While Saudi Crown Prince MBS wanted to reshape the kingdom’s economy by reducing its dependency on oil and focusing on luxury tourism, things are changing on a separate tangent. Forget the achievement of creating a luxury tourism hub, the sovereign wealth fund, the Public Investment Fund (PIF), has taken an $8 billion write-down on some of its most high-profile gigaprojects, such as $1.5 trillion Neom city. The write-off represents one of the largest financial course corrections in the PIF’s recent history. It comes on the heels of MBS laying off hundreds of employees and relocating more than 1,000 staff to curtail expenses.
The $1 trillion PIF valued gigaprojects on its books at 211 billion riyals ($56.24 billion) as of the end of 2024, over 12% lower than the 241 billion riyals in 2023, the company said in its 2024 annual report released Wednesday, per Reuters. The revision is a sharp perusal of projects underway, reflecting cost overruns, delays, and shifting market conditions, especially for the megaproject Neom City.
Designed with the intention of pioneering a new way of living in a space as big as Belgium, it was initially meant to house nine million people on the Red Sea. Of course, that has been downsized time and again, with The Line also going from 170 km to just 2.4 km.
The capacities have also been slashed accordingly, yet it seems the projects are not in sync with the Vision 2030 timeline. Still, the kingdom is giving priority to global sporting events, like the 2034 World Cup that it will host. “A more targeted investment programme with longer timelines is actually positive given the weaker oil revenue backdrop, and the large hosting events that Saudi has won. These were won after Vision 2030 was designed and will need significant investment,” said Monica Malik, Chief Economist, Abu Dhabi Commercial Bank.
The nation is also hosting the 2029 Asian Winter Games at the year-round ski resort Trojena. The cost has doubled over two years to $38 billion as of October 2024, according to Neom documents. Trojena has secured Saudi Arabia’s first W Hotel and a JW Marriott property, in addition to Chedi Trojena. One of the first projects to kickstart, along with the newly opened yet lukewarm Sindalah, it is set to host the 2029 Asian Winter Games and the prestigious 2030 Winter Olympics, but at an exceptionally high cost. Turns out, revisions aren’t such a bad idea when they save a few billion in the process.
