NEOM: Understanding Saudi Arabia’s Visionary Project

Saudi Arabia’s NEOM project is a futuristic, high-tech city aiming for sustainability, innovation, and economic diversification. Despite securing major investments, it faces financial, geopolitical, and environmental challenges.

By Sudhanshu Singh

In this article, we discuss the project’s background, key government support, recent strategic deals, and challenges confronting NEOM’s project execution.

Scale of Saudi Arabia’s NEOM Project

The NEOM Project, announced in 2017, occupies a strategic vantage point along the Red Sea. The word “NEOM” is derived from the Greek term “Neo” (new) and the Arabic word “Mostaqbal” (future), meaning a “New Future”.

NEOM encompasses tourist destinations, industrial zones, data and research centers, such as The Line (a linear smart city), Oxagon (a floating industrial city), and Trojena (a sustainable mountain tourism destination).

Key features of NEOM

NEOM, situated strategically in Saudi Arabia’s Tabuk province, is within a six-hour flight of 40 percent of the world’s population. It presents investment opportunities across 15 sectors, creating scope for substantial job creation and attracting new residents.

NEOM’s location provides access to 13 percent of global trade passing through the nearby Red Sea. It leverages cutting-edge technology, incorporating artificial intelligence (AI), robotics, and sustainable practices.

Key benefits of doing business in NEOM are:

• Aligning with the Saudi goal of economic diversification: Reduces Kingdom’s dependence on oil.
• Independent economic zone: NEOM operates under laws, taxes, and regulations aligned with global standards, distinct from the rest of Saudi Arabia.
• Investment and compliance: Provides 100 percent foreign ownership, zero corporate tax, and hassle-free business regulations.
• Sustainable: NEOM intends to accelerate the Kingdom’s efforts to transition away from fossil fuels towards renewable energy, such as green hydrogen, solar, and wind energy.
• Funding: The overall project is backed by funding from the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund.

Major developments and progress

Sindalah Island: Luxury tourism center

Sindalah Island, officially unveiled in October 2024, provides a touristic hotspot with high-end resorts and hotels, offering luxurious lifestyle for high-net-worth visitors. About 11 percent of travelers visiting NEOM are expected to visit Sindalah Island upon project completion.

The Line: A sustainable city

The Line is a linear city designed with sustainable, eco-friendly practices, and material to house millions of residents. Despite funding challenges leading to a downsize in the flagship project from 170 kilometers to 2.4 kilometers, The Line remains a lucrative project for foreign investment and aspirational residents. Its key features include:

• Hidden Marina: The first completed high-rise structure in The Line;
• Vertical living spaces: Residential, commercial, and leisure spaces are stacked vertically for efficiency; and
• Sustainability: Powered by 100 percent renewable energy to minimize carbon emissions.

Investment and strategic partnerships

NEOM has secured multiple strategic investment partnerships with leading global corporations and financial institutions for greenfield projects. To strengthen investor engagement, NEOM has developed two investment vehicles for streamlining and attracting foreign investors:

• NEOM Investment Fund focuses on strategic investments in sectors, such as AI, renewable energy, and digital transformation; and
• NEOM Investment Office facilitates real estate and infrastructure partnerships.

Biotechnology

NEOM has recently invested in Paradromics, Inc., a global leader in high-data rate brain-computer interface (BCI) technology. Paradromics BCI is useful in translating recorded brain signals into health data using AI, setting a benchmark in medical advancements.

AI data center initiative

In February 2025, NEOM signed a US$5 billion agreement with Saudi-based DataVolt at LEAP technology conference to establish an AI data center.

NEOM has also attracted other leading firms in cutting-edge technology and digital infrastructure, such as Aramco Digital, Salesforce Inc., Qualcomm Technologies Inc., and AI startup Groq Inc.

Green hydrogen development

NEOM Green Hydrogen Company (NGHC), in partnership with ACWA Power and Air Products, is building the world’s largest green hydrogen manufacturing plant in the Oxagon industrial zone. It has the potential to support the global climate change crisis, while facilitating innovation in green-tech.

The total project value stands at US$8.4 billion, with US$6.1 billion non-recourse financing secured from 23 international banks. The NGHC has concluded a US$6.7 billion Engineering, Procurement, and Construction (EPC) agreement with Air Products. It has signed an exclusive 30-year off-take agreement for all the green ammonia produced.

Infrastructure and scientific research

In terms of strategic collaborations, NEOM has partnered with leading global organizations to drive innovation, sustainability, and technological advancements:

• OceanX partnership: NEOM has collaborated with OceanX to explore the Red Sea, using multibeam sonar and the world’s largest underwater camera to map the seabed and study marine ecosystems. Underwater sea exploration provides impetus to marine tourism and scientific aid for marine life preservation.
• Van der Hoeven horticultural projects: NEOM has awarded Van der Hoeven a design, build, and operate contract for developing solar and seawater-driven cooling greenhouses to enable sustainable agriculture in NEOM’s extreme summer heat without using fossil fuels.
• Bechtel partnership: NEOM has selected Bechtel to oversee and develop a highly advanced transport system and resource-efficient utilities for NEOM’s cognitive cities.
• McLaren racing partnership: NEOM became the title partner of the NEOM McLaren Formula E Team and NEOM McLaren Extreme E Team to promote an all-electric race series under ‘NEOM McLaren Electric Racing’, bringing the two all-electric race series together for the first time.

