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Panel show: Neom will use solar energy technology to make the most of ’s long hours of sunshine Neom: oasis or mirage? SAUDI ARABIA INTENDS TO uturistic megacity Neom is one less than eight hours by plane. Thus, the new RAISE UTOPIAN MEGACITY of the cornerstones of Saudi city would provide easy access to the Saudi NEOM FROM THE SAND. THE F Arabia’s highly ambitious Arabian, Egyptian, Jordanian and global mar- reform programme, Vision 2030. The kets. AMBITIOUS PROJECT IS AN latest in a series of super-projects Besides swathes of desert sand, Neom covers EXAMPLE OF SAUDI’S NEW designed to rebrand the country’s varied terrain including islands, beaches, more VISION FOR THE COUNTRY: image and reshape its economy than 460 kilometres of pristine coastline, and DIVERSIFIED, GLOBAL, through modernising, attracting FDI mountains reaching up to 2500 metres in GRANDIOSE AND MODERN. and diversifying away from oil height (some covered in snow during the win- BUT CAN IT ATTRACT THE dependency, Neom is the brainchild ter). The unusual geography provides a temper- VAST AMOUNT OF FDI IT of Saudi’s deputy prime minister and ate climate that is, on average, roughly 10 NEEDS? heir to the throne, crown prince degrees Celsius cooler than its surrounding SEBASTIAN Mohammad Bin Salman. areas and the rest of the Arabian Peninsula. SHEHADI REPORTS Located in an untouched north- Neom’s promotional video portrays a western corner of Saudi Arabia, futuristic utopia, described by the narrator as Neom is projected to cover 26,000 square kilo- “the blank page you need to write humanity’s metres of arid terrain. At 33 times larger than next chapter”, and is accompanied by images New York City, it will extend into the outskirts of greenery, ethnic diversity, gender mixing, of and on the . renewable energy, technology, family and health. In other words, the megacity aims to Prime location attract world-class talent by offering an idyllic Lying southeast of the Suez Canal, Neom’s lifestyle and a “community founded on mod- coastal location takes it close to international ern architecture, lush green spaces, quality of markets and trade routes. Roughly 10% of the life, safety, and technology”, as the official world’s trade flows through the Red Sea and website puts it. 70% of the world’s population can reach it in Thanks to a comprehensive e-government,

86 www.fDiIntelligence.com February/March 2018 REGIONS MIDDLE EAST & AFRICA

ONLY 3% OF THE LAND OF SAUDI ARABIA CAN PROVIDE MORE THAN 50% OF THE ELECTRICITY OF THE WORLD, WITH TODAY’S SOLAR TECHNOLOGY

Neom residents are promised free facilities that govern them is innovative and completely such as internet coverage and highly auto- eliminates the challenges of dealing with any mated, technology-based civil services in edu- Saudi institution,” says Ayham Kamel, Middle cation, health, transport, entertainment and East and north Africa practice head at political other fields. According to Softbank CEO risk consultancy Eurasia Group. This may pla- Masayoshi Son, the robot population in Neom cate foreign investors worried about Saudi gov- may exceed the human one. Labour-intensive ernment inefficiencies. manual tasks will be automated and new tech- nology built into the blueprints of its infra- A $500bn price tag structure, according to the official website. Neom will need at least $500bn of support over the next few years from the Saudi Arabian Liberal environment? (PIF) as well as local Neom claims to be more than just a techno- and international private investors. With a logical experiment, however. Its “social norms planned $2000bn budget to fund Vision 2030, [will] adopt leading practices to improve… Saudi’s PIF is on the way to becoming the liveability”, according the official website. world’s largest sovereign wealth fund. The crown prince has already begun liberalis- Together with Blackstone Group, the PIF has ing Saudi Arabia’s highly conservative Islamic already established a $50bn infrastructure society with support from the youth popula- investment fund and, with SoftBank, a $45bn tion. For example, cinemas will soon be legal technology fund. and women have been granted the right to Neom will be owned by the PIF until its ini- drive. However, public gender mixing is still tial public offering (IPO) with Saudi Arabia’s forbidden, as is alcohol, and public execu- national oil company Aramco later in 2018, the tions continue. largest planned IPO in history. The megacity’s The crown prince hopes to catalyse the lib- listing aims to attract investments from com- eralisation process through Neom (which has panies in renewable energy, advanced manu- drawn criticism from some conservative facturing, biotechnology and entertainment, Saudis). He says he will implement “98% of the says the PIF. standards applied in similar cities, but there’s Although some high-net-worth individuals, 2% we can’t do, such as alcohol”. Whether 98% including Richard Branson, have voiced excite- will be enough to attract global talent – when ment over the project, only a few investors – Middle Eastern hubs such as Dubai have no such as SoftBank – have publicly committed such restrictions – remains to be seen. finances. The PIF says it has established commu- The megacity’s business environment will nication with a wide network of potential inves- also operate autonomously. The first independ- tors and partners. On January 30, 2018, Saudi ent special zone spanning three countries, Arabia awarded the first construction contracts Neom’s judicial system will have its own laws, to four local contractors. taxes and regulations that will be drafted by investors in accordance with international best Neom’s pitch practice. The zone will also be independent of The megacity aims to be a global hub for trade, Saudi Arabia’s existing governmental frame- innovation and knowledge by “offering unique work, excluding sovereign laws (that is, mili- opportunities and advantages to worldwide tary and foreign policy). leading investors and business owners”, Neom’s “regulatory environment will be according to its official website. Hoping to extremely business friendly, especially relating diversify the Saudi economy, Neom plans to to artificial intelligence and robotics. Getting develop nine economic sectors, including businesses to define the rules and regulations energy and water, advanced manufacturing,

