The images revealed a gleaming 170km-long skyscraper city only 200m wide stretching into the Red Sea, selling a future where the world’s second-largest oilproducer is also a leader in net zero.
The development, called The Line, would be home to 1.5 million residents by the end of the decade and “shine a light on alternative ways to live”, the Crown Prince promised.
Less than two years on, these ambitions have been dramatically scaled back.
The giga-project is now expected to house only 300,000 people over a 2. km stretch by 2030, reports this week suggested.
The “unsurprising” blow to MBS’ lofty plans underlines the Saudi government’s struggles to win over foreign investors and the nation’s vulnerability to oil prices, experts say.
“Foreign direct investment investors haven’t really bought into the Crown Prince’s vision for a new Saudi Arabia,” says Torbjorn Soltvedt, principal analyst at risk consultancy Maplecroft.
The Line City is only one element of Neom, the 26,500sq km urban development being built at the northern tip of the Red Sea.
It is the crown jewel in the Saudi government’s Vision 2030, MBS’ brainchild for diversifying its fossil fuel-reliant economy.
But even as Saudi Arabia remains one of the most powerful players in influencing global oil prices, the kingdom also finds itself at the mercy of such fluctuations.
About three-quarters of budget revenues have stemmed from oil since 2010, figures from the International Monetary Fund show.
It means the Gulf state’s efforts to build itself out of its reliance on the commodity hinge on how much it sells for, as well as the kindness of strangers, or foreign investors.
Most "buildings" in The Line are in the 500m-high walls, with public space and facilities like this sports stadium between them. Note the mirror glass on the outside of the wall.
“The bigger picture of the backdrop of the Saudi economy is that they returned to running a budget deficit in 2023, about 2 per cent of GDP,” says James Swanston, of Capital Economics.
“This has come as they started to loosen fiscal policy to support the kingdom’s non-oil economy and invest in projects like Neom. To support this level of spending they need a higher oil price.”
Saudi Arabia, which last year sold 9 million barrels of oil a day, needs the price to be at least US$93 to balance its budget, according to Swanston.
“Even with the rally we have seen this year with the spillovers from the war between Israel and Hamas, it is still not at that level,” he adds.
Designs for The Line, a 'city of the future', featuring a mirrored facade. Image / Neom
Brent crude rose to US$91.17 ($150) a barrel on Friday, the highest level since October. It was driven by escalating tension between Iran and Israel, prompting supply fears.
“We have seen before with Saudi Arabia the first port of call when they need to pare back spending is capital projects — giga-projects like Neom, for example. They did the exact same thing in 2016 with the King Abdullah Economic City when oil prices collapsed. They scaled back spending massively on that project and it’s never really borne fruit,” Swanston says.
The King Abdullah Economic City was one of six mega-projects announced in 2005. It was the only to launch, but failed to attract investment and had a population of only 7000 by 2018.
Attracting foreign direct investment (FDI) has also been a hurdle that MBS appears to have tripped over with Neom.
🔊 بتصميم يتبنى أروع ما يمكن تخيُّله من إبداعات نخبة العقول المعمارية حول العالم، تمتد مدينة "ذا لاين" المليونية على طول 170 كم.
ثورة الحياة الحضرية، ومدينة فيها إبداعات تُثري العالم.
This has been a persistent issue across all Vision 2030 projects, says Soltvedt. The government has fallen woefully short of its own targets, he says.
“Last year they received about US$11 billion [of FDI], so around 1 per cent or less of GDP. The goal was really to have 5-6 per cent by 2021. The goal is US$100b a year by 2030, so they are looking at a tenfold increase in foreign direct investment,” Soltvedt says.
Foreign money is flowing into buying up sovereign debt and equity securities, but MBS has failed to convince investors to directly funnel money into his projects.
“There is still that kind of catch-22: investors want to see more evidence of change before they really commit to long-term investments in Saudi Arabia,” Soltvedt says.
“But then Saudi Arabia needs foreign direct investment to really make Vision 2030 work. So they are stuck and haven’t seemed to find a way to ease investor concerns.”
The reform-minded Crown Prince has sought to soften Saudi Arabia’s outward image, pivoting it to “moderate Islam” and giving women greater freedoms such as driving and travelling abroad alone.
But its poor record on human rights abuses still puts off some investors, with the murder of Saudi journalist Jamal Khashoggi in Turkey in 2018 still fresh.
Daily drone and missile strikes from Houthi rebels until March last year did not help either, Soltvedt says. While an agreement with Iran helped put an end to attacks by the Yemeni militia backed by Tehran, Israel’s war with Hamas has brought renewed fears over security in the region.
“I think for investors looking at it, there are still just too many unknown variables,” he says.
Meanwhile, Western telcos have been spooked by the Saudi government’s plans to use hyper-modern integration of artificial intelligence and facial recognition in Neom.
“It is presented as a positive that every single citizen can be tracked and the security forces will be able to know when a crime happens in real time, making this a super-safe space. But, obviously, that comes at a huge cost when it comes to privacy,” Soltvedt says.
The wonder of a city with a perfect climate all year – some 170 km long and stretching across mountains, desert and coast.#TheLINE#NEOMpic.twitter.com/eWSYleCV8q
As a result, Western firms have been reluctant to get directly involved, while Chinese entities have stepped in.
Many observers also questioned the feasibility of the Line City when it was announced.
“There were very few people who thought the project as initially conceived could ever really come to fruition. Now with there being a big scale-back, it is something that perhaps will be pushed through in some form,” Soltvedt says.
A key question will be how many people want to live in a city that is one long skyscraper in the desert with Black Mirror levels of surveillance and threats of a regional war.
The Saudi government has never made clear whether it intends wealthy foreigners or its own citizens to populate its utopian project, although it appears to have been marketed to an international community.
