Saudi Arabia Scale Back Ambition for $1.5 Trillion Desert Project Neom.

Neom, a highly ambitious sustainable urban development and the largest project in Crown Prince Mohammed bin Salman’s plan to diversify Saudi Arabia’s economy, is undergoing a significant shift.

Originally designed to accommodate 1.5 million residents by 2030, the project’s scope has been scaled back, with expectations now adjusted to fewer than 300,000 inhabitants by that time.

The Line, an innovative city within Neom, was initially planned to cover a vast area, flanked by two towering skyscrapers. However, the envisioned 170-kilometer development along the coast is now facing a major setback, with only 2.4 kilometers projected for completion by the end of the decade.As a result, signs of a slowdown are emerging, with at least one contractor reducing its on-site workforce.

Despite these challenges, Crown Prince Mohammed bin Salman’s vision for Neom as a transformative force in the country’s economy remains steadfast. The $1.5 trillion initiative aims to showcase technological innovation and drive economic growth.

In addition to The Line, Neom includes 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 significant achievement to date lies in the development of a multi-billion-dollar project to establish solar and wind farms, earmarked for green hydrogen production.

Saudi Arabia aims to position itself as a leading global producer of this environmentally friendly fuel, aligning with efforts to reduce reliance on traditional oil exports.

In light of these developments, the Public Investment Fund is exploring options to strengthen its financial position, including debt acceleration and equity offerings in portfolio companies.

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.

Source :Bloomberg 

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