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Saudi Arabia strives to counter giga-project doubts

The Line at Neom Neom
Plans for The Line have been radically reduced
  • Global tour to attract investment
  • Cost and deadline worries
  • Many projects ‘not credible’

As Saudi Arabia ramps up its global tour to attract more giga-project investment, doubts have begun to set in over costs and whether they will meet the imminent 2030 deadline.

The kingdom’s officials put on a big show at an international real estate event in Cannes in March and this week Neom kicked off the China leg of its global tour, meeting around 500 business leaders and officials in Beijing and Shanghai.

At the same time Diriyah Company – the developer revamping Riyadh’s historical district – unveiled a new retail project at the World Retail Congress in Paris.



However, the government has said that some projects or elements could be delayed past their 2030 deadline and Neom recently admitted its 106 mile-long horizontal city will open in 2030 at only a few miles long

Owned by the Public Investment Fund, the giga-projects are the beating heart of Saudi Arabia’s massive economic transformation programme which has a target date of 2030.

But though they are valued so far at around $1.5 trillion in terms of total contracts awarded, PIF is having to raise debt and press Saudi banks into heavy lending to maintain funding flows. 

Watch AGBI‘s Saudi Arabia editor Andrew Hammond talking about the latest giga-projects news on Dubai Eye radio

Foreign direct investment levels are far below targets and the government now faces three years of budget deficits as oil prices fail to make break-even levels. 

Markets have taken in their stride the Red Sea crisis, caused by Houthi rebels in Yemen attacking alleged Israel-linked shipping. 

The threat of war between Iran and Israel has put prices over the key $86 a barrel mark over the past month but the long term trend is down. 

“Given that oil is still below fiscal break-even prices, it’s going to be the state and PIF doing a lot of the heavy lifting,” said James Swanston of Capital Economics, predicting more delays if oil prices slump.

At a construction conference in Cannes last month, project officials seemed in competition to stress what they called the “believability” of specific projects they are involved in, in some cases arguing they had no need of investors because they have PIF. 

But the most stunning revelation was that Neom’s futuristic city The Line would open in 2030 with only one phase completed, as AGBI reported at the time. 

An official confirmed that this phase would be formed of three sections with a man-made marina in the centre that would allow boats to dock inside the city. Bloomberg reported this month that some workers had been laid off from the site. 

Greg Priddy, a senior fellow at the Center for the National Interest in the United States, said he was not surprised. 

“Most of these projects were never credible as business plans – hence little private foreign capital coming in,” Priddy said.

“Relatively few people have been willing to point out the emperor’s lack of clothes here, but that is mainly due to so many people with expertise on the region feeding at the Saudi trough in one way or another.” 

Some of the larger projects look vulnerable because the percentage of commissioned projects and completed construction is low. 

None of Jeddah Economic City, which includes Jeddah Tower, has been built, and among the most expensive projects – Neom, Diriyah Gate and New Murabba – work on the latter has only just started. 

New Murabba officials in Cannes sought to allay concerns, issuing a call to investors to seize the opportunities, which would include a massive cubic structure called the Mukaab advertised as big enough to contain 20 Empire State buildings.

The projects most likely to reach full completion are those facing deadlines related to major events. The Neom resort of Trojena – due to host the Asian Winter Games in 2029 – declared in March that it will be fully opened in 2027

Some of the more traditional tourist projects, such as the hotels planned as part of the Red Sea Global resorts, are also a fair bet to reach completion – though perhaps not with the full 79 hotels cited in a recent interview

Crown Prince Mohammed bin Salman seemed to preempt criticism when he declared last September that the Vision 2030 plan would be followed by a new target: Vision 2040.

Faisal Durrani, of real estate consultancy Knight Frank, said the bigger picture was this demonstrated how Saudi Arabia was rebranding as a powerhouse of innovation.

“The colossal scale of these projects means that flexibility and evolution in execution were always going to be cornerstones that define their success,” he said.

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