US Media Report "The Line Project Under Review"
"Project Restructuring Inevitable Due to Falling Oil Prices"
NEOM States "Standard Procedure"... Dismissing Concerns
There have been reports that "The Line," a mega-scale future city development project in Saudi Arabia valued at $500 billion (approximately 696 trillion won), is now under review.
A bird's-eye view of 'The Line,' the core of the Neom City project in Saudi Arabia. Photo by Asia Economy
On the 19th (local time), U.S. economic media outlet CNBC reported that "Saudi Arabia's Public Investment Fund (PIF) has commissioned multiple consulting firms to conduct a strategic review in order to assess the feasibility of 'The Line' project, a 170-kilometer-long linear city currently being built in the NEOM region in northwestern Saudi Arabia." On the same day, Bloomberg also stated, "The outcome is drawing attention, as the review comes amid worsening fiscal conditions in Saudi Arabia, including a recent decline in international oil prices and an expanding fiscal deficit."
According to CNBC, a project official said, "Layoffs are currently underway throughout NEOM, and more realistic decisions are being made regarding the budget and implementation methods." However, the specific scope of the review has not been disclosed.
Tim Callen, a researcher at the Arab Gulf States Institute, said in an interview with CNBC, "Technical feasibility, development costs, and economic impact will be the main areas of assessment." He added, "Whether technology has truly advanced to the level envisioned by NEOM and whether development costs are excessively high have been persistent questions, and these issues have become even more pronounced due to the recent drop in oil prices."
International oil prices, which in 2022 averaged nearly $100 per barrel, have recently fallen to the low $70 range. As prices remain below Saudi Arabia's fiscal breakeven point, there is a growing consensus that a major restructuring of the project is inevitable. Researcher Callen explained, "While the NEOM City project is unlikely to be completely halted, it is highly likely that it will be scaled back or that the implementation period will be extended." Previously, according to fDi Intelligence, an investment-focused media outlet under the UK Financial Times (FT), it was reported that PIF has reduced the budget for some projects, including NEOM City, by up to 60% this year.
NEOM City, one of the core projects of "Saudi Vision 2030" led by Crown Prince Mohammed bin Salman, is centered on developing a 26,500 km² area (44 times the size of Seoul) near the Red Sea in northwestern Saudi Arabia into a low-carbon smart city. It consists of three major projects: the 170-kilometer linear city "The Line," the advanced industrial complex "Oxagon" built on the sea, and the mountain tourism complex "Trojena." The total project cost amounts to $1 trillion (1,390 trillion won).
Some have pointed out that excessive optimism and a "yes-man" culture within the organization are problems for the NEOM City project. Tarek Solomon, former president of the Saudi-American Chamber of Commerce, told the media, "A project of this scale requires adjustments based on market realities and the building of trust." However, the NEOM side drew a line regarding these reports, stating, "Strategic reviews are a standard procedure for long-term mega projects."
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