KAEC vs. NEOM: Inside the Development War Between Saudi Arabia's Sibling New Cities
As one of the most conservative countries on earth takes on the 21st century, a pair of government-initiated new cities are among its most groundbreaking and ambitious investments. With different histories and emerging trajectories, KAEC and NEOM are blazing the trail in the opportunities and pitfalls of cutting-edge innovation at the urban frontier.
Prologue: Murmurs in the Desert
50 miles from Jeddah on the Red Sea Coast of Saudi Arabia, the quiet hum of buldozers has been the backdrop to the beachfront experience for the better part of a decade now. Charting the distant streets of the future King Abdullah Economic City (KAEC), they zigzag new paths through the barren desert, towing a steady baseline against the chorus of waves sloshing against the sandy coast.
As they do so, the desert wind blasts a sandpapery air while the sun beats down through a cloudless sky, its rays sparkling against turquoise water and illuminating the land with the searing burn of 110-degree heat. In the water inch along a dozen container ships, waiting patiently their turn to dock amid a new and colorful erector set barely visible amid the sandy haze a mile or two up the coast – the King Abdullah Port, slowly becoming one of the largest in the world.
A mile downstream, here at the zenith is a small collection of buildings where a handful of guests are piling out of a car to check into a modern high-rise hotel that seems lost in the desert wilderness. Some wear suits, some traditional Saudi dishdashas with the identifiably Saudi checkered headscarves. In a few hours they will dine in a rooftop lounge with expansive unimpeded views across the rapidly changing desert landscape, and will jointly question the finances of this undeveloped new place that was envisioned to be bigger than Chicago but today has only a few thousand inhabitants. For now, however, their murmuring is hushed, as this is Saudi Arabia, after all. Tomorrow they will board a small car and trek alone across newly paved desert roads to look at property – today flat cakes of sand denoted by nothing more than a few ditches that will one day house utility lines. It’s hard to see the future here, but excitement nonetheless cuts shrilly through the thick and sandy desert air.
The excitement here is borne more of the buldozers, less so for the quiet village already here. With an array of villas, a withering golf course, one school and a 7/11-sized grocery store, this town today offers only the scant hints of what it one day wants to be. For the investors, showrooms glitter with the potential of the possible, of what this desert may yet one day become, of the profits it may someday yield, but for the most part those showrooms remain empty. Perhaps with enough marketing and investment this will become an exciting new city of houses and factories, but more urgently also it is being depended upon to become the home for a new economy that will save this storied country. The hosts make face to hide the desperation of this enterprise, boldly staring down an impossible task.
Up the Road…
Two miles north, barely visible in the sandy haze, half a dozen locals are stepping off a train at the Haramain High Speed Rail station. It isn’t full, but even so KAEC is only one stop along its journey, so once they have departed, the train chugs on. Its destination is Mecca, and it transports pilgrims, sometimes millions at a time, into a magical land that to its adherents is the holiest in the world. The gates outside Mecca remind those approaching that only Muslims are allowed in the city. Such signs might be outrageous in other nations, but in a country where all citizens must be Muslim, there are few surprises. Inside its gates the city’s pilgrims march a thousand across in a circle around the Kabba, the holiest stone in Islam. The spectacle, only viewable by Muslims, is among the most impressive on earth – a sea of humanity from across the Islamic world that showcases the power and ferocity of belief among adherents to the world’s second-largest and fastest-growing religion. In Mecca the excitement of the crowds dwarfs the tranquility of KAEC. 24/7, at night illuminated by booming stadium lights that coat the arena with an effervescent glaze. Above the crowds, a massive hotel masquerading as a clocktower reads the time against a mountain backdrop. It is one of the ten tallest buildings in the world, a symbol of the ever-growing, ever triumphant power of Islam in its holiest of holy sites.
While Mecca is impressive, it is also a place of sobriety. The occasional hajj trampling is but one risk, as in Mecca the mutawa, or religious police, have ultimate and nearly unchecked rule to enforce the faith with an iron – and at times subjective – fist. Like in other conservative parts of Saudi Arabia, religious rules are strictly enforced here. Prayer five times a day. Women, head to toe in their abayas, risk severe punishment if their bodies are revealed. They must travel with a male guardian, and many crimes are not enforced against them. Their testimony in court trusted half as much as a man’s. For all, speaking ill of the government or of Islam is verboten, and alcohol is forbidden. Should the country’s heavy diet of laws be violated, squares where beheadings, crucifixions, and stonings are still conducted in public are a reminder of the consequences. During the holiest times of the Muslim year, these rules are enforced with yet an even greater level of intensity: Islam is a meditative religion, but a deeply disciplined one.
Mecca’s energy is the thriving heart of Saudi Arabia’s past and the beating pulse of the hushed and meditative Islamic culture that continues to power the world’s largest absolute monarchy. Pilgrims to the region today comprise the source of nearly all visitors to western Saudi Arabia, an otherwise barren desert where opening the country to tourism is only now being debated by the government and oil is scarcer than in the rest of the country. While the coast has its beauty, a lack of essentials – water, vegetation, private industry, particularly of the white collar variety – do not offer a recipe for organic growth and not much appeal to many of the country’s young people yearning to explore the more progressive reaches of the world. While this side of the country is less choked than Saudi’s conservative interior, it is nonetheless still Saudi Arabia, and for all the country’s modest reform it is still dominated by the influence of conservative Muslim clerics. Western Saudi Arabia’s few cities – Jeddah, for instance – are more the bastions of hunkered down Bedouins and the occasional plot of heavy industry, perceived memorably only as a toxic mixture of sand and soot. But it is also the area of the country with the most investment and the most promise, where KAEC and NEOM are now being implemented.
