Saudi Arabia’s $1 Trillion Mirrored City Hits A Wall — The Tourism Bet Behind Riyadh Air Just Got Harder

The centerpiece of Saudi Arabia’s Vision 2030 mega project that includes new tourist development is in trouble – and suspended until after 2030.

The Saudi sovereign wealth fund mega-region NEOM that they’re building in northwest Saudi Arabia is a collection of projects, including The Line, Oxagon industrial city, Trojena mountain resort, and Red Sea coastal tourism developments.

The Line is the insane-looking part. It’s supposed to be a 105-mile long, one-third mile tall mirrored city. It was marketed as car-free, road-free, and powered by renewable energy. And it was supposed to house 9 million people, all within a 5 minute walk of daily needs. It’s the core of the NEOM project, which is the core of Vision 2030 development.

All of NEOM was supposed to cost $500 billion. The Line component alone, though, now has an estimated cost of over $1 trillion, and maybe all-in even $8.8 trillion. It’s now delayed until after 2030 because it’s done nothing but light money on fire.

The twin mirrored skyscraper design is being reworked cut cost. Red Sea tourism destinations and the Trojena mountain resort won’t receive new investment until after 2030 either.

What Does This Mean For Riyadh Air?

Saudi Arabia hasn’t just been trying to out-Dubai Dubai with NEOM. They are currently investing in a major new airline based in Riyadh that will compete with Emirates, and aiming to fly to over 100 destinations across six continents. They’re planning for a fleet of 60 Airbus A321neo, 25 Airbus A350-1000 and 39 Boeing 787-9 aircraft.

So far they’re only flying to London, but they have a partnership with Delta Air Lines. And just as this new airline is getting off the ground,

• Saudi Arabia is cutting back its spending on grand projects, but
  
• They’re also freeing up cash so shouldn’t be as constrained from investing in the airline

It’s not yet clear what the pullback on development spending means for Riyadh Air. It was certainly meant to be bringing visitors to the new NEOM resort projects. And Mohammed bin Salman Al Saud (‘MBS’) realizes they’ve been pouring good money after bad into those in furtherance of his vision.

Riyadh Air still fits as a priority for Riyadh as a global business city, and in advance of Expo 2030 and World Cup 2034. But it relies of the free flow of funds from the Saudi Public Investment Fund, and they’re cutting back.

What Does This Tell Us About The Competence Of The Saudi State?

An ecosystem of consultants, starchitects, contractors, and advisers built up around The Line and NEOM. It was a politically untouchable idea, as MBS’s priority. It had an enormous budget and deadlines. And it had consultants like McKinsey and PwC. It was the perfect grift.

Despite the engineering issues, the project kept expanding with ever more spectacular features like a hidden marina, enormous stadiums, and suspended structures in addition to the mirrored wall. No one could ask whether any of this actually made sense.

Where Does Saudi Arabia Go From Here?

Vision 2030 is meant to diversify away from oil, building jobs and industry outside of energy, and making Saudi Arabia a tourism, logistics, and technology hub. It’s part of ‘bringing Saudi Arabia into the future’ and there’s been some cultural progress. Although far from equality, women can drive, get passports and travel abroad without male permission, and can work (over a third now do).

The Line was a huge branding investment for the country, both domestically and abroad. But 9 million people in a mirrored wall was bizarre, and it reveals cracks in the decision-making process and competence of the Saudi state, along a very specific dimension. It remains an open question whether they can convert oil cash into areas beyond energy.

They’ll now presumably focus more on projects that can deliver by Expo 2030 and World Cup 2034 as less ambitious showpieces.