Saudi Arabia’s Vision 2030 plan aims to reduce the country’s dependence on oil, diversify its economy, and develop public service sectors such as health, education, infrastructure, recreation, and tourism. The biggest oil exporter in the world, Saudi Arabia, has been facing a big hole in its budget due to the drop in oil revenues.
Saudi Arabia is facing three major problems: less profit from oil which forms 46% of its GDP, slowing oil demand, and the rise of renewable energy. By 2050, when the oil price drops below 50 a barrel, it will no longer be viable for Saudi Arabia to sustain on oil. The country’s growing domestic economic indicators show that although 65% of its population is under the age of 30, 63% of its population under 30 is unemployed. The country needs a diversification project that can make it economically viable in the future and will give future opportunities to the citizens of Saudi Arabia.
The 500 billion dollar Mega City project is part of efforts to free the Kingdom from its dependence on oil. The project was announced by Saudi crown prince Muhammad Bin Salman on the 10th of January 2021. The project is part of the Kingdom’s Vision 2030 plan. The project is planned to be 105 miles (170 kilometres) long and will be called “The Line” which people can live and work in without ever leaving. The futuristic megacity will feature two massive, mirror-encased skyscrapers that extend over 170 kilometres of desert and mountain terrain, ultimately housing nine million people. The project has consistently raised eyebrows for proposed flourishes like flying taxis and robot maids, even as architects and economists have questioned its feasibility. The city will stretch from the Red Sea to the city of Tabuk and will only be 200 meters wide but 170km long and 500 meters above sea level. The city will be built on a footprint of just 34 sq km. The city will have no roads, no cars, no emissions, and will run on 100% renewable energy sources. The city will produce over 600,000 tons of sustainable food to help Saudi achieve self-sufficiency with food. The city will lie along Saudi Arabia’s Red Sea coastline adjacent to the beautiful views of the Gulf of Aqaba and near the Swiss Canal where Maritime trade routes exist. The location is valuable because as of 2021, approximately 12% of the entire global trade passed through the Swiss canal and this represents 30% of all Global container traffic. The location falls at the centre of three continents which are Asia, Europe, and Africa. The city is located in such a strategic location that it can be reached by an 8-hour flight by 70% of the world’s population. This makes it the perfect location to build an air transhipment hub. As the oil price drops further and aviation fuel becomes cheaper, air cargo will become cheaper. If they build a high-grade facility to board and manage air traffic, it’s going to be a very solid stream of income for Saudi Arabia. The Neom Bay airport has already been opened up. The topography and climatic characteristics of the new home area have a unique blend of pristine nature, dramatic mountain backdrops which are covered with snow during winter, an uninterrupted coastline with untouched beaches and coral reefs, several spectacular islands, peaceful deserts, mild temperatures, Red Sea breezes, and above all, beautiful views across the Gulf of Aqaba and the Red Sea. This makes ‘The Line City’ one of the most valuable tourist destinations in the world provided the tourism ecosystem is set up. The city’s goal is to have zero cars in the city and all essential daily needs can be met within five minutes of walking from any corner of the city, which will completely reduce the dependency on transport. The city transport system will be seamlessly integrated with artificial intelligence.
The Trojena project will be a year-round tourism destination with a man-made freshwater lake. Trojena will have a natural reserve, hiking roots, mountain hiking trails, and even water sports that will take place on this man-made freshwater lake. The project is all about entertainment and includes a Six Flags theme park, a golf course, an arts complex, and even one of the largest water theme parks in the world.
The Jeddah Tower is coming up, which will be the world’s tallest building that’s going to be taller than Burj Khalifa. By 2030, Saudi Arabia hopes to attract 17 million visitors annually. To accommodate these tourists and other ultra-rich people, there are some massive projects like the Red Sea project that will comprise 50 resorts offering up to 8,000 hotel rooms and more than 1,000 residential properties across 22 islands and six inland sites. This entire project will also feature mountain canyons, dormant volcanoes, and ancient cultural heritage sites. In total, it is expected to generate 22 billion reals or 5.85 billion dollars of revenue annually by 2030 and 464 billion Rials or 123 billion dollars in cumulative revenue throughout its construction cycle and its 10 years of steady operation by 2040. On top of that, it is also expected to support 70,000 jobs by 2040.
The Amala project will add 2,500 hotels and 700 private residential villas, along with a retail area featuring 200 outlets. Multiple projects are being undertaken to create employment and diversify the Southeast economy to prevent itself from sinking. The final element of Neom City is business and the vision of turning Neom into a world-class business hub.