Part 1: Welcome to the Magic Kingdom
Despite its appearance, for the Kingdom of Saudi Arabia this otherwise-bleak desert coast of Western Saudi Arabia is seen to offer the greatest opportunity for the country since oil was discovered there in 1938, only six years after the country was founded. Built on the foundation of the crowds to Mecca, KAEC and a host of other new cities – particularly a new nascent one called NEOM – are increasingly seen a potential formula for radical and dynamic transformation that will lead the country not only to catch up to the rest of the world, but to pass by it at blazing speed. If all goes well.
Never an ordinary country, the territory of the Arabian Peninsula had long existed as a collection of tribes, eternally warring factions who had roamed the wilderness all the way back to the infancy of mankind. Stocked deeply and exclusively in the tribal fabric of Islam, these territorial kingdoms of Hejaz and Nejd that were assembled into the unified Kingdom of the House of Saud were never cut out for the broad western framework of an industrialized nation, and it was by the grace of fate that the discovery of oil gave them a reason to remain together. If not for that, and for the visit from Franklin Roosevelt that sealed America’s commitment to providing the industrialized expertise to extract, refine, and, most importantly pay for the sea of oil laying under the vast deserts of Saudi Arabia, this Kingdom may not even have subsisted, much less remained unified, strong, and wealthy for the better part of the tumultuous 20th and early 21st centuries.
Since its founding, Saudi Arabia has remained remarkably conservative under the reign of six brothers who have handed rule to each other for 70 years across a single generation. The impending generational handoff from King Salman to Crown Prince Mohamed bin Salman (MBS) will be a pivotal moment for Saudi Arabia’s future in defining its identity, but perhaps more importantly in ensuring the stability of perhaps the world’s most interesting country.
To date, oil’s power over the Saudi Arabian economy has been as profound as Islam’s. It is the reason Saudi Arabia is the 15th wealthiest country on earth, and has given weight to the monarchy’s penchant for autocratic rule. With nearly unlimited wealth, Saudi Arabia’s monarchy has used money as a way to breed passivity among its population, instilling a general pleasure in submissiveness to autocracy, broad-based support for the centralization of power and the economy, and a limit to incentives for residents to participate in the private sector. Saudis today live comfortably, if not lavishly, despite inordinate government waste, nary a private sector, and a noticeable dearth of intellectual curiosity evidenced by the country’s abysmal record on reading and its dearth of public libraries.
Despite this, Saudi Arabia’s leaders have remained ever vigilant to the murmurs of restlessness among its astoundingly large young population. They’ve implemented gradual reforms they hope walk the line between convincing the young that the future of the country will be more progressive while also convincing the hard-liners that Saudi Arabia won’t become like the western world. But these reforms have been modest, and have come as the country’s neighbors, like first Bahrain and Qatar, and more recently the UAE, have seen expansive success and global fame realized from liberalizing more broadly and opening their doors to the outside world. In contrast Saudi Arabia is well behind.
Saudi’s quest for gradual modernization has ever been tinged with the ephemeral acceptance that the country’s boom years in the oil era might one day come to an end. The clamor has become increasingly urgent to do something to leverage the country’s vast resources today to ensure a viable future for the country if that day without oil ever comes. Even before the country’s current leader, Saudi Arabia has launched a bevy of reform packages designed to broaden the economy and slowly open the country’s doors to new investment.
Why is Saudi Arabia developing new cities?
That “new cities” are part of Saudi Arabia’s framework for modernization and diversification may seem odd to some given the vast investments needed to realize a new city. But they have long been part of the formula in this part of the world. The returns from investment in growing Abu Dhabi and Dubai in the UAE have realized tremendous attention, if not profit streams, for that country. And at the very least they’ve stoked the egos of several generations of monarchical leaders.
Historically Saudi Arabia’s efforts to modernize through new cities were modest. In the 1970s the government built out industrial cities at Jubail and Yanbu as the first iterations of modern “free trade zones”, which incentivize foreign direct investment by eliminating customs duties on logistics activities and manufacturing at key sites geographically situated along major shipping routes. The goal is to incentivize midstream industrial activities in these areas, thereby bringing economic activity and jobs to the host nation. Today the Middle East is dotted all over with special economic “free trade” zones that compete relentlessly for coastal business. In the case of Jubail and Yanbu, elite international consulting firms like Bechtel and Skidmore, Owings & Merrill were enlisted to design them, and today these cities have a sizeable impact on Saudi Arabia’s economy. Each has over 200,000 residents, and Jubail contributes around 7 percent to Saudi Arabia’s GDP. Unlike the country’s more recent endeavors, however, both are petrochemical-oriented cities and both were built on existing small population centers – Yanbu, for instance, a site that had been used by Arab and British forces during the first World War.
Jubail, Courtesy Wikipedia
A New Generation of New Cities
While the growth of Saudi Arabia’s 1970s free trade zones has been remarkable, they are ancient history in the early 2020s. In fact, over the lifespan of Jubail and Yanbu, the more diversified investment by the UAE in Dubai resulted in an even more remarkable transformation of that city from a hamlet of 160,000 residents to a global megacity of 3+ million people. Despite its efforts, Saudi Arabia entered the 21st century having lost ground to its Arab neighbors.
The 2005 ascendance of the late Abdullah to the Saudi throne brought fresh energy to the Saudi quest for modernization. Almost immediately Abdullah launched a new program called “10 x 10”, which aimed to make Saudi Arabia a top ten competitive destination for foreign direct investment. To achieve this, Abdullah launched a program in 2006 called the Economic Cities program, with the aggressive goal of creating six new cities to propel the Kingdom’s new 21st-century economy. Each of the new cities would support competitiveness, job creation, and economic diversification. At varying costs, each of the proposed cities was themed around new possible drivers for the Saudi economy – one around sustainability, another around “knowledge”, and the largest – the King Abdullah Economic City – around eliminating the country’s reliance on oil. After numerous early hurdles, KAEC found its footing by 2013, and its development continues onward to this day.