Logistics

In terms of logistics, construction, and financial backing, NEOM has secured key partnerships to enhance infrastructure development and project execution:

• DSV joint venture: NEOM has signed a joint venture with DSV, one of the world’s leading logistics firms, to create an advanced logistics network for urban mobility.
• Partnership with Samsung: NEOM has partnered with Samsung to automate rebar production, enhancing construction safety for the workers and efficiency of the project.
• ECA with Sace: NEOM has successfully closed a landmark US$3 billion Export Credit Agency (ECA) financing deal with the Italian financial group, SACE, to support construction and project development. The deal is backed by a syndicate of nine global banks, including HSBC, Banco Bilbao Vizcaya Argentaria, Bank of China, Crédit Agricole CIB, Agricultural Bank of China, Citi, China Construction Bank, J.P. Morgan and Bank of America.

Key sectors for investments in NEOM

In terms of investment opportunities, NEOM presents lucrative prospects across various high-growth sectors, attracting global businesses and investors:

1. Renewable energy and green hydrogen

Investors in clean energy and sustainable infrastructure stand to benefit from government-backed initiatives.

2. AI and digital infrastructure

Companies specializing in AI, cloud computing, and data analytics can leverage opportunities in NEOM’s smart city framework.

3. Tourism and hospitality

NEOM aims to attract millions of high-net-worth travelers, creating opportunities for global hotel chains and luxury brands.

4. Advanced logistics and transportation

The region is set to become a key logistics hub, benefiting companies in freight, warehousing, and automated transportation systems.

5. Biotechnology and healthcare

Biotechnology, medical AI, and pharmaceutical companies can tap into NEOM’s push for futuristic healthcare solutions and catering to the health conscious lifestyles of high-net-worth residents.

6. Construction and smart infrastructure

Companies specializing in modular construction, sustainable building materials, and robotics-driven infrastructure are also looking at vast opportunities.

Risks and strategic considerations

Financial and investment challenges

• High cost and scaling issues: NEOM is projected to require over US$1.5 trillion in investment, making it one of the costliest infrastructure projects in history. Financial constraints have already led to the downscaling of The Line from 170 kilometers to 2.4 kilometers.
• Foreign investment dependency: NEOM is heavily reliant on international funding and foreign direct investment. Economic fluctuations and geopolitical instability can affect investor confidence.
• Budgetary adjustments: In April 2024, Saudi Arabia announced budget cut of 20 percent for projects under NEOM due to declining oil revenues.

Geopolitical and security risks

• Red Sea conflict: Frequent piracy and the recent string of Houthi attacks on ships navigating the Red Sea pose security risks for NEOM’s own infrastructure and tourism ambitions. Disruptions to supply chains and international trade routes could affect project timelines and investor confidence.
• Regional tensions: Saudi Arabia’s geopolitical posturing makes NEOM vulnerable to regional disputes, including tensions with neighboring countries that may impact stability.
• Tourism and safety concerns: Political instability in the Middle East may deter potential tourists and expatriates from moving to NEOM.

Environmental and sustainability challenges

• Energy and water supply: NEOM aims to be 100 percent powered by renewable energy, but its reliance on desalination plants for meeting water needs could negatively impact marine ecosystems.
• Climate adaptation risks: NEOM’s futuristic architecture and large-scale urbanization demand significant energy resources. Implementing sustainable cooling, waste management, and eco-friendly construction materials remain a challenge.
• Unproven technologies: Many of NEOM’s ambitious sustainability initiatives rely on emerging and untested technologies, adding uncertainty to their feasibility.

Way forward for businesses in Saudi Arabia’s NEOM

Seizing emerging opportunities

• Strategic alliances: Partnering with local firms and NEOM’s investment bodies can ease market entry and increase project approvals.
• Flexible investment models: Investors can explore joint ventures, equity investments, and long-term financing to balance risk and reward.
• Innovation-focused: Companies that are investing in smart city solutions, AI governance, and sustainable energy will be positioned as first movers.
• Infrastructure and construction: Businesses developing modular housing, smart grids, and sustainable urban design can leverage NEOM’s focus on next-generation city planning.

Mitigating business risks

• Diversification strategies: Businesses should hedge geopolitical risks by diversifying investments and securing contracts in multiple NEOM sectors.
• Regulatory compliance and tax advisory: Tax and professional service consultancies in the region can assist businesses in navigating Saudi Arabia’s evolving regulatory landscape.
• Market entry strategy consulting: Businesses can benefit from tapping into timely market intelligence, assessing optimal business setup procedures, and being aware of local cultural practices.
• Corporate governance and ESG advisory: Sustainability and governance firms will play a key role in aligning business operations with NEOM’s eco-friendly vision

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