Saudi Arabia Is Betting Its Future on a Desert Megacity

RIYADH, Saudi Arabia — “Welcome to the future of Saudi Arabia,” a Saudi tour guide intoned last week as she led guests into a showroom advertising values not traditionally associated with the kingdom: gender equality, environmental sustainability, and technological innovation.

After an IMAX-style introductory video, the first stop on this “megaprojects tour” was a model of one of three new futuristic cities that Saudi Arabia is set to break ground on next year, dubbed Qiddiya. Located 25 miles from the capital, Riyadh, the city is envisioned as an entertainment megaplex with everything from indoor ski slopes to roller coasters to a zoo.

Guests on the preview tour could interact with a holographic lion or try out the mountain bike and race car simulators. Down the hall were previews of the second two cities, a Red Sea tourist resort and Neom, a tech hub that aims to have more robots than humans in its population.

The cities are part of Vision 2030, the kingdom’s ambitious plan to pivot the economy away from oil. The program was announced over a year ago, but the event, which ran from Oct. 24 to Oct. 26, was the “coming out” party — a chance for the global financial elite to see for themselves whether Crown Prince Mohammed bin Salman was, in the words of one investor, “for real.” The so-called Future Investment Initiative (FII) pulled in 3,500 attendees, including dozens of blue-chip executives. Crew members from the Saudi national airline helped guide potential investors through the hallways of the Ritz Carlton. Robot “concierges” stood outside panel rooms, playfully soliciting interaction and selfies.

The theatrics were surely meant to awe international visitors. But they played to a domestic audience as well, providing clues about the direction the kingdom is heading under Crown Prince Mohammed bin Salman.

The roster of local attendees was a who’s who of Saudi business, while every major Saudi television broadcaster and newspaper columnist churned out coverage. The message was clear to all: For three decades, the state has worked assiduously to avoid offending the conservative religious elite, stalling the trappings of modernity that have catapulted development in cities such as neighboring Dubai. This conference was meant to seal that chapter and set out a new, aspirational end point.

“Before now, the government always made a balance between the liberal people and the conservatives. They gave this side something, [that] faction another thing,” said Amal al-Hazzani, a columnist at Saudi newspaper Asharq Al-Awsat and professor at King Saud University. “They kept trying to make that balance, until Crown Prince Mohammed bin Salman came.… [H]e ended that era.”

Pinning so much symbolic and material weight on megaprojects is risky in Saudi Arabia, where massive undertakings have a history of falling short. Saudi Arabia hasn’t yet released detailed cost estimates for the cities, including where investment will come from, aside from saying that Neom will receive $500 billion “over the coming years” from public and private investors. Meanwhile, half a dozen “economic cities,” launched by the General Investment Authority in 2005 to garner private investment, have mostly floundered. One could easily rattle off a list of sectors — including health care, education, and public transport — that could more urgently use some of the billions that will be spent on these megaprojects.

But the grand ambitions of the conference may be the point: Mohammed bin Salman is signaling to Saudis that they are embarking on a momentous reform project from which there is no turning back. Saudi Arabia will need a serious shaking up to bring its economic and social structure into the 21st century.

“Seventy percent of the Saudi people are less than 30 years old, and we will not waste 30 years of our lives dealing with extremist ideas — we will destroy them today,” Mohammed bin Salman told the gathering. “We want to live a normal life.”

Many conference attendees likely didn’t realize just how revolutionary certain aspects of last week’s event were. Bankers from London to Lagos enjoyed gender-mixed coffee breaks, where women weren’t required to wear the traditional abaya. There were no intermissions for prayers, which shut down Saudi businesses for 30 minutes multiple times a day. Only a handful of speeches began with the usual Islamic prayer.

Pomp and circumstance

Saudi Arabia’s urban dreams are almost absurdly large, and Mohammed bin Salman has been intimately involved in forming them. He first pitched the idea of building completely new cities in 2015, just after his father was elevated as king, and has since signed off on details — even down to the logo designs.

Neom, the centerpiece of the mega projects, will cover more than 10,000 square miles — 10 times the size of Luxembourg. An initial press release described the city as “the safest, most efficient, most future-oriented, and best place to live and work” in the world.

A walk through the Neom preview last week offered a surreal peek at the planning. Every piece of life in Neom will be linked to artificial intelligence: roads and cars will adjust to avoid traffic, and grocery orders will be fed directly to drone delivery units. Hydroponic growers will farm produce without soil, utilizing electricity produced by solar panels.

The city aims to attract top tech talent from across the globe, incentivizing businesses to flock to Neom through preferential regulation. Social life and gender norms will be drawn from “global best practices,” a term that serves as the default answer to any question about how something in the city — whether transport or official language — will work.

“It’s all about execution,” said Samar Jamjoom, director of investment banking at Merrill Lynch in Saudi Arabia. She said Mohammed bin Salman’s personal support and the emphasis on good regulations was “very reassuring. It’s also something that we didn’t hear in the last three decades.”

