October 26, 2017 / 11:31 AM / a year ago

Breakingviews - Saudi utopia plan is so bonkers it just might work

RIYADH (Reuters Breakingviews) - Mohammed bin Salman, Saudi Arabia’s crown prince, wants to build utopia from scratch. This week he unveiled his vision for NEOM, a shining city on the Red Sea where entrepreneurs will draft the rules and robots outnumber people. One day, the imagined metropolis may even become a publicly traded company.

A gas flame is seen in the desert near the Khurais oilfield, about 160 km (99 miles) from Riyadh, June 23, 2008. State oil giant Saudi Aramco is adamant the biggest new field in its plan to raise oil capacity will arrive bang on schedule in June next year. REUTERS/Ali Jarekji

While the likes of Dubai, Shanghai and Abu Dhabi have successfully gone some of the way, oil-rich Saudi has limited itself to industrial zones and financial centers – until NEOM. The megalopolis will encompass 26,500 square km, including 468 km of beachfront. It will border Jordan, link across the Red Sea to Egypt, and cost $500 billion to build.

The idea is almost bonkers, but that’s also its beauty. “The project will be the land of the future, where great minds and talents can create ground-breaking ideas and think outside the box, in a real world inspired by imagination,” according to Saudi’s Public Investment Fund, which will oversee the kingdom’s investment in NEOM.

If that’s not ambitious enough, NEOM will “without a doubt” go public, the crown prince told Reuters Breakingviews on Wednesday at the Future Investment Initiative in Riyadh. “It’s as if you float the city of New York,” he said.

Of course New York already exists. And for global investors, the crown prince’s plan requires a healthy suspension of disbelief. But in the context of Saudi Arabia’s hopes to wean its economy off hydrocarbons, nothing can be off limits. Shifting from an era in which oil riches blessed its 33 million people, nearly 60 percent of whom are under 35, to a new model requires extraordinary creativity.

Yet to succeed, Saudi will need doers at least as much as dreamers: architects, engineers and construction workers. That makes the selection of Klaus Kleinfeld as chief executive of NEOM puzzling. In April, he lost the top job at Arconic, the specialty parts maker that split from Alcoa, after inappropriate contact with an activist investor. Before moving to Alcoa in 2007, he resigned as CEO of Siemens after losing the confidence of the industrial conglomerate’s board.

That said, Kleinfeld is a consummate networker. And the crown prince will need every kind of help he can get. The choice does, however, underline the huge challenge. Defining the dream, finding the money and making it happen add up to a task far beyond any one CEO.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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