Can Rome Be Built in a Day?

Oliver Herndon & Jon Pezzi

On a sandy, barren expanse of the Saudi Arabian dessert lies the foundations for history’s most ambitious mega-city project. The policy of the Crown Prince Mohammad Bin Salman is to build a 10,230-square-mile city known as Neom, along the Red Sea coast. It’s a $500 billion project to create a commercial capitol of the Middle East to rival and complement Dubai. Because the Saudi’s dwindling resource reserves and the economy’s stability is at the whim of any fluctuation of oil prices, the Saud family is making another attempt to diversify its economy. Nearly 90% of Saudi Arabia’s export revenues are from oil sales and at the current trajectory, there is no change in sight. The  Mohammad Bin Salman’s situation is not unique to his country but a circumstance resource-rich countries all over the world face, specifically those in the Persian Gulf region. Dubbed the city of the future, Neom is to be a center for international business, manufacturing, entertainment, tourism, technology and renewable energy.

There have been several previous attempts to broaden the desert kingdom’s economic spectrum; however, all failed due to varying issues and falling oil prices. This new city would be set up as a modern metropolis, antithetical to the culture of the Wahhabi Saudi conservatives who have a tight grasp on the society.

Despite a per-capita income of nearly $60,000, Saudi Arabia suffers from one of the highest Gini coefficients in the world and an enormous youth population with 50% of the population under 25. Many of the ageing youth are unemployed, making this project as partial attempt to remedy this rising issue. Because of the low-labour requirement for resource extraction, a growing population, and a decreasing oil reserve, if Saudi Arabia wants to maintain its place as a regional power it must evolve. The whole development is under the umbrella of a plan unveiled by the Crown Prince known as Vision 2030, an attempt to transform the Gulf State’s economy. Much of the Neom’s construction and planning will be funded by the Saudi Arabian’s billion-dollar sovereign wealth fund and direct foreign investment from major banks and private equity firms.

Perhaps the largest roadblock to Saudi Arabia’s development is the cultural and religious values of the country. Many prohibitions and laws are inherently contrary to the success of an international city. Without movie theatres, alcohol, religious toleration, and fair punishments for the violation of a crime, Saudi Arabia is not an ideal investment for foreign firms and tourism. These stigmas and practices are exactly what Bin Salman is hoping to address in his utopian dream. There are many possibilities that can occur. But because of the volatility of global oil prices, political and clerical discontent, and a failing precedent for these type of projects; success is in no way guaranteed.

Bloomberg Mega Project, Business Insider Saudi Oil, City Lab Mega City, Bloomberg Graphics, Big Think Design, Meob Server

  • Is this project destined to fail like its predecessors?
  • Is a project like this possible with cultural opposition like that in Saudi Arabia?
  • Is it really possible to fill all vacancies in a megacity?
  • Is there an adequate demand or will this create the demand? Does a city’s growth need to be more organic and over time?
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11 Responses to Can Rome Be Built in a Day?

  1. ahny19 says:

    The tremendous economic and cultural implications of Bin Salman’s city project are striking. Although the legal challenges within Saudi Arabia’s business environment may certainly deter foreign investors, optimistic projections for oil revenues and a billion-dollar sovereign wealth fund appear to make the Crown Prince’s commercial capitol a viable venture. There’s no doubt that Neom will encounter opposition from both political and private sectors leaders (likely from Dubai). However, I’m curious as to how Salman anticipates responding to a possible shock in oil prices. If volatility of commodities has been the plight of similar efforts in the past, is he expecting either his wealth fund or an unprecedented influx of foreign direct investment to be the difference for Neom? I’m also greatly interested in learning how the need or demand for mega-city projects are determined. Are there particular metrics such as increases in urbanization rates or educational attainments that motivate such ventures?

  2. the prof says:

    As background, with petroleum Saudi Arabia has no pricing power: it’s global share is perhaps 15% and likely to fall, so cutting output doesn’t drive up prices much. Hence the only way to preserve revenue to pay for the lifestyles of all the 2000+ princes is to pump as much as they can. That hastens the day of reckoning when they won’t have enough revenue to maintain lifestyles for even the elite. The US should not be eager to treat them as an ally and arm them to the teeth, as they will all too soon be the source of instability in the Persian Gulf.