Today the “10 x 10” program is viewed with mixed reviews within the country, but it did improve the country’s competitiveness by its own metrics – from #67 in 2005 to #16 in 2009. While the Economic Cities program is still part of the country’s policy regime, only KAEC continues ahead with serious economic momentum, though even it is by some viewed as ancient history by now.
The general penchant for immediate gratification has tested the resolve of this and other of the country’s programs. Neither the cost nor the timescale of urban growth is well understood by many leaders, and such development is not achieved as quickly as other policy reforms. Most new cities envisioned over time have taken decades, if not centuries to “fill in” once they are planned. Some of the world’s most triumphant stories of such planned cities – like Philadelphia (1682) and Washington, DC (1791) took centuries to fill in but eventually outgrew the boundaries of their original physical plans by leaps and bounds. Today they are two of the most influential cities in the world.
Even with the slow growth trajectory, the 2006 New Cities Program might still be pushed more forcefully by the Kingdom if not for the demise of Abdullah in 2015. With new leadership now in charge, there is less personal incentive for King Salman and heir apparent MBS to push forward with a city project whose triumphant archway features a picture of a past monarch.
The response from the current regime has been to construct a framework for new city growth that is even more ambitious than KAEC – which itself carried an initial pricetag of around $87 billion. First came the vision for an effort called the “Red Sea Project”, an ambitious new resort development across 50 islands of a coastal lagoon just north of KAEC, seen as a future eco-tourist experience, and even larger. Today five new cities have been proposed along the Red Sea Coast, but not all of them have yet become “real”.
Then the birth of a new policy framework called Vision 2030, which ramps up with aggression the modest reforms started by Abdullah. And from that the newest and most ambitious vision for a new city to date for NEOM, a wildly ambitious new cities project that would add yet another major new urban investment to Saudi’s western coast, this one dwarfing the others, spanning three countries and costing $500 billion to $2 trillion, one to three years’ entire GDP for the country.
Despite their differences, KAEC and NEOM are both part of the formula for Saudi Arabia’s future. More than any other country in the world, the government here has bet its future on development – on new cities that might slowly wrest the future from the past, and which can tiptoe the line between aggressive modernization and a future free from oil with a stone-fisted cultural tradition mostly inclined to reject the outside world. More than anywhere else on earth, the battle for the future of Saudi Arabia is delicately yet ferociously being navigated in the most complex of conditions.
Part 2: A Sibling Rivalry: KAEC and NEOM
If NEOM is the Crown Prince’s new play project, KAEC has a head start at the serious and sober task of city building in the most inhospitable desert on earth. If both are successful, they could form the dual anchors of the radical transformation of Saudi Arabia’s Red Sea Coast, between them a dozen other pet projects of the regime. Ambitious as they are individually, though, the Kingdom is struggling to paint a coherent picture of how they can fit together, of how both can succeed rather than cannibalize one another, and how the newer, better-funded project can develop without dooming the prospects of the hundreds of billions already invested in its now-second string downstream rival.
KAEC and NEOM are like competing brothers, the younger one more ambitious but the older one with the advantage of a head start. If NEOM is to succeed, it can heed many lessons from KAEC, both for good and for ill. With modest success, KAEC is largely viewed as a failed experiment across Saudi Arabia today. That is not yet the case for NEOM, which is still in the good grace of the Crown Prince as the next vital megaproject for the Kingdom. But both are developing their own grizzled storylines over a short timespan. Here they are…
KAEC, Courtesy Wikipedia
The KAEC Vision
Without a clear precedent, KAEC has had the unenviable task of blazing the trail for what a new city in Saudi Arabia can be: not Jubail, an industrial carbon sink, not the country’s many past economic cities who had sole purposes and defined land uses, and not anything on a scale ever attempted before in the country.
To put it simply, the vision for KAEC was massive and inventive. The area outlaid for it is about the size of Washington, DC, a span of territory its development has only partially filled in. It is located along the Red Sea Coast north of Jeddah, near a sabbkah lagoon with only faint assets linking it to the outside world, including a station along the brand new high speed rail linkage between Jeddah and Mecca, and immediate proximity to the previously developed King Abdullah University of Sciences and Technology, Saudi Arabia’s first co-educatonal technology university. These assets bolstered its coastal location as a strategic opportunity point. But they hardly established the rationale for a new city. Here, in an inhospitable desert with little organic reason for a city to be there, KAEC became a novel challenge given over to the brightest minds.
The purpose of KAEC was multifold: to develop a city that could financially tap into the project’s location on a key shipping crossroads on the Red Sea Coast to generate revenue for the Kingdom, to in doing so generate an abundance of jobs and economic activity that could create an urban ecosystem of both blue-collar and white-collar employment opportunities for Saudi citizens, and the ambition to create the kind of new and exciting place that can help propel Saudi Arabia’s young people into meaningful, productive lives, while preventing them from leaving the country to find such opportunities. Today, 65 percent of Saudi citizens are under 30.
To meet these aims, the vision for KAEC has to be ambitious: to establish an exemplary city that would be the first step to growing a Saudi Arabia without hydrocarbons and cementing the Kingdom as a trade and logistics gateway as the foundations of its future economy.
While the strategy for how to do so was one strategic question without a clear answer, even more important at the outset was finding the resources – and the entity – to be able to take on a project so large. This required tremendous creativity to make KAEC feasible. Once pinned with a projected pricetag between $86 billion and $200 billion, KAEC was far more expensive than any one private developer could take on alone. And at a scale so massive, it was well outside the bounds of government to develop itself.
