In October of 2017, many observers expressed their lack of optimism after the Saudi Crown Prince Mohammed bin Salman proposed the idea of “NEOM” project. Observers' lack of optimism was due to the economic crises that Saudi Arabia is suffering from in various sectors, which affected the oil prices, causing a deficit in its annual budget, in addition to the flight cancellations for Umrah and Hajj due to the spread of the Coronavirus that struck the whole world. The budget for this project is about $ 500 billion.
The assassination of the Saudi journalist Jamal Khashoggi, in his country's consulate in Istanbul put great pressure on foreign investors, who had previously declared their willingness to invest in the project with their money. However, the investors reconsidered the idea, as they could not find guarantees for the success of the project, given policies of the kingdom and the reckless actions of the crown prince.
The investors considered the idea of NEOM project illusionary, similar to that of Sisi’s new Suez Canal, which negatively affects the value of the Egyptian pound.
Media reports revealed that the Saudi government notified the Egyptian counterpart to stop working on the NEOM project, indicating the seriousness of Saudi Arabia’s financial crisis.
According to reports, the Kingdom decided to pause working on the project and it did not specify a time to resume work on it. The launching of these media reports coincided with the attacks on ARAMCO facilities, which led to the disruption of more than 50% of Saudi oil production at that time.
The illusionist promises the dreamers
When the Saudi Crown Prince proposed the NEOM project, he spoke to a crowd of investors who attended the launch of the project in Riyadh: “Only dreamers are welcome to join,” adding “this place is not for traditional people or companies.”.
The Eurasia Group for consultations stated, “The initiative is more ambitious than it should be, and it has enormous risks in terms of implementation that would not make it able to deal effectively with employment challenges.” The group added, “Saudi Arabia's ongoing presentation of new investment initiatives and plans ‘gives the impression of a dynamic government; however the government is unable to implement several ambitious programs at the same time.”
Meanwhile, economists warned of the negative impacts of these projects, as it would be a great financing burden for the Saudi government, which is facing a large deficit in its budget amid non-oil economic growth.
The announcement of the Saudi Council of Economic and Development Affairs -headed by Mohammed bin Salman- to stop contracting for projects amounting to $ 266.6 billion, a year before the promotion for the “NEOM” project, raised the concerns of many investors, who became reluctant to invest their money in projects that do not have a clear vision. According to the Saudi Press Agency, the council justified this by saying “Contracts have been put on hold for projects where the expenditure exceeds revenue, and for projects that do not contribute to the economic development or improving services provided to citizens’.
Putting projects on hold is an ordinary thing in KSA
Stopping the implementation of ambitious projects is a usual thing for the Saudi government. The NEOM project, which was set to start in 2025, and expected to be finished within 30-50 years, stopped only two years since it was announced, like many other projects.
In 2005, the Saudi government launched a project of four economic cities, at a cost estimated at 455 billion riyals. These cities are King Abdullah Economic City in Makkah Al-Mukarramah, Prince Abdulaziz bin Mousaed Economic City in Hail, Knowledge City in Medina, in addition to Jazan Economic City.
The establishing of King Abdullah Economic City costed about 375 billion riyals, and it aimed to place the Kingdom among the top 10 attractive countries for investment and competitiveness, however despite the passage of more than 14 years, only 15% of the city was implemented due to the decline in oil prices.
Suspending work on NEOM project is an indication of economic crisis due to the decline in oil prices in the kingdom of Saudi Arabia. It also reflects the great financial loss Saudi treasury due to the money spent on the war in Yemen, in addition to the Khashoggi assassination case, which exposed an unprecedented deterioration in the human rights file, while Bin Salman spends on buying palaces and luxury boats, holding parties and hosting stars from everywhere, without supervision or accountability.
