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Reports suggest that the project’s projected costs could escalate up to $8.8 trillion by 2080, raising concerns about its feasibility and financial sustainability, against $500 billion projected initially.
Launched in 2017 by Crown Prince Mohammed bin Salman, Neom was designed to be a technological utopia featuring innovations like flying cars and robot dinosaurs, apart from artificial ski resort and a floating business district.
Saudi Arabia’s ambitious Neom project, initially envisioned as a $500-billion futuristic groundbreaking megacity to diversify the nation’s economy beyond oil, is now confronting significant financial and operational challenges. Recent reports suggest that the project’s projected costs could escalate up to $8.8 trillion by 2080, raising concerns about its feasibility and financial sustainability.
Neom: The Cost Overrun
Launched in 2017 by Crown Prince Mohammed bin Salman, Neom was designed to be a technological utopia featuring innovations like flying cars and robot dinosaurs, apart from artificial ski resort and a floating business district. Initially, it was projected to be a $500-billion project. However, the project has been plagued by soaring costs, unrealistic projections, and poor execution. According to the Wall Street Journal, the estimated cost has skyrocketed to $8.8 billion, which is around 25 times Saudi Arabia’s annual budget.
So far, the kingdom has invested around $50 billion. However, the progress on the project has been slow. Also, the first phase alone would require $370 billion.
According to the report, an internal audit revealed financial manipulations and overly optimistic assumptions, partly driven by consulting firm McKinsey & Co.
Management Turmoil and Execution Delays
The project’s leadership has also faced instability. Nadhmi Al-Nasr, who led Neom since 2018, was dismissed amid budget and scheduling issues, as well as criticism for his management style, according to The Times UK. His replacement, Aimen Al-Mudaifer, previously headed local real estate at the Public Investment Fund, indicating a strategic shift to address these challenges.
Scaling Back Ambitions
Financial constraints have led to a reassessment of Neom’s scope. The Line, a flagship component of Neom, was initially planned to accommodate 9 million residents by 2030. However, according to a report by news agency Bloomberg in April last year, projections have been reduced to fewer than 300,000 residents.
Labour and Human Rights Concerns
Beyond financial issues, Neom has been criticised for labor conditions and human rights violations. Reports indicate that thousands of people have been forcibly relocated to make way for the project, with villages razed and local tribes protesting against their expulsion.
Though the project has become a financial sinkhole, consulting giant McKinsey & Company has emerged as one of the biggest beneficiary earning more than $130 million per year. Despite some controversy surround its role, given the firm’s involvement in both the planning and validation of some of the project’s financial projections, McKinsey denies any role in financial manipulation and says it follows “strict protocols to prevent conflicts of interest”.