The solution was a partnership that would allow the private sector to develop the city, while the government would fund its initial development. Financed by the Saudi Arabian General Investment Authority, a license provider established by the Kingdom in 2000 to incentivize economic liberalization for the country, the city has been developed by a development corporation established by the crown to manage the project. Under that corporation, the government hired the largest developer in the region, Dubai-based Emaar, a joint stock company, to manage its construction. To be safe, it also created a government agency to oversee the developer, to implement guidelines for design and development, and to ensure the interests of the Saudi government were being met.
The city’s early development plan was a profound failure at establishing a credible vision to achieve a new city. Among its ideas, it relied on massive highways to connect the port to a fanciful downtown, and massive canals to drive tourism. The highways were contextual but anti-urban, the canals proved too expensive, and the site outlaid for the downtown was on the least buildable part of the lagoon. There was also nary a vision for how the city would come online. Without any demand, there was no need for the massive scale of buildings first illustrated., and nothing about the early equation suggested the investment would make people want to come.
Within a few short years, efforts to implement the initial plan bankrupted KAEC’s management group. They could only afford to build one of the canals, and the future cost of stormwater infrastructure – in the desert it doesn’t rain much, but when it does, it can be a doozy – was leading to spiraling costs. And to that point, there was little to no investment outside the initial funding.
In 2012 KAEC was back on the drawing board, and many of the old problems were accounted for in a new plan executed by Skidmore, Owings & Merrill. With a robust economic vision for how to link the site’s limited existing assets, centers of development envisioned away from the sabbkah, and a new plan in place that minimizes the need for heavy infrastructure through natural stormwater management rather than canals, the projected pricetag shrank dramatically.
The new vision established strong connections between the project’s existing assets. Among them, the King Abdullah Port is the city’s most valuable asset. The city’s first major construction project, the port had natural reason to exist at a critical midstream juncture for shipping routes traversing the world from the Atlantic through the Suez Canal to the Indian Ocean. To incentivize its use, KAEC, like Jubail and other cities, was developed as a “free trade zone” based on a wide array of successful global examples. The FTZ helped catalyze a demand for midstream logistics activities around the port, and has led to the port’s growth as one of the world’s largest, with 30 deepwater berths. Today the port is the world’s second-fastest growing, nearly as large as the Port of Seattle. It has also catalyzed rapid industrial growth around the port, which have helped propel Saudi Arabia’s Direct Foreign Investment.
Around the port, half of the city was envisioned for industrial activity, which has comprised much of its early growth. While this growth doesn’t reflect the ambition for the city to pioneer a more sustainable green economy post-hydrocarbons, it does help propel a goal for economic diversification in the Saudi economy. Among the shortfalls it helps address is the fact that today 80 percent of Saudi Arabia’s pharmaceuticals are imported.
Thanks to aggressive marketing, KAEC is currently home to around 100 industrial companies. Early industrial tenants in the city have included a plant for international candy bar company Mars. KAEC signed Pfizer to establish a manufacturing plant in 2011, then promptly sold foreign ownership of its legal entity back to Pfizer. While there is hope that such industrial tenants may one day comprise more “green” activities consistent with the city’s 21st-century sustainability goals, today the industrial tentans still include a wide array of “nasty” uses, including blending plants for oil lubricants, a car assembly plant, and an air conditioner firm. KAEC has learned the hard way that when starting a new city, at the outset sometimes you have to take what you can get.
The birth of the city’s nascent downtown at Bay La Sun has been largely around facilities to support these industrial functions. To support travel from international locales, one of the first projects in KAEC after the port was built was a 200-room hotel, something leadership viewed as essential to expanding from blue collar-only employment to white collar employment.
Despite the success of the hotel, the city’s two white collar hubs – Bay La Sun and Haramain – have been slow to develop. Bay La Sun features the previously developed canal, the hotel, and a few office buildings amidst a highly manicured landscape. It feels something between a suburban office park, a downtown, and a country club. It has a great beach and great fountains, but it is low density development with few people around. Located several miles away, up a long drive through the desert across the lagoon, the Haramain High Speed Rail Station is a symbolic gateway to the city designed by international star architect Norman Foster. It sits mostly idle in the desert, however, as on most trips only a few people disembark at the new city. Little development has materialized around it, and you can barely see Bay La Sun from there. The whole territory in between is envisioned for future residential development, but it will be ages before it fills in, if it ever does.
Between these hubs, a modest residential and commercial fabric has started to infill slowly at the edges consistent with the planning vision. While it’s been a process, one of the biggest goals of KAEC has been challenging the traditionally private life of the Middle East to create a more community-centric city outside of the downtowns. By targeting millenials and young families, much of the city’s design has indeed changed the game for Saudi cities. While past projects like Yanbu had been divided into clusters – in that case two residential areas and an industrial area with oil refineries and plastics facilities – KAEC was envisioned to be “mixed-use” like a real city, with different uses interspersed among each other. This alone pushed cultural boundaries for the region. The city’s roadway network is more interconnected than most cities in the region, which has limited the extent of high-speed arterials and cul-de-sacs. Similar to contemporary planning in the United States, KAEC’s planning is fighting the urge to be suburban. Within this grid, the new naturalized stormwater network has created more natural moments for park space adjacent to the grid, as opposed to merely the highly water-consumptive lawns that were built prior to the new plan’s development. While development has been slow, the interconnected grid has created flexibility for the city’s growth, important if it fails to achieve its ambitious plans to eventually house 2 million people (equivalent to 3 times the size of Washington, DC).
Fighting against the norms of the region as well as its own early design failures, KAEC today is a collection of many things. Its gateway structure bears a giant portrait of the late King Abdullah and is a massive, seemingly inexplicable fortress in the middle of the desert. The main roads traverse the site in odd zig-zagging formations, often with little accompanying development. The port is a bastion of daily activity, and the surrounding industrial plots are starting to come together. Down the road, its residential neighborhoods are a combination of urban and gated. Some are fully developed with only some of the houses occupied, and others are massive construction zones with plot lines, roads, and utility lines, but no houses. The road framework for new neighborhoods can materialize seemingly overnight.