In simple words, just like in Dubai, businesses will be given tax rebates so that they can set up their hubs in Neom. 10 years down the line, when Saudi Arabia charges them taxes, Saudi Arabia can make money out of corporate taxes. If you want to know more about investments and investment opportunities in Saudi Arabia, you can visit the Saudi Arabian General Investment Authority website.
Unfortunately, things are not so good for Saudi Arabia. Firstly, the website very boldly says that it’s going to have 100% renewable energy sources powering the entire city and it will also be food-sufficient. But the sad fact is that Saudi Arabia, as of 2020, imported 80% of its food from 157 countries. In fact, Saudi is so far away from food self-sufficiency that the Saudi government is now buying and leasing lands in other countries, and they’re also buying agricultural companies from all across the world just so that they can import food from those locations and have food security in Saudi Arabia. This is because of the massive water shortage problem that Saudi has. And this water shortage is again the second point of scepticism. There are only 18 countries in the world that do not have rivers, and most of these countries are small island countries. But Saudi Arabia is so huge that it’s almost 60% of the size of India, but even then, Saudi Arabia literally does not have a single river at all. Saudi Arabia runs on two fluids, water and oil. Overuse, demographic, and economic pressure could push Saudi Arabia’s water supply to its limit. The Middle East is rich in oil reserves, providing a huge amount of the world’s energy, but although it has an abundance of hydrocarbons, it lacks water.
The problem with the desalination process is that it is extremely toxic and requires a lot of oil, which leads to a lot of carbon emissions, which is against the very principles of Neom City. Currently, Saudi Arabia’s desalination plants produce about 31.5 million cubic meters of contaminated water each day. That volume of liquid is equivalent to about 20 million barrels of oil per day, and most of this is pumped back into the ocean, which again leads to massive pollution. Saudi Arabia is also classified as one of the most water-scarce nations on the planet, and you’ll be shocked to know that the absolute water scarcity level is said to be 500 cubic meters per capita, but Saudi Arabia only has 89.5 cubic meters per capita per year. So, let alone food sufficiency, how will Neom achieve water sufficiency using clean methods? That itself is a big, big question. And while most people think desalination can be done using renewable energy, the harsh truth is that as of now, it’s extremely difficult and almost impossible. Lastly, while Saudi aims for 15% of the electricity to be generated with renewable energy by 2030, only about 0.1% of electricity was generated this way in 2019. Beyond 2040, we’ll be seeing the rise of something called a carbon powder tax, which means if you are emitting carbon emissions beyond a certain limit, then whatever goods or services you are going to offer in the market will incur a carbon tax. So, by default, due to carbon emissions, your product and service will become extremely costly in the international market. No company or investment fund would like to invest in a place that cannot grow green. This is the reason why people say Saudi claims are not backed up by a practical plan of action, and 500 billion dollars of investment might just be a distant dream.
On top of that, another looming threat for Saudi Arabia is its debt problem. You see, as the world’s largest oil producer, Saudi Arabia traditionally has had no need to borrow money at all. But since 2015, as the oil prices dropped below the break-even point, you will see that Saudi Arabia has been accumulating more and more debt. And it’s only after COVID recovery and the Russia-Ukraine war that Saudi’s debt-to-GDP ratio has actually started dropping down. And like I said, this is because of the increase in oil prices. On top of that, if you look at their foreign reserves, they have depleted by a massive margin after the oil prices went down. This is how sensitive the Saudi economy is. So, if trillions of dollars are needed to fund the Vision 2030 projects, and if any of them go wrong, it’s going to cost Saudi both money and reputation, both of which they cannot afford to play with as the world becomes oil-free.
Saudi Arabia’s Crown Prince Mohammed bin Salman has been trying to transform the hardline kingdom into an open society that empowers citizens and lures investors. He has been trying to make Saudi Arabia more attractive to tourists and investors by relaxing some of the country’s strict social rules. He has been trying to return the country to “moderate Islam”. He has been amending many radical practices of Islam in Saudi Arabia. He has been trying to contain Iranian influence while attempting to establish Saudi dominance in the region. He has been trying to cut back the bureaucracy and restrictive legislation that has strangled the Saudi private sector. He has been trying to revitalize the kingdom’s economy beyond oil. He has been allowing movie theatres and live music. He has been lifting the ban on women driving themselves in the country.
So, when next time you see any reform in the practices of strict religious adherence of Saudi Arabia, don’t relate it to the liberalism of the Prince. Being ‘Open To All’ is Saudi’s compulsion to protect its own existence in an Oil-Free World.
