Friday,24 November, 2017
Current issue | Issue 1367, (2 - 8 November 2017)
Friday,24 November, 2017
Issue 1367, (2 - 8 November 2017)

Ahram Weekly

Neom: Vision of the future

Crown Prince Mohamed bin Salman has set out a bold vision for the diversification of the Saudi economy, one that will likely put him at loggerheads with the country’s conservative clergy, writes Haitham Nouri

 

Neom: Vision of the future
Neom: Vision of the future

اقرأ باللغة العربية


Saudi Arabia is changing remarkably fast. The latest sign of this is Crown Prince Mohamed bin Salman’s announcement in late October of the Neom project, the “city of the future” as it is called in the Saudi media.

The crown prince unveiled the new project during the Future of Investment symposium in Riyadh, an event that some financial circles refer to as the “Davos in the desert”. “Neom,” Salman explained, derives from the prefix “Neo” plus the first letter of the word for future in Arabic (mustaqbal).

According to the Saudi Press Agency (SPA), the new city/industrial zone is to be located in northwest Saudi Arabia. Its overall land mass is to extend into Jordan and Egypt. The average temperatures there are about 10 degrees centigrade higher than in the Gulf. The mountains in the vicinity become snow-topped in the winter. Extending across 26,500 square kilometres, Neom will have a more than 460-kilometre coastline on the Red Sea and Gulf of Aqaba.

Among the reasons this location was chosen, according to the kingdom’s official news agency, is its proximity to the Suez Canal, the vital waterway through which passes 10 per cent of the world’s trade and a significant portion of its oil. Also, the location is central enough that 70 per cent of the population of the world can reach it in under seven hours.

The new city will have its own laws and court system, separate from those elsewhere in the kingdom where a strict interpretation of Sharia law is applied. The purpose of the specially designed legal system is to avert bureaucratic red tape and to create a space governed in accordance with universal liberal values which provide for more individual, social and cultural rights and freedoms than are currently available in Saudi Arabia.

The crown prince has appointed the former CEO of Siemans Klaus Kleinfeld to head the major development project. Kleinfeld is also a former CEO of Alcoa and Arconic.

The estimated $500 billion project will be funded by the Saudi Public Investment Fund (PIF), the titular owner of the project, as well as by local, regional and international investors that the Neom project hopes to attract. Last month PIF, which is a sovereign fund, announced its plan to increase its assets to $400 billion by 2020.

Plummeting oil prices, relative to the 2002-2012 period, have begged the question as to whether it will be possible to come up with the necessary money for the project.

PIF estimates that individual Saudis send about $37 billion per year abroad, of which $15 billion is spent on tourism, more than $12 billion on healthcare and medical treatment, $5 billion on education and another $5 billion on investment.

Last week, the Russian Direct Investment Fund (RDIF) announced that it would take part, together with major Russian companies, in the construction of the future city project when the tender processes begin or when shares are floated in international stock markets.

As a vision for the promotion of future technologies, Neom will focus on nine core investment sectors: renewable energy and water, advanced transportation, biotechnologies, food, digital sciences, advanced manufacturing, media, entertainment and future life.

The first phase of the project is due to be completed in 2025, according to SPA.

Prince Salman stated in an interview with Reuters that, while Neom will be “the first capitalist city in the world... this is the unique thing that will be revolutionary.” He added: “It won’t be listed in the markets until the idea is mature enough. It might be after 2030, it might be before, but the idea and the strategy is to float it eventually.”

On the other hand, in a huge and powerful stride in Riyadh’s privatisation programme, Saudi Aramco, the world’s largest oil producer, worth over a trillion dollars, will be floated on the London Stock Exchange by the end of 2018.

The Neom project will contribute an estimated $100 billion per year to Saudi GDP by 2030, lifting per capita income in the kingdom to the highest in the world.

2030 will be a landmark year for Saudi Arabia. That year has been designated as the end of the crown prince’s vision to transform the country from near total dependency on petroleum to a diversified economy. The Saudi economy is currently about 85 per cent reliant on oil.

Vision 2030 also seeks to steer Saudi Arabia towards a moderate Islam and away from Wahhabi ideology that is regarded by many as not only extremist but also the source of extremist thought in the Islamic world.

Some observers believe that Neom is one of Riyadh’s instruments for augmenting and expanding its regional role. They point to a projected physical manifestation of this in the plan to have the zone span three countries (Saudi Arabia, Egypt and Jordan).

The involvement of other countries in the project, the bulk of which will be situated in Saudi Arabia, gives the impression that Riyadh is spearheading a movement for change that has as much of a socio-political dimension as it does an economic one.

Many observers interpret the crown prince’s decisions to grant women the right to drive and to permit Om Kulthoum concerts to be aired on Saudi television, the likelihood that he will allow cinema theatres will be reintroduced into the country, and the fact that he has hosted parties attended by women, as part of a drive to limit the power of the Committee for the Promotion of Virtue and the Prevention of Vice which, in turn, will reduce the influence of religious hardliners at home and abroad.

To most Muslims, and to many non-Muslims, Saudi Arabia represents Islam. Therefore, what happens there affects prevailing views and attitudes elsewhere in the Islamic world. For example, conservative religious pundits cannot question women’s right to education and to work once Saudi women are granted those rights.

Neom also hopes to attract skills and talents from elsewhere in the region and the world and, therefore, it should also serve as an instrument to enhance Saudi prestige. For decades, Saudi Arabia has drawn millions of Arab, Asian and European workers, creating an image of a country that is both wealthy and stable. Riyadh is keen to sustain that image which has been damaged by plummeting oil prices and the fight against terrorism. It also wants to improve that image by adding to it the idea that the country is also in the process of comprehensive reform and on the way to becoming more open and liberal-minded.

In spite of such hopes, Western investors still fear that Riyadh will not be able to fulfil its ambitions due to the unfavourable legislative climate, cumbersome bureaucracy and low productiveness. The growth of the private sector, which has sunk to zero, also puts off Western investors. In addition, there is widespread concern over restlessness among conservative Wahhabi clergymen and their possible designs to undermine the crown prince’s bold vision and its ambitious projects.

This said, the fact that youth make up 70 per cent of the Saudi population should work in favour of the liberalisation and, accordingly, a new regional role for the oil kingdom as it moves towards a diversified economy and a more tolerant interpretation of Islam.

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