Saudi Arabia’s Crown Prince Mohammed bin Salman al-Saud has announced plans to build a $500bn city in the kingdom known as Neom.
The city will be developed with backing from the government, the Public Investment Fund (PIF) and investors. “Neom will be backed by more than $500bn over the coming years by the kingdom of Saudi Arabia, the Saudi Arabian Public Investment Fund, local as well as international investors,” said Prince Mohammed on 24 October.
The city will be developed on 26,500 square kilometres of land along 468km of coastline along the Red Sea and the Gulf of Aqaba. It will also cross into Jordan and Egypt. The plans also include the King Salman Bridge that will connect Saudi Arabia and Egypt – Riyadh and Cairo agreed to develop a causeway that will link the two countries across the Red Sea in 2016.
The aim of the city is to be an innovation hub that will be made more attractive to future investors and residents by creating an independent economic zone for the city with its own laws, taxes and regulations.
The sectors that will be targeted are:
- Energy and water
- Advanced manufacturing
- Technological and digital sciences
For energy, the plan is for Neom to be entirely powered by wind and solar energy.
Neom’s contribution to the kingdom’s GDP is expected to be at least $100bn by 2030. Construction of the first phase is due to be completed by 2025.
The project announcement follows a string of high profile projects launched by PIF as it gears up to play a leading role in the future development of the kingdom after launching a series of multibillion dollar real estate schemes.
The sovereign wealth fund, which is set to become the largest in the world when it takes on the non-listed portion of Saudi Aramco after its initial public offering in 2018, has been hiring staff and offering large salaries to drive the development of new projects that include the sprawling Red Sea Project on the west coast of the kingdom as well as projects in Jeddah, Medina, and Riyadh.
In early October, the PIF said it will establish a new company to deliver projects that will allow more pilgrims to visit Medina and the city’s Prophet’s Mosque.
The company will be known as Roua al-Madinah. It aims to develop a 1.3 million square metre site about 1 kilometre away from the east wing of the Prophet’s Mosque.
The proposed company’s activities will include the development of hotel, commercial and residential projects, as well as the development of cultural centres and museums. The company will also create opportunities for investment and private sector participation through the development of strategic partnerships.
Its upcoming projects include 500 housing units, 80,000 hotel rooms, and prayer areas capable of accommodating 200,000 worshippers a-day. Initial preparation works are currently underway, with construction due to start in 2018. The first phase of the project is anticipated to launch in 2023.
It is estimated that the projects will create about 200,000 job opportunities, with an estimated annual contribution to GDP of SR7bn ($1.9bn).
The projects will support the goals set out in Riyadh’s Vision 2030 document that outlines plans to develop religious tourism further. For Medina, the aim is to increase the number of visitors to the city each year to 23 million by 2030.
A few days before the Medina announcement in late September, PIF said it will lead the SR18bn redevelopment of Jeddah’s waterfront corniche.
Known as New Jeddah Downtown, the 10-year redevelopment scheme aims to create a tourist, residential and commercial destination on the Red Sea coast that will create 36,000 new jobs.
The 5 square kilometre site will be divided into six main sections that include housing; museums, and cultural and social centres; areas for business and innovation; gardens, amusement parks and sports facilities; hotels and hospitality facilities; retail spaces; as well as coastal areas for seaside activities, and walking routes along the private boat and yacht pier.
The residential area will comprise 42 percent of the new development, with 35 percent dedicated to entertainment and retail areas, 12 per cent to office space, and 11 percent to new hotel and hospitality facilities.
For housing, the project aims to deliver over 12,000 housing units that will accommodate 58,000 new residents.
Initial preparation works are currently underway, with construction due to start in 2019. The first phase of the project is expected to be completed by the end of 2022.
The Jeddah and Medina are joined by another major development project in the Western Region that is being led by PIF, the Red Sea Project. The scheme, which was officially announced in late July, was given a major marketing boost in early October when Richard Branson was reported to be the first international investor to commit to take in the project that involves the development of 200 kilometres of coastline.
The UK businessman had been visiting Saudi Arabia and wrote about his experiences and the economic and social changes – such as allowing women to drive from next year – being made in the kingdom on his blog.
The Red Sea Project will incorporate 200 kilometres of coastline between the cities of Amlaj and Al-Jawh on the western coast of the kingdom.
Although the scheme is still in the early stages and no budgets have been revealed, it has the potential to be the largest project announced since the drop in oil prices in 2014, and could offer billions of dollars of opportunities for contractors in the kingdom.
The area for development is vast and includes a wide range of attractions, among them 50 natural islands, heritage sites such as the ancient ruins of Madain Saleh, mountains, nature reserves, dormant volcanoes at Harat Alrahat, coastlines and beaches.
Construction work on the first phase of the scheme is scheduled to start in the third quarter of 2019, with completion in the fourth quarter of 2022. These initial works will largely involve establishing infrastructure and the first resorts.
The infrastructure required will be substantial. There will be a seaport, roads and airports, as well as infrastructure for boats and seaplanes, and the new development areas will need water, power, drainage and telecoms infrastructure installed.
The procurement process for the infrastructure is at the early stages, with consultants in the kingdom saying firms have been approached for design contracts and some early work has been completed on basic concepts for the project.
In addition to the infrastructure, the first phase also includes the development of hotels and luxury residential units that will be delivered in partnership with international companies. Construction work for these schemes is expected to follow the infrastructure.
In Riyadh, PIF is developing an entertainment city in the Al-Qidya area of the Saudi capital. The project will focus on cultural, sports and entertainment offerings, will cover an area of 334 square kilometres, including a safari site.
Construction work on the project will start in 2018 and first phase of the city will be completed by 2022.
The project will be supported by a new investment company that PIF is establishing to help develop the kingdom’s entertainment sector.
The company will have an initial capitalisation of SR10bn and aims to play an active investment role in various areas of the entertainment sector. It will seek to attract strategic partnerships with international entertainment companies to expand the scope and variety of entertainment offerings across Saudi Arabia.
The company is planning to invest in a number of entertainment projects, and by the end of 2030, the company’s projects aim to serve more than 50 million visitors annually and create more than 22,000 jobs, which will contribute about SR8bn to GDP.
Another scheme being managed by PIF is Riyadh’s King Abdullah Financial District (KAFD) that was transferred to the fund from the Public Pension Agency (PPA) in 2016.
The move is an attempt to rescue the project, which was launched 10 years ago and has been substantially built.
According to the government’s Vision 2030 plan, the plan is to directly connect KAFD to King Khaled International airport in Riyadh, as well as turn it into a special zone with “competitive regulations and procedures”, and visa exemptions.