Can Rome Be Built in a Day?

Oliver Herndon & Jon Pezzi

On a sandy, barren expanse of the Saudi Arabian dessert lies the foundations for history’s most ambitious mega-city project. The policy of the Crown Prince Mohammad Bin Salman is to build a 10,230-square-mile city known as Neom, along the Red Sea coast. It’s a $500 billion project to create a commercial capitol of the Middle East to rival and complement Dubai. Because the Saudi’s dwindling resource reserves and the economy’s stability is at the whim of any fluctuation of oil prices, the Saud family is making another attempt to diversify its economy. Nearly 90% of Saudi Arabia’s export revenues are from oil sales and at the current trajectory, there is no change in sight. The  Mohammad Bin Salman’s situation is not unique to his country but a circumstance resource-rich countries all over the world face, specifically those in the Persian Gulf region. Dubbed the city of the future, Neom is to be a center for international business, manufacturing, entertainment, tourism, technology and renewable energy.

There have been several previous attempts to broaden the desert kingdom’s economic spectrum; however, all failed due to varying issues and falling oil prices. This new city would be set up as a modern metropolis, antithetical to the culture of the Wahhabi Saudi conservatives who have a tight grasp on the society.

Despite a per-capita income of nearly $60,000, Saudi Arabia suffers from one of the highest Gini coefficients in the world and an enormous youth population with 50% of the population under 25. Many of the ageing youth are unemployed, making this project as partial attempt to remedy this rising issue. Because of the low-labour requirement for resource extraction, a growing population, and a decreasing oil reserve, if Saudi Arabia wants to maintain its place as a regional power it must evolve. The whole development is under the umbrella of a plan unveiled by the Crown Prince known as Vision 2030, an attempt to transform the Gulf State’s economy. Much of the Neom’s construction and planning will be funded by the Saudi Arabian’s billion-dollar sovereign wealth fund and direct foreign investment from major banks and private equity firms.

Perhaps the largest roadblock to Saudi Arabia’s development is the cultural and religious values of the country. Many prohibitions and laws are inherently contrary to the success of an international city. Without movie theatres, alcohol, religious toleration, and fair punishments for the violation of a crime, Saudi Arabia is not an ideal investment for foreign firms and tourism. These stigmas and practices are exactly what Bin Salman is hoping to address in his utopian dream. There are many possibilities that can occur. But because of the volatility of global oil prices, political and clerical discontent, and a failing precedent for these type of projects; success is in no way guaranteed.

Bloomberg Mega Project, Business Insider Saudi Oil, City Lab Mega City, Bloomberg Graphics, Big Think Design, Meob Server

  • Is this project destined to fail like its predecessors?
  • Is a project like this possible with cultural opposition like that in Saudi Arabia?
  • Is it really possible to fill all vacancies in a megacity?
  • Is there an adequate demand or will this create the demand? Does a city’s growth need to be more organic and over time?
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2 Responses to Can Rome Be Built in a Day?

  1. ahny19 says:

    The tremendous economic and cultural implications of Bin Salman’s city project are striking. Although the legal challenges within Saudi Arabia’s business environment may certainly deter foreign investors, optimistic projections for oil revenues and a billion-dollar sovereign wealth fund appear to make the Crown Prince’s commercial capitol a viable venture. There’s no doubt that Neom will encounter opposition from both political and private sectors leaders (likely from Dubai). However, I’m curious as to how Salman anticipates responding to a possible shock in oil prices. If volatility of commodities has been the plight of similar efforts in the past, is he expecting either his wealth fund or an unprecedented influx of foreign direct investment to be the difference for Neom? I’m also greatly interested in learning how the need or demand for mega-city projects are determined. Are there particular metrics such as increases in urbanization rates or educational attainments that motivate such ventures?

  2. the prof says:

    As background, with petroleum Saudi Arabia has no pricing power: it’s global share is perhaps 15% and likely to fall, so cutting output doesn’t drive up prices much. Hence the only way to preserve revenue to pay for the lifestyles of all the 2000+ princes is to pump as much as they can. That hastens the day of reckoning when they won’t have enough revenue to maintain lifestyles for even the elite. The US should not be eager to treat them as an ally and arm them to the teeth, as they will all too soon be the source of instability in the Persian Gulf.

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