Insights: Where does Saudi’s $500bn NEOM stand today?
Before AMEinfo attempts to answer that, what we do know is that Saudi King Salman has on Monday taken up post on the grounds of NEOM, for some rest and recreation, according to the Saudi Press Agency.
Where the king is staying is anyone’s guess, but the only possible locations fitting the Saudi sovereign are the castles that Saudi Crown prince Mohammed bin Salman had commissioned to build on NEOM ahead of full-fledged infrastructure development that would take place within a complete master plan and vision.
NEOM is the $500 billion business zone and tech city of the future and in February 2018, sources told Reuters that the government had asked local construction companies to build five palaces for the king, crown prince and other senior royals on the Red Sea coast about 150 km (95 miles) west of the city of Tabuk.
“A design document seen by Reuters shows opulent buildings with modern and traditional Moroccan-style architecture featuring Islamic designs and colorful ceramic tiles. The complex of palaces is set to include helipads, a marina, and a golf course,” said Reuters.
“At least some of the palaces are believed to have been completed in a matter of months, at an undisclosed cost.”
Two Saudi cement makers are churning out production to cash in on the birth of NEOM, according to data compiled by Bloomberg.
Tabuk Cement and Hail Cement, both located in the desert kingdom’s northern region, have increased output for the six months ending in June, surging 20% and 55%, respectively, year on year.
On Wednesday, August 1st, NEOM will go under new management but many questions remain unanswered as to how to steer investment interest towards a city that will take no less than 30 years to build.
Saudi Crown Prince Mohammed announced plans for the 26,500 sqkm futuristic high-tech hub during the Future Investment Initiative conference in Riyadh, in October 2017, as part of reforms aimed at creating jobs, reducing Saudi dependence on oil, diversifying its economy towards industries such as mining, advanced manufacturing and tourism while encouraging foreign direct investment (FDI).
In November 2017, Bloomberg reported that Japan’s SoftBank plans to deploy up to $15 billion in NEOM, but since then, concrete business ventures have not yet been announced, though it is a project based on public private partnership (P3) principles.
Saudi Arabia replaced the first CEO of NEOM, Klaus Kleinfeld, less than a year after the unveiling of the venture, with Nadhmi al-Nasr, a member of NEOM’s founding board and a veteran of state oil giant Saudi Aramco, who will take over from Kleinfeld from August 1, according to government statements.
CNBC reported that NEOM which will link Saudi, Egypt, and Jordan and is envisaged as a futuristic hub for both industry and citizens, aims to embrace digital technologies and services to make the city a major commercial location in the Middle East.
NEOM’s Chief Executive Klaus Kleinfeld said earlier this year that the project was attracting massive interest from foreign investors.
“The investment case for NEOM is actually very easy to make because we’ve got so many things going for us,” he said, adding that the interest in partnering with Saudi Arabia in the creation of NEOM was “overwhelming.”
“We’ve had a huge amount of interest and we’re talking to a lot of companies that are at the forefront of technologies wanting to partner with us and try out things in NEOM… On the technological side, a lot of people look at it as a place where they think they can try a lot of things out.”
In a bid to remove bureaucratic and legislative obstacles that could deter businesses, Kleinfeld said the crown prince had specifically instructed that regulations be written in the most business-friendly and future-orientated way as possible.
The project is estimated to take between 30 to 50 years to complete, however, with the first phase due by 2025.
PIF’s Aramco headache
Outside of Japan’s Softbank, officials hope a privatization program, including the sale of 5% of oil giant Saudi Aramco, will raise $300 billion to help fund the creation of NEOM, and that more money will be invested by the private sector.
NEOM is designed to receive backing by more than $500 billion from the Public Investment Fund (PIF) and local and international investors.
PIF, central to the government’s effort to diversify the economy away from oil, hopes to control more than $2 trillion in assets by 2030.
The fund was set up in 1971 to support projects of strategic significance to the Saudi economy and holds about $150 billion of assets in listed Saudi companies, including stakes in Saudi Basic Industries Corp., the world’s second-biggest chemicals manufacturer; Saudi Telecom Co.; and National Commercial Bank, the kingdom’s largest lender by assets. It currently has assets of about $230 billion.
In 2017, the PIF announced plans to build NEOM on the Red Sea, invest as much as $45 billion in SoftBank, set up a $1.1 billion fund to support small- and medium-sized enterprises, embark on a $4.8 billion project to redevelop the Jeddah waterfront on the Red Sea and put $20 billion into a U.S infrastructure fund managed by Blackstone Group LP.
More recently the fund has been said to be buying a $400 million stake in Endeavor, a major Hollywood talent, and event manager.
Of course its role in the planned IPO of Aramco was to provide the fund with a new stream of money to strike additional deals, and provide part or all of $100bn from the sale of 5% of Aramco in a public or private listing, but the IPO has been indefinitely postponed from its 2018 plans.
New man in charge of NEOM
Nadhmi al-Nasr is the executive vice president for administration and finance at King Abdullah University of Science and Technology, a position he has held since 2008, said Arab News.
Al-Nasr was most recently appointed the interim president for King Abdullah University of Science and Technology (KAUST), had worked on developing the strategy and development of NEOM Bay, one of the initial stages of NEOM megacity.
His new CEO responsibilities will include furthering the strategic development, major initiatives, and business plans for NEOM’s core economic sectors.
New assignment for former NEOM CEO
Bloomberg said Klaus Kleinfeld, who ran Siemens AG and Arconic Inc., will take a new role advising Saudi Arabia’s Crown Prince on his reform plans, leaving his current position as NEOM CEO.
The change is effective Aug. 1 and Kleinfeld will retain a role as a board member at NEOM.
Kleinfeld “will take over wider responsibilities to enhance the economic, technological and financial development of Saudi Arabia,” an official Saudi statement says.
According to the Arab Weekly, Kleinfeld is a prominent businessman who began working for Siemens in 1987 and was promoted to head the company’s projects division within a few years and led restructuring processes that turned to profits in Siemens and later at US aluminum company Alcoa as COO and CEO.
Kleinfeld was appointed CEO of NEOM in October 2017 but had begun groundwork the project in June 2017, having put together a team of project developers, according to the Arab Weekly.
Kleinfeld was instrumental in strengthening ties with leading investors, scientists, universities, developers, media and other potential partners.
NEOM free of people?
NEOM will follow an earth-friendly system with robots performing functions such as security, and it will run on wind and solar power.
The Internet of Things (IoT) enabled devices will feature where there will be all-green transport systems, advanced manufacturing, passenger drones, self-learning traffic systems, solar-powered urban farms and the buildings will have fresh, clean air, according to Forbes.
The future of living is a fully-automated megacity run on artificial intelligence (AI) where there will be more robots than people, so residents will be freed of inconveniences to spend time on what matters to them.
By 2029, it’s estimated AI will surpass human intelligence and may act in its own interest and by 2049, it’s supposed to be a billion times smarter than people, a time when Neom will be completed.
The late Stephen Hawking warned that AI could replace the human race. What would keep it from doing just that in NEOM?