs looking to scale up their ventures or for exploiting established tourism corridors. However, Israel may function as a more important partner over the longer term. Israel’s geographic proximity to the megaproject, a regional trend supporting eventual normalization of relations, and Israeli technological and entrepreneurial prowess all point toward growing Neom-Israel linkages.
Planners are wagering that strong technology credentials will serve as a differentiator for the megaproject. Neom’s tech unit, rebranded as Tonomous, announced that it had invested $1 billion in artificial intelligence-driven products and solutions so far in 2022. According to the chief executive officer, Nadhmi Al-Nasr, Neom intends to become the “world’s first cognitive community.” Neom also boasts experimental plans to build the “world’s largest green hydrogen plant” and various efforts related to “changing the future of water,” such as solar-powered desalination with no liquid discharge. Many of these water initiatives are described as “world-firsts.”
Advanced technologies and experimental development initiatives are expensive. In July, Saudi Crown Prince Mohammed bin Salman announced plans to launch a 300 billion riyal (approximately $80 billion) Neom Investment Fund, which may increase to 400 billion riyals, to channel investments toward firms operating in Neom. The Public Investment Fund, with around $600 billion in assets under management, owns Neom. This association with the Saudi sovereign wealth fund offers Neom financial firepower and reputational benefits.
As for external financing support, Mohammed bin Salman indicated a desire to tap other Gulf sovereign wealth funds. It is difficult to envision Gulf sovereign wealth funds – which, like the Public Investment Fund, must also balance international investment opportunities against domestic needs – committing substantial investment capital to support Neom. The Saudi crown prince also plans to publicly list Neom in the local stock market in 2024. The Public Investment Fund’s debut green bond sale included a $500 million issuance of 100-year notes, suggesting some degree of interest in its longer-term investment plans.
Raising the Stakes
Saudi officials are not keen on comparisons with the neighboring United Arab Emirates, especially concerning economic policy announcements and ongoing economic zone development. Neom may eventually prove to be bigger and better than similar entities in the UAE, which contains dozens of well-established economic zones. But at its essence, Neom is a special economic zone – albeit one with an increasingly strong technological dimension. Despite all the rhetoric about changing the world, the megaproject is ultimately designed to advance Saudi economic interests.
Delineating appropriate regulatory authority and oversight of Neom poses additional challenges for Saudi officials. These decisions will determine who can take credit for Neom’s successes as well as assume responsibility for any failures. The legal foundation and nature of regulatory policy creation within Neom likewise influence concerns over governance, as foreign investors often struggle to determine the precise relationship between the Saudi government and various commercial entities. Neom is likely to enjoy a distinct legal and regulatory status determined by a designated authority. However, this authority and its decisions will ultimately be subordinate to King Salman bin Abdulaziz and subject to adjustment by Mohammed bin Salman. It would be in Neom’s commercial interest for the Saudi government to resist unnecessary meddling in the legal and regulatory framework, but there are no political institutions to prevent this from happening.
Hosting the 2029 Winter Asian Games in Trojena raises the stakes associated with Neom. It is an excellent opportunity to promote the destination to a global audience and strengthen sporting credentials. Yet, there are now harder deadlines underlying Neom’s current transition from the conceptual to implementation stage. Trojena plans to offer year-round activities including outdoor skiing and other adventure sports by 2026. Pushing the developmental can down the road and expending financial and human resources to launch new initiatives, rather than advance existing ones, will become much harder to justify.
