Saudi Arabia plans to create an $80-billion investment fund to help develop the megaproject NEOM for a clean-energy living area in the northwest of the country as announced by its de-facto leader Mohammed bin Salman. The fund will invest in companies that agree to operate in NEOM, the kingdom's most ambitious project aimed at diversifying from the oil economy.
The first phase of the project is expected to cost $319bn, half of which will come from the country’s Public Investment Fund. Bin Salman funding for the scheme would be also be raised through a flotation expected in 2024. Neom, announced in 2017 as part of Saudi Vision 2030, is a 26,500 sq km development along the Red Sea with several zones including industry and tourism. It has been said it will run entirely on renewable energy.
Saudi Arabia also plans an initial public offering (IPO) for NEOM during 2024 to finance part of the enormous costs for building a mega clean-energy city on a plot of land the size of Belgium. The Crown Prince hopes that NEOM will eventually become self-sufficient and have a 13% to 14% return on investment. "NEOM will add a $266 billion to the Saudi stock market value" the Prince added.
Why it matters
Announced in 2017, Neom is Prince Mohammed’s plan to turn an expanse of desert the size of Belgium into a high-tech region with a linear metropolis, a ski resort and an industrial city that partially floats on water. He’s billed it as a testbed for new technologies that could revolutionize urban life as well as a way to attract foreign investment and diversify Saudi Arabia’s oil-dependent economy.