  3. chase wonderlic says:

    In response to the professor’s comment, I wonder whether support for Saudi futures should take the form of social as opposed to economic programming. Given the looming collapse of the petrol supply and the elite that controls it, the Saudi nation needs a plan that will stabilize conditions for the people who will watch the aristocracy crumble. Rather than empower the country with strategies of economic diversification, I would advocate for humanitarian programs to set up shop as the people await a socio-political meltdown. That way, U.S. foreign policy can at least contain the chaos of yet another Middle Eastern country in chaos.

  4. John Gaugin-Rosenthal says:

    Mohammed bin Salman seems to be advertising his mega-city on the platform of “cultural revolution,” indicating that he seeks to crumble the region’s political and cultural rigidity. It will likely prove to be effective among the young population since, as the world becomes more closely connected via technology/social media, they are probably slowly falling to the influence of the millennial stereotype and are thus more accepting of different values. The economy is extremely volatile, but if building a mega-city isn’t a viable solution, what is? They aren’t endowed with many resources as their territory is barren (as Prof hinted, this may entice territory take-overs), and even attempting to establish a lucrative secondary sector will prove to be costly due to transportation costs of input materials…etc. Another solution may be to take advantage of ecommerce and other international tertiary sector activities. This may require enhancing human capital levels and encouraging entrepreneurship, but what of the poor?

  5. mesisklism19 says:

    The rise of Smart Cities in the middle east is a pretty incredible and sustainable prospect, which would have been a good Idea to begin city planning some 40 years ago. Unfortunately, mismanagement of resources and unstable oil markets leave people skeptical at the Saudi government’s ability to save enough money for long-term projects. Crown princes spend and spend, living luxurious lives off their oil reserves. In short, a lifestyle change away from abundance and toward frugality among Saudi magnates is necessary for real city-building

  6. reamest18 says:

    Mohammed bin Salman at the surface appears to be one of the most progressive Crown Princes in recent memory. Under his rule, Saudi Arabia has begun to allow women to drive. Additonally, he is behind the push to sell part of Saudi ARAMCO, the state-owned, multi-billionaire dollar oil company. The reason for relinquishing part of the state’s control is to make the economy more open to private investment. It is a sign of good faith that the government is committed to a more open economy. However, perhaps Mohammed bin Salman is just trying to trick the people and world into believing Saui Arabia is beginning to change its attitudes towards policy and economics. It should not be forgotten that many princes had their assets freized while they were held prisoner in a Ritz Carlton in Saudi Arabia. One even died while in custody due to what appeared to be abuse. So how open is Saudi Arabia really to becoming more democratic?

  7. Chris DuPont says:

    This development to me seems quite foreign. It’s pretty remarkable to learn that Saudi Arabia is planning on creating a city straight out of the ground for an incredible price and in a remarkably short amount of time. It sounds as though this project has many benefits for the country as a whole and will greatly stimulate economic growth and activity, not to mention provide an incredible amount of new job opportunities for its citizens.

  8. aidanchandless says:

    The current Crown Prince seems to consider that making sure the future of Saudi Arabia is prosperous is more important than maintaining traditional Saudi customs. This is great news for Saudis and the world as a whole. Saudi Arabia is one of the wealthiest countries in the world with one of the biggest oil reserves. If the Crown Prince continues to move Saudi Arabia in the direction its moving now, they may start to become a global power. With the extreme wealth brought into the country through oil exports and the plans for futuristic business paradise cities, Saudi Arabia may become a popular destination for international business.

  9. Banks Pflager says:

    The idea of a mega-city seems as though it would be a great project for Saudi-Arabia. The increase of international business will provide jobs and opportunities for income for the young people that are currently unemployed. A big city will also expand the economy as it seems to be focused specifically on petroleum. With a major city and international trade there is opportunity for more industries to rise. This will ultimately increase GDP and help employment ratings. Unfortunately, a week culture and poor institutions for the citizens will halt this expansion.

    • the prof says:

      Given the long history of “Dutch Disease” and government handouts is it realistic to think the government can convince large numbers of young Saudi men to drive bulldozers and pick up nail guns?

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