At the heart of this process is NEOM, a futuristic city located in north-west Saudi Arabia, which is considered the most daring urban experiment of the 21st century so far.
The Gulf has now entered a new era of economic aspiration characterised by projects of unprecedented scale. In the Arabian Peninsula as a whole, governments are launching futuristic cities, tourism centres, and industrial complexes worth trillions of dollars. These mega-projects are not simply envisioned as extensions of existing infrastructure but as fundamental transformations of the existing urban and economic landscape. From futuristic cities in the desert to tourism complexes near the sea, the leadership of the Gulf is trying to reimagine the very functioning of cities and economies.
At the heart of this process is NEOM, a futuristic city located in north-west Saudi Arabia, which is considered the most daring urban experiment of the 21st century so far. NEOM was launched in 2017 as part of Saudi Arabia’s Vision 2030 plan, with the goal of creating a new economic area of enormous proportions, spanning 26,500 square kilometres along the Red Sea coast. NEOM consists of different urban and industrial units, including a luxury tourism complex, a floating industrial city, as well as a linear city named “The Line” which runs on renewable energy only.
The aspirations behind such projects go far beyond the boundaries of architectural ingenuity. Gulf countries now see such projects as economic diversification tools, which can attract international investments, generate jobs, and establish new innovation centres across the world. Saudi Arabia has announced real estate and infrastructure projects worth about $1.3 trillion in recent years as part of its economic diversification strategy to reduce its reliance on oil revenues.
This transformation is part of a larger shift in strategy. Traditionally, cities in the Gulf region have developed in ways cantered on exporting energy and logistics. Today, however, policymakers are trying to create entirely new forms of city-building cantered on knowledge economies, tourism, advanced manufacturing, and green energy production. In this context, NEOM represents a conscious effort to create economic ecosystems, rather than metropolitan cities per se.
The sheer size of such developments is enormous even by global standards. The initial investment commitment for the NEOM project has been estimated at $500 billion, and this has been mainly planned to be financed by Saudi Arabia’s wealth fund vehicle, the Public Investment Fund. It has been planned as a special regulatory and economic zone with its own set of laws and its own model of governance.
However, it should be highlighted that NEOM is just part of a much larger portfolio of so-called “giga-projects.” Other projects such as Diriyah Gate, Qiddiya entertainment city, and Red Sea tourism project are also underway and are expected to be collectively valued at over $1 trillion when completed.
The projects signify a radical rethinking of urban planning in the region. Rather than expanding existing cities, governments are trying to create new economic zones from scratch. The idea is to create new urban systems that integrate residential areas, tourism facilities, research facilities, and advanced industries.
The underlying philosophy in the planning of all this can be said to be ‘future-centric urbanism’. This is where the concept of the integration of high-speed transport systems, renewable energy systems, digital technologies, and artificial intelligence systems is factored into the very fabric of the city. A good example is the linear concept in the planning of The Line in NEOM, which eliminates the need for roads and cars in the city.
The rationale for these models is that they can lead to a redefinition of urban living by reducing congestion, cutting carbon emissions, and making efficient land use strategies. However, others raise a critical eye on whether a highly centralised master planning approach can actually lead to a more sustainable community in a place characterised by extreme climate conditions and complex social conditions.
Financing structures are yet another important factor in the strategy of the Gulf countries’ mega projects. While the sovereign wealth funds are the main source of investments in Saudi Arabia and the UAE, the success of the projects in the long run depends on the participation of the private sector.
For the Saudi Arabian case, the Public Investment Fund has become the main driver of development, investing tens of billions of dollars into infrastructure and property development projects across the country. However, the role of financial institutions and international investors is becoming essential as projects reach the operational phase and generate revenue streams.
As a result, public-private partnership models are emerging as a critical tool in the allocation of financial risk, as well as the leveraging of global expertise. Export credit agencies, international banks, as well as multinational construction companies, are already involved in financing structures related to NEOM, as well as other mega-scale projects. In a specific case, export credit support from financial institutions based in Europe has been utilised to facilitate multi-billion-dollar infrastructure financing models related to the project.
These partnerships demonstrate the gradual shift of the Gulf states from state-centric infrastructure development to hybrid financing models that combine state funds and investment from the private sector. This is aimed at speeding up the development process while fostering international economic integration.
Nevertheless, the economics of mega-projects are complex and sometimes controversial in nature. Mega-projects always involve huge capital costs and long periods of construction time. For example, NEOM has been questioned repeatedly regarding its budget and time frame for completion, with estimates suggesting it could take decades for the project to be completed in its entirety.
Furthermore, the financial magnitude of such projects in a region where large-scale initiatives are the norm has sparked concerns over the sustainability of such projects. Analysts argue that the projects are heavily reliant on government support, especially during the initial stages when the projects generate minimal revenue. Some projects are reported to have been recalibrated in response to the economic environment.
However, despite all these challenges, the rationale for the strategic need for the projects in the Gulf states is still valid. This is because the development of cities has always been a catalyst for change in the economies of the countries involved.
