Is an emergency review of project costs the beginning of the end for the boondoggle in the Saudi Arabian desert?
Neom has ordered a review of the scope and priority of projects after an emergency board meeting last week, putting in doubt hundreds of millions of dollars in contracts to companies advising Saudi Arabia on its $500bn project to build a city of the future.
Staff have yet to be paid their bonuses for 2024, despite receiving them in early March the previous year, according to two people working on the project who spoke to The Observer. While bonuses have apparently been approved by Neom’s board, late payment has fuelled concerns that Crown Prince Mohamed bin Salman’s landmark scheme is going to be redrawn, as the new management reviews contracts, allegations of corruption, cost overruns and pressure on cash.
Neom’s acting chief executive, Aiman al-Mudaifer, took the helm after the sudden departure of previous chief executive Nadhmi al-Nasr in November last year. Neom did not respond to requests for comment.
“Rumours are strong that lots more projects will be pulled in June,” said one of the sources. “MBS [Prince Mohammed] was embarrassed by the Sindalah issue. PIF [the Public Investment Fund] is looking to protect him by only funding the projects that they think are going to be successful, and funding them fully.” The Public Investment Fund, the sovereign wealth fund of Saudi Arabia, is the main shareholder in Neom.
The “Sindalah issue” refers to the opening last year of Neom’s island resort. Controversies had already begun to cloud Nasr’s reputation, including boasts that he drove workers “like slaves”, but it was the botched launch party of Sindalah that was the final straw. An unimpressed Prince Mohammed fired him two weeks later.
Neom is supposed to be the jewel in the prince’s crown; a region on the Red Sea complete with a fully renewable power system, glow-in-the-dark beaches and a ski resort due to host the 10th Asian Winter Games in 2029. But a languishing oil price has created a fiscal hole for the Saudi government, and mismanagement at Neom has taken a toll.
In one episode described to The Observer, the spoils from two years of excavating the Line – a science fiction-inspired linear city, 500m tall and 105 miles (170km) long – were dumped where a future camp was being built and had to be painstakingly removed. Last year, officials said that just a mile and half of the 105-mile structure would be completed by 2030.
For a handful of consultancies, many of which registered businesses and relocated staff to the kingdom, the outlook at Neom is bleak. McKinsey, for example, has reportedly been earning more than $130m a year on contracts at Neom – close to 0.8% of its annual revenue.
“Ultimately, from MBS’s perspective, the project can’t fail,” said a consultant working in the region. “It’s likely that another set of tenders will eventually be put out with tighter terms, but the halcyon days of ‘planning and strategy’ are over.”
Source: observer.co.uk