Together they are shaping a network of residential lifestyle opportunities designed to create a gradient of options for residents from birth until death: inland labor housing and highly compact quarters for young laborers, family-oriented urban neighborhoods for young families, golf-course communities for the wealthy, and beachfront villas for the very wealthy. A few small shopping options support the small community of residents who live there. The network of communities is intentionally branded and thought out, which each different typology of place intentionally designed to serve part of the marketplace not served by the others.
To date KAEC has been a bit of a “throw everything at the wall and see what sticks” exercise and to date it has bolstered its positioning as an economic city of the future in many ways beyond its initial development.
One area where the city has excelled is that consistent with its mission to create opportunities for Saudi Arabia’s young population, KAEC has pioneered a spirit of educational innovation. It has leveraged its strategic location next to the King Abdullah University of Sciences and Technology, the Kingdom’s first co-ed technology university, and houses many of the employees associated with the school. While coeducation may not seem revolutionary, side-by-side male- and female- schooling is a new thing in a country where there were no universities, period, until 1957. Today the Kingdom is preparing for a future in which more university graduates are female than male. In addition, the Prince Mohammed Bin Salman College has since opened near the center of KAEC, a joint venture between the Saudis, a subsidiary of Babson College, and Lockheed Martin. Among its new innovations for the country, it specializes in hands-on learning, experiential courses, and pathways to launch new business ventures. KAEC today also has a first-rate international school for K-12 education, including 600 boys already attending boarding school within the city.
KAEC has also sought inventiveness in towing the edge of technological innovation. It has pioneered on city-scale fiber optics and smart utility networks, and was one of the first cities to develop a real-time interactive phone app, as well as apps for each of the successive neighborhoods built there. It was also one of the first cities globally to provide free wifi zones across the city.
At a more iconic scale, KAEC can’t match the level of futurism instilled in the vision for NEOM. But that doesn’t mean it’s not a test bed for new things. Among its recent wins, KAEC has announced that Hyperloop will build its first global test track at KAEC – Virgin Hyperloop One – which will carry passengers at over 1100 kilometers per hour. Leaders are hoping such investments hope to catalyze a Saudi Silicon Valley. At the very least they have the space for such investments.
KAEC has been a modest pioneer in social reforms as well. Initially envisioned as a testing grounds for autonomous vehicle technologies, KAEC was one of the first testing grounds for women driving in Saudi Arabia. In addition to its pioneering spirit with regard to co-educational education, it is also notoriously liberal in terms of public dress and interaction, and has pioneered a spirit of outdoor entertainment unusual for the region. For a large section of Saudi Arabia’s western coast, KAEC is the most exciting place to be, with 5K races, social events, and late-night activities organized within the city’s parks.
Despite these reforms, questions remain. Many of the houses were built for a future in which women would not drive, with driver’s quarters part of the residential architecture. More challenging to the city’s long-term development, eternally in question at KAEC is the role of migrant labor, which persists as a main function within the city and a major source of construction jobs. A foreign concept to westerners, much of Saudi Arabia’s economy, including the industrial plots at KAEC, relies on migrant labor, often low-skilled employees from nearby countries like Bangladesh who have little choice but to accept long hours and poor working conditions while surviving in dormitory-style living quarters that walk a fine line between humanely acceptable and not. Is it better for a city like KAEC to house migrant laborers in better conditions than they would receive elsewhere in the country, knowing they are likely to end up in similar jobs elsewhere if not KAEC? Or should KAEC be a leader in rejecting this kind of labor outright, which would probably doom its economic prospects?
In the grand scale of city-building KAEC is but a baby. Still, the freneticism of Saudi investment is forcing evaluation and scrutiny at every step of its development. While the continually looming threat of having the plug pulled on future investment is not helpful, it is the reality KAEC faces. And the success of KAEC to date depends on your perspective.
On the one hand, to date numerous of its major projects have indeed been built: Prince Mohammed Bin Salman College, the Industrial Valley, the King Abdullah Port, and the Royal Greens Golf and Country Club. From a residential standpoint the city’s future is unclear, however. Today around 25 percent of the physical area of KAEC is developed. While estimates have been eternally ambitious, the city planned for 2 million residents is today well short of that figure. It’s today likely home to around 10,000 to 15,000 people, but it is growing – slowly. Leadership points to other metrics: visitors to KAEC rose from 10,000 to 370,000, for instance, in just two years from 2015 to 2017.
If KAEC does have a future, one of the biggest challenges today is keeping it financially sustainable long enough for that future to become self-sustaining. To date KAEC claims to be net profitable, earning a net return of around 15% on home sales for investors who bought in speculatively. In addition it has attracted $8 billion in recent investment, and secured enough cash and credit to fund its planned spending for the next decade. But it’s unclear how much these investments account for the true costs and revenues of the city.
The first reason these figures are unclear is that they may not account for the actual costs of long-term infrastructural investment. To help stabilize the books for the city, major physical investments have been pushed out as long as possible, and have created a backlog of vital long-term projects that may create an insurmountable financial burden for its developers over the long-term. KAEC, for instance, still lacks a full-size hospital, not absurd for a city of 10,000, but something that must be developed if it is to grow much more. Other infrastructure was only built for short-term demand, without thought to the longer-term.
The opposite challenge is impacting KAEC as well, as many investments that were built are slowly losing their luster as the city’s growth languishes. Most concerning to those who fronted investment for the city is the fact that its facilities that lie idle may reach the end of their useful life before a larger population actually comes, something that would ultimately render those initial investments a “lost cost”.
