Saudi Arabia's Deputy Crown Prince Mohammed bin Salman. Picture: REUTERS
Saudi Arabia's Deputy Crown Prince Mohammed bin Salman. Picture: REUTERS

Dubai/Riyadh — Saudi Crown Prince Mohammed bin Salman announced plans to build a new city on the Red Sea coast, promising a lifestyle not available in today’s Saudi Arabia as he seeks to remake the kingdom in a time of dwindling resources.

The prince said the city project, to be called "Neom", would operate independently from the "existing governmental framework", with investors and businesses consulted at every step during development.

The project will be backed by more than $500bn from the Saudi government, the country’s sovereign wealth fund and local and international investors, according to a statement released on Tuesday at an international business conference in Riyadh.

Prince Mohammed, the kingdom’s unrivaled leader, is spearheading efforts to prepare Saudi Arabia for the post-oil era. In the course of his meteoric rise to power since 2015, he’s disclosed plans to sell a stake in oil giant Saudi Aramco and create the world’s largest sovereign wealth fund, and has ended some social constraints, including a long-standing ban on women drivers.

"Neom will be constructed from the ground up, on greenfield sites, allowing it a unique opportunity to be distinguished from all other places that have been developed and constructed over hundreds of years," the prince said in the statement.

The plan is likely to be met with the same mixture of optimism and doubt that has greeted his previous headline-grabbing announcements. His supporters can be expected to cheer what they see as a bold drive to transform the kingdom, while others will point to past failed attempts to overhaul the Saudi economy that also included industrial cities in the desert.

The ambitious plan includes a bridge spanning the Red Sea, connecting the proposed city to Egypt and the rest of Africa. About 25,900km² have been allocated for the development of the urban area that will stretch into Jordan and Egypt, creating "the world’s first independent special zone stretching over three countries".

A bridge connecting Saudi Arabia with Egypt was announced during a visit to Cairo last year by Salman.

Klaus Kleinfeld, the former chairman and CEO of Siemens and Alcoa, was appointed to lead the development of Neom.

The project "seems to be broadly modelled on the ‘free zone’ concept pioneered in Dubai, where such zones are not only exempt from tariffs but also have their own regulations and laws, hence operating separately from the rest of government," said Steffen Hertog, a professor at the London School of Economics and longtime Saudi-watcher. "In Dubai, this has worked well, but attempts to copy it have done less well in the region."

A promotional video released on Tuesday features a lifestyle so far unavailable in Saudi cities. It showed women free to jog in leotards in public spaces, working alongside men and playing instruments in a musical ensemble. The one woman wearing a hijab had her head covered with a patterned pink scarf.

The unveiling of the project comes as Saudi officials, almost two years into the latest reform drive, are still grappling with crucial questions of how to speed up change without crippling the economy and are clashing with the kingdom’s conservative religious establishment.

The world’s biggest oil exporter wants to overhaul an economy reliant on oil revenue while creating enough wealth to avoid the risk of social unrest. Similar efforts over the past three decades have floundered, with plans losing steam as soon as crude prices recovered. Some landmark projects, such as a $10bn financial district in Riyadh, are struggling to take off.

The city will focus on nine industries: energy and water, mobility, biotech, food, technological and digital sciences, advanced manufacturing, media and entertainment, according to the statement. "The focus on these sectors will stimulate economic growth and diversification."

Prince Mohammed, who became heir to the throne this summer after his older cousin was removed from office, has vowed not to repeat past mistakes, insisting that his Vision 2030 will proceed regardless of oil prices. His government has cut subsidies and has slashed spending to trim the budget deficit. It plans to introduce value-added tax in 2018 to raise non-oil revenue.

Hertog said investors would want to see whether "circumventing some of the slow, mainline bureaucracy and general social restrictions in Saudi Arabia in a special zone" can work.

"If this is to be an international hub, it needs to offer something better than Dubai, which is a high bar to cross," he said.

Bloomberg

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