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Saudi Arabia's ambition for $1.5 trillion Neom project scaled back

  • Saudi Arabia's ambition for $1.5 trillion Neom project scaled back

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Neom, one of the world’s most aspiring sustainable urban developments, and the biggest project within Crown Prince Mohammed bin Salman's ambitious plans to diversify Saudi Arabia's economy, is witnessing a notable shift in its trajectory, sources familiar with the matter revealed to Bloomberg.

Originally envisioned to accommodate 1.5 million residents by 2030, the project's ambitions have been tempered, with expectations now reduced to fewer than 300,000 inhabitants by that time.

The Line, a groundbreaking city nestled within Neom, was slated to span a vast expanse, encapsulated by two towering skyscrapers. However, the envisioned 170-kilometer stretch of development along the coast now faces a significant setback, with only 2.4 kilometers projected for completion by the end of the decade.

Consequently, indications of a slowdown are emerging, with at least one contractor downsizing its workforce on-site, according to documents obtained by Bloomberg.

Crown Prince Mohammed bin Salman's vision for Neom as a transformative force in the country's economy remains unwavering. The $1.5 trillion endeavor aims to showcase technological innovation while catalyzing economic growth. Alongside The Line, Neom encompasses plans for an industrial hub, maritime infrastructure, and tourism ventures, with preparations underway to host the Asian Winter Games in 2029 at the Trojena mountain resort.

Neom's most notable achievement so far lies in the development of a multi-billion-dollar project to establish solar and wind farms

Although work persists on other facets of the Neom project, uncertainties loom as the kingdom's sovereign wealth fund hesitates to greenlight Neom's budget for 2024. This hesitation underscores the fiscal pragmatism encroaching upon Saudi Arabia's ambitious Vision 2030 initiative, designed to pivot the nation away from its oil-centric economy. Acknowledging the evolving landscape, officials have conceded that some projects may face delays beyond the initial target year of 2030.

Neom's most notable achievement so far lies in the development of a multi-billion-dollar project to establish solar and wind farms, earmarked for green hydrogen production. Saudi Arabia aspires to position itself as a leading global producer of this eco-friendly fuel, aligning with efforts to reduce reliance on traditional oil exports.

Amid these developments, the Public Investment Fund explores avenues to bolster its financial standing, including debt acceleration and equity offerings in portfolio companies, as reported by Bloomberg. With cash reserves dwindling to $15 billion as of September, the sovereign wealth fund faces pressing financial considerations, casting a shadow over Neom's ambitious aspirations.

In 2022, Crown Prince Mohammed bin Salman outlined the initial phase of Neom with an estimated cost of 1.2 trillion riyals ($320 billion) by 2030, with half of the funding anticipated from the Public Investment Fund.

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