Compounding the infrastructure issue, which may be leading to an under-representation of costs, funding streams are also speculatively inflated. Namely, so far the Kingdom has relied on speculative investment to fuel recent spending. Many neighborhood development projects in the city are sold out before construction even begins on the housing thanks to aggressive and nationalistic marketing efforts.
This approach to speculative funding is actually one of KAEC’s greatest financial innovations: funded by government up-front, the city today is paid for largely through private capital. In 2013 KAEC was put on the Saudi stock market via Emaar Economic City, a publicly traded Saudi company, attracting tremendous levels of investment from somewhere in the neighborhood of two thirds of Saudi citizens. It was the first city worldwide to experiment with "going public" on the market, and it was a huge cash boon to the project. While the stock is down 50 percent since 2015, it for a while was outpacing the Dow Jones Industrial Average, and is an impressive experiment in creative urban financing. It can be thought of two ways: on the one hand as a sort of over-inflated ponzi scheme in which increasingly more money gets pulled into a project that may not ever be able to close the loop, or on the other hand a creative attempt to provide the kind of gap financing necessary to fund such a long-term and high-stakes project through national crowdfunding.
Financing aside, the biggest long-term challenge to KAEC is that it is no longer the shining jewel of the future in the eye of the country’s central leadership. Now that its namesake is no longer King, KAEC can no longer rely on steady government funding to bolster it if it begins to sink. The Crown Prince is more interested in NEOM, and that is where his money goes. It also hurts KAEC’s competitive pitch to investors. It’s why it’s ever more important for the city to find a path to become self-sustaining with private-sector sources of investment capital.
On the positive side, KAEC has benefitted from the fact that its leadership has remained remarkably stable. KAEC’s CEO has been a mainstay, though he’s only in his 30s. He has stuck to the materplan, and is selling many of the same talking points today that he was in 2013, remarkable consistency for a project so experimental. He has aggressively courted international diplomats and investors, and has marketed the city with a fervor, with frequent trips and trade shows around the globe. Because of this, and because it has a track record of actual development and the bones of an emerging city, KAEC is tangibly real. It's not yet Dubai, but it is emerging from the desert, and there is a light at the end of its development tunnel. The same, at least yet, cannot be said for NEOM, the even more massively ambitious project several hundred miles up the road.
NEOM, Courtesy Wikipedia
The NEOM Vision
If KAEC was an experiment that evolved slowly through trial and error, NEOM has been an explosion – in land, in funding, and in out-of-the-box ideas designed to transform the Kingdom in one swoop. Although it is inspired by KAEC, NEOM is not, in any way, a project about incrementalism, and is borne out of frustration more around the slow pace of KAEC's development than around inspiration from KAEC's successes. The difference right now remains drastic: while KAEC can be scrutinized in detail by accountants on how it is measuring its costs and revenues and whether it is really profitable, NEOM is nowhere near that conversation: here success or failure will be massive in either direction: either a folly in fantastical futurism that drains the country, or a transformational triumph that breaks the will of historical ankle-dragging and propels Saudi Arabia not only into the 21st century, but about five centuries into the future as a global leader. There is yet no pro forma for the project.
While KAEC is big, the area allocated for NEOM is massive – 10,200 square miles – literally dozens of times bigger. In fact, NEOM is bigger than KAEC in every way, from both the language bandied about for its ambitions as well as the physical area slated for its growth.
As a physical place, it’s hard to see the future of NEOM today. While KAEC benefits from being near Jeddah, the most progressive place in the Kingdom, the area around NEOM is more conservative and more barren. And while KAEC can leverage proximity to Jeddah, Mecca, and the adjacent existing university – all bones that give reason for a city – NEOM today is a barren peninsula that’s larger than the eye can see, with nothing around it.
Not far from the Suez Canal, the land outlaid for NEOM covers multiple countries. NEOM will stretch into Jordan and Egypt, and be bigger than Qatar. While there is little there today, this area is viewed as advantageous at a macro level due to a strategic location close to international shipping routes. It is also a literal link between continents. The breadth of the location is not accidental, as spanning across multiple borders will give it not only advantages for trade and access, but also put physical parts of the city in countries with more lax social conventions than Saudi Arabia itself. For a city where alcohol may need to become legal to drive tourism, this is an important and delicate move by the Kingdom, which today bans alcohol across the country.
Despite the thought behind it, there is nothing exceptional about NEOM today. It is a barren desert of sun-burnt white hills and desert flats, turquoise water and a guardhouse and communication tower and the site a crashed Russian passenger jet from years ago. Not only has nothing been built there, but the plane crash has scarcely been cleared. There’s no reason to invest the energy. There’s nothing there.
The economic vision for NEOM is borne from the Kingdom’s Vision 2030 plan, and offers a far more aggressive pitch than KAEC to attract international investment as a means to transform the country. To leaders of Saudi Arabia, KAEC hasn’t stalled because it was too ambitious; rather it has grown slowly because it didn’t make enough of a splash. A city that prides itself for being developed responsibly after the lessons that grizzled it from its early bankruptcy, KAEC is viewed as boring and traditional by the developers of NEOM. KAEC is studied by planners, but NEOM needs to be on the front pages of every newspaper in the world.
Part of the vision for NEOM is to create the kind of fun, opportunity-rich, dynamic kind of place that even Saudi Arabia’s most conservative leadership has begun to recognize young people in the country crave. It recognizes the fact that of the 180,000 Saudis currently study outside of the Kingdom, banking on the idea that some might return if Saudi Arabia offered a more dynamic city. Clearly, they have recognized, it is not a sustainable model for the country’s best and brightest to leave the country for their education, because far too many of the best and brightest never return.
