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NEOM’s Mirage? Vision 2030 flagship faces budget cuts, construction stalls

Published: 22 May. 2025, 19:19

An image of The Line, a residential area of the NEOM city [SCREEN CAPTURE]

NEOM, the ambitious megacity rising from the Saudi Arabian desert and once heralded as a symbol of futuristic urban planning, seems to be stuck in a sandy storm.

A combination of falling oil prices, fiscal strain in the kingdom and growing geopolitical risks in the Middle East have cast doubt on the viability of the $500 billion future city project, leading Korean construction companies to wait anxiously for the skies to clear up.

On May 15, Saudi Arabia officially announced Aiman Al-Mudaifer as the CEO of NEOM, the company overseeing the development of the project. He has “in recent weeks launched a 'comprehensive review' of the scope and priority of projects,” according to a Financial Times article on April 28.

NEOM authorities said in a statement that it was entering a “new phase of delivery.” The main projects at NEOM were being “reviewed in terms of their scope,” according to the Financial Times report.

“NEOM has struggled with projects running over budget and timelines and drawn skepticism from inside and outside the kingdom since its launch in 2017,” read the report.

Spanning 26,500 square kilometers — 44 times the size of Seoul — Neom is a central pillar of Saudi Arabia’s national development strategy. Citing internal documents, the Wall Street Journal reported in March that the project’s cost could balloon to $8.8 trillion by its completion in 2080, far exceeding the original $500 billion estimate.

Facing repeated delays and downscaling, NEOM has revised its 2030 population target from 1.5 million to fewer than 300,000. The initial phase of its flagship linear city, “The Line,” will now cover only 2.4 kilometers (1.7 miles) of the planned 170-kilometer stretch.

An image of The Line, a residential area of the NEOM city [SCREEN CAPTURE]

An image of Trojena. a unique travel destination in the mountains of NEOM [SCREEN CAPTURE]

A key reason behind the retrenchment is the kingdom’s deteriorating fiscal health. Saudi Arabia’s Ministry of Finance reported a $30 billion rise in net national debt in the first quarter of 2025 — the sharpest quarterly increase on record. The country’s total debt now stands at $354 billion, or about 30 percent of its GDP.

State-run oil giant Aramco, which serves as a major source of government revenue, saw its net income decline by 4.6 percent year-on-year in this year's first quarter, its dividend payouts were slashed by 30 percent. Efforts to attract private investment have also faltered amid heightened regional tensions.

A drop in global oil prices has further strained Saudi finances. While crude traded at $75 to $80 per barrel earlier this year, it has since fallen by around 20 percent as of May. Goldman Sachs warned that if prices dip to $62 a barrel, the kingdom's budget deficit could double.

Korean companies have also begun to feel the ripple effects.

In 2022, the Samsung C&T and Hyundai Engineering & Construction consortium won a construction project to lay the tunnel grounds of 28 kilometers of the “Running Tunnel” — an underground tunnel for high-speed and freight rail lines under The Line. The consortium won the $1 billion deal, but has not been able to go further than the 30-percent progress since late last year, according to industry sources.

Samsung Electronics Executive Chairman Lee Jae-yong takes a look around the Neom megacity project in Saudi Arabia on Oct. 1, 2023. [SAMSUNG ELECTRONICS]

Hyundai Motor Group Executive Chair Euisun Chung tours a Hyundai Engineering & Construction tunnel construction site at The Line, a residential area of Saudi Arabia’s mega-project Neom City, on Oct. 23, 2023. [HYUNDAI MOTOR]

Sungshin Cement even established a local subsidiary and operational plant in 2023 to supply ready-mix concrete for the tunnel. The venture suspended operations earlier this year and has partially withdrawn staff from the site.

“We have not yet set a date for reopening the plant,” said a Sungshin Cement official. “The remaining staff are now looking into other local business opportunities.”

“The Saudi government seems to be prioritizing funds for international events like the 2029 Asian Winter Games, 2030 World Expo and 2034 World Cup, which cost a lot,” said an official at the International Contractors Association of Korea. “NEOM appears to have been pushed down the list.”

A partner at Crescent Consulting, a consulting firm specializing in oil and gas companies, added, “Since 2023, NEOM has been pivoting toward tourism-focused developments. Middle Eastern projects always carry chronic risks of scale-back or cancellation, so Korean firms must remain prepared.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY PARK YU-MI, LEE HYEON [[email protected]]