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Jeddah - Yasmine El Tohamy - RIYADH: As NEOM’s The Line designs have been revealed, the focus is now shifting to funding the development.
“The planned funding of NEOM’s ambitious The Line project is also on a truly epic scale,” according to London-based economist and former King Fahd University of Petroleum and Minerals Prof. Mohamed Ramady.
The crown prince’s bold proposals aptly underscore what NEOM is all about, that all of humanity, not only Saudi Arabia will benefit from.
Mohamed Ramady, London-based economist.
“It will not be an easy task as global investors will have to be satisfied with the different NEOM project viabilities, execution timescales and acceptable rates of return,” he told Arab News.
Investors will take into account the premium pricing for such new ventures and risks, future inflationary cost increases as well as higher interest rates, he added.
The project’s masterminds are already aware of the challenges and what is needed to bring in investors.
Talking to reporters on July 25, Saudi Crown Prince Mohammed bin Salman revealed investments for NEOM’s first phase could reach SR1.2 trillion by 2030.
He also acknowledged that NEOM’s capital will come from sovereign wealth funds, initial public offering, and international private investors, adding this will be the main challenge to overcome in the next two years.
The Crown Prince also made clear the project will depend on government support until 2030 with an additional SR200 to SR300 billion in state funding, in addition to the investments the Public Investment Fund will put in the project.
Work on the internal rate of return is still going on, he said, adding it will be between 9 and 16 percent.
“The Crown Prince noted that eventually the source of funding will be from private sector and IPO proceeds of the PIF entities, which will also help Saudi stock market to achieve a global dominance, with SR5 trillion in new IPO proceeds from NEOM surpassing the mega Aramco IPO,” Ramady added.
In addition, Ramady said that international contractors might participate in NEOM on a BOT basis — build, operate and transfer model — while hedge funds and other sovereign wealth funds will be key funding partners, “especially those with long-term Saudi risk appetite and confidence in the Kingdom's non-oil economic transformation.”
“Indeed, nearly one in five Saudis would like to live in NEOM,” he said.
Faisal Durrani, partner and head of Middle East Research at Knight Frank
Yet there is optimism building around the project.
Faisal Durrani, partner and head of Middle East Research at Knight Frank, told Arab News that attracting this level of investment will rapidly unlock NEOM’s development schedule.
“The immense project has captured the hearts and minds of Saudi investors who are patiently waiting to be part of history. Indeed, nearly one in five Saudis would like to live in NEOM,” he said.
“The bold vision of Saudi is unfolding rapidly and plans for NEOM’s multi-billion dollar IPO will help to cement the Kingdom’s spectacular vision in the minds of the global investment community,” added Durrani.
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