But the vision for NEOM is much more than education and retention. While KAEC is about attracting jobs, NEOM is about bringing the world to Saudi Arabia, bypassing other leading global capitals, and changing the vision of Saudi Arabia from stuck in the Stone Age to blazing the trail of the modern one.
They are all great words, but the specific vision for NEOM is still seeking out its identity. The one part everyone is sure on is that NEOM wants to be massive. Leaders are talking big, inspired and perhaps a little jealous of their next-door neighbor: NEOM will be bigger than Dubai and more forward-thinking: “a civilizational leap for humanity”, according to the Crown Prince. While it will compete with Dubai, the vision asserts, it will also complement it, making a statement not only for Saudi Arabia, but about the importance of the Middle East to the world economy generally.
The underpinnings of that vision include a city that will change the game far more aggressively than KAEC for what the city of the future will be. The project’s leadership has underscored that NEOM will challenge every norm of city-building to date, and that it might look fundamentally different from any city yet conceived – whether it will have traditional roads, buildings, or infrastructure, yet undefined, and, so far, doubtful. In doing so, they hope NEOM will not just learn from other cities, as KAEC did, but reinvent an entire new future for what a city can be in the 21st century. They are hopeful that NEOM will change the world and cities as we know them.
Among the specific ideas they have committed to so far is that NEOM will be a “smart city”. Not only will it have more robots than humans, itself a bold proposition, but its leaders are talking about the city as a hub that will challenge all existing paradigms of smart technology, including introducing a new way of living dependent and focused on technology from birth-through-death. NEOM, they say, will be a robotic city with everything linked by artificial intelligence. Here, they say, IDs may be a thing of the past, as AI surveillance cameras will monitor and enhance every facet of life through cameras, drones, and facial recognition.
But it won’t stop there. Among its more questionable and curious attributes discussed so far, the notion of a “smart city” at NEOM will cutting edge adventures in eugenics, with the goal to establish cutting-edge facilities for exploring genetic mutations to increase human strength and human IQ. NEOM, they say, will be a test bed for such engineering as a hub for experiments in modifying the human genome. One can imagine visions of Dr. Frankenstein meets Jurassic Park, but this, its leaders feel, is the next bleeding edge of technological advancement: reviving the effervescent dream of perfect human beings, eternally healthy, and perhaps with eternal life.
It's also critical they attract leading international minds in this realm as genetic engineering is critical to solving Saudi Arabia's globally unmatched incidence of genetically transferred disease. NEOM, it is envisioned, will be the place where the innovations in genetic engineering are borne that help the country buck that trend. Its embryos are on notice.
At a more mundane level, NEOM’s economy is envisioned as that of a business hub with advanced manufacturing, bio-tech media, and airlines. There is talk of the city attracting companies like Amazon by subsidizing labor for them and providing free energy.
To be clear, though, jobs are not the key. NEOM, instead, will be a hub for everyone in the world. For any transformational companies located elsewhere, NEOM will initiate a competitive war to win them. KAEC may have the Hyperloop, but NEOM has everything that’s after it.
While KAEC is a nice retreat for Saudis, NEOM is envisioned as a destination for unparalleled global tourism – “like the Hamptons”, they say. While part of the rationale is that tourism may be a greater draw to international investment than industry, part of this, too, is based on impatience with the kind of urban development KAEC has sought, and a yearning to reinvent the speed of growth in the contemporary city. Rather than waiting for NEOM to evolve from a port city to an industrial town and then a white collar business hub only many decades from now – the traditional model of how history-rich cities like Florence have grown, and the inspiration for KAEC – NEOM is designed for immediate success. If it is to mimic the US or even regional megacity Dubai, it will need 40 percent or more of its employment to be entertainment-based.
In providing entertainment, at the very least NEOM will likely feature an entertainment park, a tourist retreat, and a waterfront different from any other in the world. Part of the project called NEOM Bay will be the operational tourism hub for the city. Within this framework, new visions for entertainment: a glow-in-the-dark beach will thrill beachgoers 24/7. Robots will fight in cages for amusement, and an amusement park full of robot dinosaurs. So they say.
In growing tourism, if NEOM is to learn from Dubai’s successes, it will have to challenge nearly every norm the Saudis today uphold. Dubai, of course, has succeeded because of its unparalleled freedom for this part of the world. In Dubai women can drive, other faiths fan practice, alcohol is permitted, movie theaters exist, there are no religious police, women can be in public without an abaya, workplaces are gender-integrated, and proselytizing is prohibited. That despite the UAE’s dynastic rule and vestiges of more traditional culture: even in Dubai lashes can be administered for offenses, apostasy is a crime, and homosexuality is illegal. For NEOM, some indications are that liberalization will be permitted: the vision calls for women to be able to jog, public music, a business-friendly environment, and even alcohol – probably not in the city, mind you, but anywhere the development crosses into Egypt or Jordan. In lieu of Dubai’s comparatively traditional judicial system, NEOM will be governed differently than the rest of Saudi Arabia by judges who report directly to the king. That is, if they are needed at all: part of being a “smart city” means the aspiration for policing to occur automatically through computers that will notify the government of crimes with no need for police. And you thought red light cameras were scary.
What this set of fantastical dreams all means in terms of physical development is – obviously – not yet defined. Over the last few years the team leading the development of NEOM has hired numerous companies to help influence the vision. At one point architecture and engineering mega-giant AECOM was announced at the lead consultant for its development, but NEOM has turned over staff and consulting firms at such a wild clip that it’s hard to tell who’s in charge today. Many of the changes have been influenced from the highest levels because traditional city builders have been deemed too traditional for the city of the future. This is likely true: in many respects architecture and city building are stuck in the dark ages in terms of being able to successfully reinvent their models, but this has much to do with the massive scale and seriousness of an endeavor like city building. Is the dinosaur amusement park realistic, or too much? Whether justified or not, the constant turnover in designers and consultants has led to an international perception of instability for the project, quite the contrast from KAEC’s decade of sure and steady leadership and annual financial statements.