Yet most analysts say Neom’s science fiction plan may be decades off, if it happens at all. No shortage of countries have tried and failed to build their own Silicon Valleys. State-led plans such as Neom often miss the organic, bottom-up tech ecosystem that breeds innovation. Meanwhile, the Gulf cities that Neom hopes to rival — Dubai, Abu Dhabi, and even Doha — have a decade-plus head start.

Critics also warn that the projects will initially do little to address many of the fundamental challenges that inspired Vision 2030, such as youth unemployment, a bloated bureaucracy, and lagging education and health systems.

“NEOM raises serious questions about how realistic such dramatic change can be in the kingdom while also drawing attention to the plethora of issues that continue to plague it,” wrote Giorgio Cafiero and Theodore Karasik, two analysts at the risk consultancy Gulf State Analytics.

What the cities can tackle in the medium term, project officials say, is keeping Saudi money within the kingdom. Today, Saudis spend $15 billion on overseas tourism each year and $12.5 billion on health care abroad. Proponents of the plan are hoping some of those dollars can be directed into Red Sea tourism and a new biotech hub in Neom, and that Saudis can be persuaded to vacation in Qiddiya rather than Dubai or Bahrain.

The three megacities are set to break ground in 2018 or 2019. This much at least is likely to happen, project consultants told Foreign Policy on the condition of anonymity because they weren’t authorized to speak to press. The first phases of construction are scheduled to be complete around 2022, though consultants said that there is no final determination of what that would include.

Taking on the Saudi bureaucracy

Building new cities gives Mohammed bin Salman the unique luxury of working from scratch — but in the existing bureaucracy, creating the Saudi Arabia he imagines will be a profoundly different chore. He will have to convince some 30 million Saudis, including roughly 1.2 million entrenched in the state bureaucracy, that change is inevitable.

The vehicle for reform in Saudi Arabia’s existing cities and towns is the recently re-drafted National Transformation Program. Each ministry has been given corporate-style Key Performance Indicator targets to redefine their work.

Teams of elite consultants and bureaucrats, some international and some from Mohammed bin Salman’s circle, have been planted in government offices to reach the targets. Each is “doing intensive studies for the policy design,” said Sumayah Fatani, a consultant and former researcher at the King Faisal Center for Research and Islamic Studies.

Ministers have been under pressure to produce tangible wins that can keep bureaucrats and businessmen on board. For example, Saudi small-business owners were delighted by a change freeing them from paying into the government insurance program on behalf of their employees, said Saud al-Mahdi, founder and CEO of Almontage Entertainment. “It was a burden in the past,” he said.

High-profile sackings and dressings-down have also changed the incentives within the bureaucracy, businessmen said. Watching corrupt ministers face charges, incompetent consultants lose their jobs, and longtime undersecretaries demoted is starting to change the work culture. Fatani says the new ethos is, “Just get it done.”

As with the megaprojects, many of the details of reforming Saudi Arabia’s bureaucracy and its economy remain unsettled. Ministries haven’t yet implemented any subsidy reform, while salary and bonus cuts implemented last fall were quickly reversed, including back payments.

Fatani says some of the planning now is about how to cushion harder changes amid good news, to keep the population on board with reform. “Saudi society forgets quickly,” she said. The ministries are “studying what do you put first — [the sequencing of] good thing, bad thing, good thing, bad thing.”

How fast is too fast?

Mohammed bin Salman’s grand plans for Saudi Arabia’s future have so far served to raise expectations. Among those roaming the halls of October’s event was a young Saudi architect named Rana Alkadi, who had just moved back after seven years working in Spain. “To be frank, I was escaping Saudi Arabia,” she said. “But what’s happening is grabbing the attention of all of us to come back,” she added.

Alkadi and others know change here has speed limits. Stephen A. Schwarzman, the chairman of the private-equity firm Blackstone Group,  described the conference mood as “a pep rally” while warning about aiming too high too fast. “How fast do you realize your dream?” he asked, while sitting onstage with Mohammed bin Salman. “That’s something that needs to be scoped out and planned and made sure that expectations are in line with what’s achievable.”

Mohammed bin Salman, meanwhile, pointed to another ticking time bomb: Saudi Arabia’s youth bulge, he said, “is a double-edged sword.” The new generation could forge an entirely new Saudi Arabia if properly empowered, he said, “but if they go the other way, they will bring destruction.”

The crown prince’s challenge now is to dream big, but not bigger than what’s possible. For now, few are complaining publicly about the changes, but Mohammed bin Salman will surely need to remain mindful of simmering conservative frustrations.

The very bureaucrats he aims to reform may also push back, quietly delaying projects, sitting on approvals, or just heading home from work early. The stagnating price of oil, skepticism from investors, or regional instability could also set progress back. Meanwhile, he has clamped down on domestic critics of his new policies.

Above all, Mohammed bin Salman’s most important task may be to avoid treading water — as so many past administrations have done. “Saudi Arabia is a rich country. We just need good administration from the country; we don’t need miracles,” said a Saudi political analyst, who requested anonymity out of fear that this tempered optimism could land him in jail. “We need at least five years of working day and night to make things better.”