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Saudi Arabia’s Mega City has Mega Problems

Saudi Arabia- NEOM project
Saudi Arabia’s NEOM project. Photo thegreatmiddleeast

Saudi Arabia, a country mocked for its outdated and ultraconservative norms, is diving headfirst into the future. On 24 October 2017, the kingdom’s crown prince, Mohammed bin Salman (MBS), unveiled his plans to build a mega city costing more than $500 billion in the country’s north-west.

If he succeeds, the mega city will be 33 times larger than New York City and feature a 26,500km2 business zone called NEOM – an amalgam of neo and mustaqbal, the Arabic word for future. The city’s location, situated on the Red Sea and the Gulf of Aqaba, would enable it to strengthen economic ties with countries in both the Middle East and Africa.

The task is a tall order in a country where members of the royal family and ultraconservative clerics vie for power and influence over domestic affairs.

Yet MBS is driven. The city’s promotional video portrays an image of Saudi life that is alien to many: men and women mingling on the streets, more robots than humans and renewable energy powering everything. Investors hope MBS succeeds, although Steffen Hertog, an associate professor at the London School of Economics, is sceptical.

“Investors will want to see more detail before moving forward,” he told Mimi Kirk, a reporter for CityLab. “But because Saudi Arabia is more financially constrained than it used to be, it may not be able to make large up-front investments until private money comes.”

“The project is certainly a novel idea and one with a lot of potential, but a lot of details still require clarification,” Raza Agha, a chief economist at VTB Capital, told Reuters.

The clock is ticking for Saudi Arabia to diversify its economy, which has depended on oil exports since it discovered in 1938. Eighty years later, Saudi oil production is in decline, increasing the urgency for the crown prince to realize his dream.

NEOM is slated to open by 2030. It will rely heavily on the food, entertainment, energy, water, manufacturing and biotechnology sectors. MBS also promises that the city will host top-of-the-line artificial intelligence (AI) such as drones, nanobiology labs and solar panels.

Construction of the mega city runs parallel to MBS’ National Transformation Programme (NTP, also known as Vision 2030), which he announced last year 2016. So far, the NTP seems to be moving forward despite encountering major obstacles. Not only are oil prices slumping but the country’s clerical establishment is also impeding progress. The timeline of some targets has thus been extended, while others have been scratched entirely.

Nevertheless, the NTP still aims to create 1.2 million private sector jobs, while privatizing state assets by 2020. The programme’s larger purpose, however, is to restructure Saudi bureaucracy so that MBS can make all the changes he desires in the kingdom. Most important is the freeing up capital to build the mega city.

However, critics wonder how the mega city will curb youth unemployment. State-sponsored projects such as NEOM often fail to foster an organic tech ecosystem that breeds innovation. Saudi youth, despite making up 70 per cent of the population, need time to learn these skills if they are to find work in NEOM. If they do not, there will be few opportunities since robots will be engaged to perform what is typically low-wage labour.

MBS has dismissed these concerns, insisting that NEOM has a greater purpose than producing jobs for Saudis. It will instead serve as the new business and technological hub for the world. The city should at least help keep Saudi money in the kingdom. The country’s ultraconservative laws often encourage Saudis to vacation elsewhere in the region such as the United Arab Emirates, Bahrain and Lebanon.

MBS hopes that by 2030, wealthy Saudis can visit the Red Sea Coast Resorts (RSCR), blueprinted for construction just south of NEOM. Luxury hotels will be erected on this strip, stretching across 50 islands and 33,998km2.

RSCR will benefit from more liberal laws, making the destination attractive to foreigners. Alcohol will be legalized and laws regulating women’s clothing will be removed or extensively scaled back.

Still, not everybody is convinced that Saudi Arabia can finish the project, citing its past failures to fulfil its unrealistic ambitions. Most notably, in November 1976, the kingdom tried to tow icebergs from Antarctica to supply the country with sufficient water. The project would have cost at least $100 million, spent over six months. Despite the drive of Mohammed bin Faisal – son of then King Faisal – the project was cancelled. Desalinization technology was adopted instead.

More recently, the kingdom has struggled to build King Abdullah Economic City, which is located south of where NEOM will stand. The city should have housed 2 million people by now, yet it has only 10,000 residents. King Abdullah Financial District, in the north of the capital Riyadh, is also still under construction after more than a decade. The district was supposed to challenge Dubai as a major international business hub but has not come anywhere near to fulfilling this ambition.

Toby Craig Jones, an expert on oil and water in Saudi Arabia and the author of Desert Kingdom, argues that MBS’ mega city is the latest in a long-standing tendency to invest in grandiose schemes like the Antarctica project. The House of Saud, he suggests, would be better off preserving enough oil and water to foster sustainable development.

Northern Hijaz, where MBS plans to build NEOM, lacks both these natural resources. Rather than catapulting Saudi Arabia into the 21st century, the city could be a burden. The government is already struggling to cater to the needs of people living in Riyadh, Jeddah, Mecca and Damman. If NEOM and RSCR are completed, these cities could suffer further neglect, exacerbating the grievances of the country’s population, particularly its youth.

Social liberalization in the kingdom will only do so much. Saudi authorities also need to refrain from imposing austerity measures too fast. MBS seems to know that. With oil prices declining, he is easing state cuts for now. However, he is reportedly planning to raise domestic prices again by 80 per cent in January 2018, as part of a programme to eliminate energy subsidies and balance the kingdom’s budget.

It is clear that MBS is relying partly on austerity to finance his mega project. Of course, he could have charted a different path by fostering coding skills, good governance and steady growth in the AI sector. This strategy, though modest, would have equipped the youth with skills for the future. But if unemployment increases, the next generation may end up resenting the extravagant crown prince. MBS is already at the point of no return. The mega city is in the works, and its success is imperative to Saudi Arabia’s makeover.

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