While the lack of consistency in consultants has created a muddled picture that has put NEOM’s future as a real place in doubt, many of the best and the brightest minds have been at the table trying to make it work. In some cases, those minds have received heavy criticism, as is the case of the work produced by McKinsey and Boston Consulting Group, who accepted a consulting fee to inform the dystopian ambition of the effort and have in turn suggested what appears to be an “all over the map” cornucopia of opportunities. Among them halogram teachers to educate the city’s population of genetically enhanced students, flying taxis, robot maids to replace migrant labor, the glow-in-the-dark sand on the beaches, and a fake moon with live-streaming skylight images, much like a never-ending IMAX experience outdoor throughout the city. If they provided costs for these amenities, they have not been published.
On the one hand NEOM runs the risk of being an absurd amusement park built with limitless cash that could alternatively be put to other uses. On the other, some fear that once the visions of dystopia have faded, NEOM at the end of the day will be just another case of Middle Eastern coastal suburban sprawl, sacrificing prime waterfront for luxury villas, sapping the character of outlying villages and towns, and lots and lots of industrial and manufacturing activities with horrendous ecological, waste, water, and energy performance. Just much more expensive. The fear is that NEOM will turn out like Jubail or Yanbu, which are successful in their own way, but which do not reflect any of the ambitions discussed for NEOM.
Leaders insist this won’t be the case. For one, they insist, the city as a physical place will be far more sustainable even than KAEC, not just with a framework that embodies contemporary mixed-use urban planning and environmental conservation, but an even more forward-looking framework that will be tech-first with no roads or pavement. Instead, the flying taxis will be a replacement transportation. And instead of a typical desert approach to sustainability built on conservation and locally contextual plant life – many of the lessons of KAEC – cloud seeding will be used to bring rain to the desert and bring the peninsula to life.
All signs point to a vision that at this point remains not only ambitious, but wildly untested. Its advocates, however, insist it will be transformational: without proof, they have insisted the new city will feature zero work- or stress-related diseases. And they’ve also committed to quality of life, too. Among other things, NEOM will feature the highest rate of Michelin-starred restaurants in the world. Such blanket claims make the more realistically creative ones seem questionable.
It goes without saying that the vision of NEOM is something out of the Jetsons. It’s easy to write it off as crazy, but there are also facets of the vision that truly are the cutting edge for cities. After a century of roadways, on the dawn of any measure of autonomous technologies, might flying vehicles be next? For a part of the world whose development is top-to-bottom unsustainable, could there be an approach to sustainability that’s far more ambitious than the current best practices? That creativity to challenge best practices is both NEOM’s greatest strength of opportunity and likely its greatest roadblock. There is some evidence that MBS understands this, as he’s allocated abundant cash to the effort, including more than it’s actually likely to cost. Whether that cash could go to something immediately more necessary has been hotly debated.
While KAEC’s development is often described in terms that make the city’s growth feel almost organic, like its creators are trying to rediscover a formula for organic city growth that has propelled the evolution of urban places for millenia, the vision for NEOM is more that of a project: a place, more like modern Dubai, that may suddenly appear as a great force in the world out of nowhere, something that will take far more money to achieve, and which may be the only thing capable of saving Saudi Arabia before its oil runs out.
The biggest hurdle to KAEC has been establishing the formula that can propel a new city to sustainable growth. And the biggest challenge to creating that formula at the outset involved a path to funding and implementation. NEOM has tried a different approach. While KAEC has been reactive in its funding, with its greatest successes the result of scrappy creativity in the period since its bankruptcy, MBS has raised the stature of NEOM by prioritizing funding for its development over other national initiatives. He's not messing around with complicated public-private schemes, but rather committing all the needed cash himself. To do this, he has established the world’s largest sovereign wealth fund to help, a $2 trillion pot of assets, four times the city’s projected cost, giving it plenty of room to try different things and fail.
It’s not a replicable model for the rest of the world, but if MBS can afford three failures along the way, maybe the country can, over up to four tries, perfect the formula for reinventing the city of tomorrow. This "freedom to fail" is the reason NEOM can be so creative. But it will certainly come at a price. If that is indeed how much the Kingdom expects to spend on NEOM, it represents approximately three years of 100% GDP for the country, all invested in this one project. To date the wealth fund has been invested widely, including $20 billion to an infrastructure investment fund with Blackstone, $45 billion in a Softbank fund, and a significant stake in Elon Musk’s Tesla. According to some reports, Saudi Arabia now owns more than 5 percent of the innovative automaker.
The commitment to making NEOM a success is not just financial. The language around NEOM suggests it will be developed much as though it is an independent country, and some reporting suggests it may involve the forcible relocation of 20,000 or more people to live there. This kind of investment is something KAEC has not benefitted from, and which would be antithetical to its ethos.
For all of its glowing sand, NEOM’s greatest innovations may not be in the realm of city planning or environmental sustainability. Rather, they’ll be in its experiments in eugenics and forced relocations, if either end up being part of its real identity. Ultimately, this may be the legacy of the 21st-century, in which the advancement of technology begins to merge with the potential to change who we are, fundamentally, as human beings – and for such opportunities to exert change on the world to tempt the palates of the world’s benevolent autocrats.
As NEOM is testing, the city of the future may not be so much an effort to create the ideal place for our flawed species to live, but it just maybe will be the inverse of that equation: a reinvention of us as human beings to better suit our future environments. NEOM is certainly challenging every convention on which we have built environments to make ourselves feel grounded. All while KAEC chugs along, modestly trying to rediscover that grounding in the desert heat.
Like siblings, the older one mature and grounded, the younger one a bit of a rabble-rouser. Can they find a way to get along?