February/March 2018 www.fDiIntelligence.com 87 REGIONS MIDDLE EAST & AFRICA

towns meant to house millions. However, Mr Hertog argues that Neom’s “advantage is the very high-level backing under a now much more centralised political system with fewer veto players. So politically and administratively, THE OPPORTUNITY IS TO the hurdles are lower.” The crown prince has argued that Neom is “a totally different story… DEPLOY PRODUCTS IN AN there’s commitment from the government”. For this reason, Jon Truby, director of the Centre for Law & Development at Qatar URBAN ENVIRONMENT University, is critical of the Neom plans. “It will be so costly and controlled that investors WHERE THERE ARE NO LEGACY will again be faced by exorbitantly high rents and an infrastructure that requires mainte- DEVELOPMENT CONSTRAINTS nance beyond the capability of the local work- force: [robots that will constantly need repair- ing],” he says. However, in just two years, the crown prince has ushered in greater socioeconomic and political change than any of his modern predecessors, and some people argue his and technological and digital sciences. efforts to diversify the economy are serious. While details are still to be firmed up, there Meqbel Aledan, a professor at Saudi Arabia’s will be major investment opportunities in tech, King Faisal University, says: “The commitment renewable energy and infrastructure. and passion shown by [the crown prince] Softbank’s Mr Son says of Neom: “Only 3% of towards the project is remarkable; he looks at the land of Saudi Arabia can provide more than Neom as his own dream. The number and type 50% of the electricity of the world, with today’s of investors who have visited [Saudi Arabia] solar technology.” recently is unprecedented.” Hasnain Malik, head of equity research at developing markets investment bank Exotix Consolidating power Capital, says: “For technology and infrastruc- Meanwhile, Neom’s contentious social reforms ture companies, the opportunity is to deploy may be moving too fast for the country’s con- their products in an urban environment where servative society, and reactionary forces may there are no legacy development constraints: already be gathering steam. However, the crown an urban test lab, effectively.” prince’s mild reforms have hitherto gone Saudi Arabia has promised investors they unchallenged from either bottom or top of soci- will receive financial support to develop pro- ety, and his power has become increasingly jects that “serve Neom’s future goals, since the absolute and centralised. Saudi Arabian government has classified this However, his foreign policy and the volatile project as a priority at all levels”. The website politics of the Middle East could also be barriers also says the city will encourage Saudi citizens to FDI. Over the past three years, he has engaged to invest and travel within the country. in numerous controversies, such as the war in Currently, billions of dollars are going abroad Yemen, the blockade against Qatar, the mass due to the country’s limited local investment, arrest of Saudi businessmen, and the political education and entertainment options. crisis in Lebanon. While some view this as a strong man’s defence, others could consider FDI fantasy? him as unpredictable or aggressive. Neom’s greatest challenge is its investment Although Saudi Arabia is not reliant on strategy and the capacity of the PIF to pick win- Egypt or Jordan to build Neom, the crown ners in next-generation technologies, accord- prince will need to maintain healthy relations ing to Eurasia Group’s Mr Kamel. Mr Son will be with the two countries if the megacity is to of help, but Neom will need many more sup- span three countries. Saudi Arabia will most porters. Naturally, at this early stage, finding likely need to support its partners’ construc- concrete investment will prove difficult since tion costs, thereby raising Neom’s $500bn price there is very little proof of concept. Steffen tag (which some have seen as a rather optimis- Hertog, a specialist in Middle East politics at the tic figure anyway). While nothing has been for- London School of Economics, says: “The infor- mally mentioned, there is also the possibility mation publicly available is insufficient to that , with its deep expertise in IT, may judge the feasibility of the project and [Saudi play a role in Neom. Arabia] will have to provide quite significant FDI in hand or not, Mohammed bin incentives to attract anchor investors.” Salman’s belief in Neom is reflected in the fact Neom is not the first megacity project in the that land breaking has already begun on some country. Saudi Arabia’s history of city building critical infrastructure, according to the PIF. The is poor, as shown by ’s office park and first phase of construction may be complete by the King Abdullah Economic City, two ghost 2025, if FDI dreams become reality. ■

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