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Saudi Arabia Lowers Its Expectations for the $1.5 Trillion Neom Initiative

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The creation of Neom, a large project led by Crown Prince Mohammed bin Salman with the purpose of diversifying the kingdom’s economy away from oil dependence, has caused Saudi Arabia to modify its medium-term ambitions. The original plans for The Line, a futuristic city inside Neom, to house 1.5 million people have been drastically scaled back, according to those familiar with the situation.

Although the project was originally expected to be finished by 2030, officials now predict that by then, The Line will not accommodate as many as 300,000 people. The project’s original scope of 170 kilometers of desert coastline is likely to be significantly reduced; by 2030, it is anticipated to cover barely 2.4 kilometers.

According to documents seen by Bloomberg, at least one contractor has started terminating employees on the site as a result of this scaling back. Neom and the kingdom’s Public Investment Fund, the project’s primary funder, declined to comment on the situation.

Neom, a $1.5 trillion development along the Red Sea coast, is envisioned by Crown Prince Mohammed as a revolutionary project that will showcase cutting-edge technologies and completely overhaul the Saudi economy. The kingdom’s sovereign wealth fund has not yet approved Neom’s 2024 budget, raising financial concerns.

The building of The Line has been delayed, which highlights the difficulties Saudi Arabia’s Vision 2030 program faces, even while work goes on with other components of the Neom project, such as the inauguration of the upscale tourist destination Sindalah later this year. Certain initiatives under this plan, which aims to diversify the economy, have already been delayed until around 2030.

The Public Investment Fund is investigating different ways to raise money, such as debt sales and equity offerings, at the same time as The Line is retreating. As of September, the fund’s cash reserves had fallen to $15 billion, the lowest since 2020.

The Public Investment Fund was supposed to contribute to the financing of Neom’s first phase, which was initially projected to cost 1.2 trillion riyals ($320 billion) by 2030. The project’s reduction in scope, meanwhile, emphasizes the difficulties in achieving the lofty goal that Crown Prince Mohammed bin Salman has set forth.

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