Saudi Arabia is seeking to issue bonds as an additional source of funding its “city of the future”, Neom, according to inside sources reported by Bloomberg.
Neom, the crown jewel of the Saudi Vision 2030, has been primarily funded the country’s Public Investment Fund (PIF), the city’s budget for this year has nor been approved yet. Earmarked to be a $1.5 trillion investment, Neom has also recently secured a 10 billion riyals (€2.51 billion) loan from a group of Saudi banks and a separate 3 billion riyals (€750 million) loan to finance Sindalah, a luxury tourism island in the Red Sea.
Through the sale of Islamic bonds, called sukuk, which would be issued in the local currency of royal, the city is looking to secure up to 5 billion more riyals (€1.25 billion). HSBC Holdings Plc and the securities units of Al Rajhi Bank and Saudi National Bank have been tasked with planning the issuance of the bonds, which could start circulating by the end of the year, according to Bloomberg.
The Saudi Vision 2030 programme is an ambitious project started by Prince Mohammed Bin Salman in an attempt to diversify the country’s economy from oil. However, the financial realities of achieving its goals are starting to show. The Line, a 170-km-long belt of skyscrapers built in the middle of the desert and one of Neom’s forefront projects, has recently been scaled back. Instead of 1.5 million residents, the Line is now hoped to house under 300,000 people by 2030 and just 2.4 km of the complex development are expected to be completed.
Another sign that the country lacks sufficient funding for the Vision came in March, when Saudi Tourism Minister Ahmed al-Khateeb announced a plan to complement the $800 billion state funding in the tourism industry with $60 billion to $80 billion in private investment by 2030.
On the other hand, other projects are reportedly unaffected. Neom’s mountain resort Trojena in particular is going ahead, as the aim is to have it up and running by 2029, in time for hosting the Asian Winter Games in 2029. A luxury island resort built in the Red Sea is also supposed to open this year.
Besides Neom, the country is developing several mega projects that are meant to completely transform Riyadh by the end of the decade. A new national airline, Riyadh Air, was also launched in March 2023, with the ambition of tripling Saudi Arabia’s air traffic to 330 million passengers by 2030 and turning the country into a regional travel hub. Moreover, tourism campaigns featuring football stars Lionel Messi and Cristiano Ronaldo have been developed to increase the international appeal of the destination. The country has been recently rumoured to even consider a partial lift of the ban on alcohol soon.
