How Saudi Arabia’s $1.5 trillion Neom megacity has had another major setback

Saudi Arabia’s $1.5 trillion Neom mega-city project, a central piece of the Kingdom’s Vision 2030 for economic diversification, has encountered new challenges.

The recent departure of Neom’s long-time CEO, Nadhmi al-Nasr, has created waves across the project’s leadership structure. Neom announced on Tuesday that al-Nasr, who has spearheaded the construction since 2018, would be stepping down, though the statement did not specify a reason.

Reuters reported that sources close to the matter suggested that al-Nasr’s exit was partly due to unmet performance metrics, while reports also uncovered his controversial management style, which included derogatory language and threats towards employees.

Al-Nasr allegedly boasted about driving his employees “like a slave,” further adding, “When they drop down dead, I celebrate. That’s how I do my projects.” This departure marks a significant leadership change during a critical phase of development as Neom races to meet its 2030 completion targets.

Al-Nasr’s replacement, Aiman al-Mudaifer, a senior official from Saudi Arabia’s Public Investment Fund (PIF), will step in as acting CEO. With experience in overseeing the fund’s real estate and infrastructure projects, Al-Mudaifer is expected to bring “operational continuity, agility, and efficiency,” according to Neom’s statement.

Al-Mudaifer has led the PIF’s Local Real Estate Division since 2018 and is recognised for his “strategic understanding” of Neom’s vision and logistical challenges.

A reality check for Saudi’s Vision 2030

The departure of al-Nasr comes amidst concerns that the project’s original ambitions are being drastically scaled back. Once billed as a $1.5 trillion city that would be 33 times the size of New York City, Neom’s vision has been revised as cost overruns and delays mount.

Early plans projected Neom to house up to 1.5 million people by 2030, but current projections suggest it may accommodate fewer than 300,000 residents by the decade’s end. Additionally, only 2.4 kilometres of the planned 170-kilometre mirrored skyscraper “The Line” are expected to be completed by 2030.

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Despite its futuristic design and lofty goals, Neom has faced financial strains, intensified by a lower-than-expected oil revenue. The project relies heavily on petrodollars, with Saudi Arabia’s economy needing oil prices at around $96 per barrel to balance its budget.

As of recent reports, oil prices hover at roughly $24 below that mark, squeezing the Kingdom’s financial resources for Vision 2030 initiatives. The $925 billion PIF, which controls Neom’s funding, has reportedly shifted its strategy to focus on projects with higher success potential, reflecting a broader reorganisation to ensure return on investments.

Investor hesitation & Workforce challenges

Investor reluctance remains a significant hurdle for Neom. Western private equity firms and financiers have been hesitant to commit to the ambitious project, even as Saudi Arabia attempts to attract foreign capital to the Kingdom.

While some investment has been secured for other projects under Vision 2030, Neom’s grand scale has caused skepticism, with many questioning the viability of the futuristic “The Line” development and other grandiose plans, such as the floating industrial complex and global trade hub.

Neom’s workforce has also faced troubling conditions. Reports have emerged of harsh working conditions for expatriate employees and accusations of discriminatory treatment by some executives.

The Wall Street Journal reported that Wayne Borg, who managed Neom’s media division, reportedly made disparaging remarks about Islam and mocked Gulf women, calling migrant workers “fucking morons” and asserting that “white people are at the top of the pecking order.”

Another executive, Antoni Vives, involved in The Line project, allegedly engaged in physical altercations with staff. Both Borg and Vives have recently left the project.

Controversy over forced evictions

Beyond financial and managerial issues, Neom has been criticised for its environmental and social impacts. The massive scale of construction has required the forced relocation of local communities, including the Howeitat tribe, sparking controversy and resistance.

An estimated 20,000 people are expected to be displaced. Some Howeitat members who protested have faced severe consequences, with several individuals sentenced to death, and reports of extrajudicial actions, including the killing of Abdul Rahim al-Huwaiti by Saudi security forces.

Additionally, environmental concerns loom large. Neom’s planners have highlighted renewable energy as a cornerstone of the project, yet questions persist about the long-term sustainability of such a massive urban footprint in the desert. The environmental cost of building infrastructure on such a scale has prompted skepticism from experts worldwide.

Will Saudi Arabia manage to complete Neom?

Despite setbacks, Neom remains a cornerstone of Crown Prince Mohammed bin Salman’s Vision 2030 — a transformative agenda aimed at reducing the Kingdom’s dependence on oil.

Since its launch in 2017, the project has garnered international attention for its ambitions and futuristic vision, with the Crown Prince even touting Neom as a model city for future generations.

Meanwhile, Saudi Arabia is on track to host the 2034 FIFA World Cup, a move that will require significant development of its infrastructure, lodging, and transportation capabilities.

Neom is envisioned as an ultra-modern city that spans 26,500 square kilometres (10,200 square miles) along Saudi Arabia’s northwest coast, in Tabuk Province.

Positioned as a “civilisational leap,” Neom is set to include multiple zones, such as a floating industrial complex, a global trade hub, and tourist resorts. The most iconic part of Neom is "The Line," a 170-kilometre straight-line city housed between two mirrored walls, designed to eventually accommodate nine million people.

Powered by renewable energy, Neom aims to generate approximately 460,000 jobs and add an estimated $48 billion to Saudi Arabia’s GDP.

Developers initially planned for major sections of Neom to be completed by 2025, with additional expansions to follow by 2030.

Also Read | What is Saudi Arabia's giant cube-shaped skyscraper 'The Mukaab', the size of 20 Empire State Buildings?

With inputs from agencies