Saudi Arabia is an energy and financial powerhouse, blessed with incredible reserves of oil and gas, a tremendous amount of cash, and access to even more. The combination of these assets gives the Saudis great political power in the Middle East and regions far beyond.
But at some point, even massive energy deposits are depleted, and so is cash, and the Saudis are aware of this. That’s why they’re developing economic, cultural, and social projects to replace their oil revenues and make the country a showcase of technology and innovation.
The Saudis do things in a big way, and this is no exception. A variety of analysts put the cost of these projects at $1 trillion, but some estimate it will be more than three times this amount. Cost overruns, which are frequent in large construction projects, could make the final bill even higher. Whatever the actual cost you can be sure that engineering firms, architects, construction workers, and a host of support services are drooling.
The bills are starting to pile up, but the Saudis are confident that the cost will be worthwhile. In fact, they fully expect these projects to generate humongous revenues that will pour into the Kingdom every year.
In The Foreseeable Future
Among their most spectacular plans is The Line, a desert complex already under construction but that will take years more to complete. The Line is part of the Neom, a project pushed by the de facto ruler Prince bin Salman.
When completed, it will be a “mirror-wrapped ‘landscraper’ city whose images look straight out of a science fiction film,” writes The New York Post.
Its Twin Towers will stand 1,640 feet high – much higher than the Empire State Building, and even 380 feet taller than the World Trade Center; it will offer residents an artificial ski resort, robots, and AI.
But even this is only for starters. The development will stretch an unprecedented 75 miles across desert and mountainous terrain, and when completed will be filled with retail shops, residences, and offices.
As an example of how complex this project is to build, consider this: The construction over such a great distance will have to take into account the curvature of the Earth and other factors usually ignored by builders.
Ultimately, The Line will be home to 5 million residents, who will be able to purchase everything they need within a five-minute walk, an important factor since there will be no cars or roads in this city.
The Prince’s goal is for construction to be completed by 2030. Engineers, however, reportedly say this is way too optimistic, and a target of five decades is more realistic.
It remains to be seen whether the Saudis can become the powerhouse in tourism that it is now in oil, but even if not, tourism will still be an important business, as the Kingdom is home to the holiest sites in Islam.
Thousands of construction workers will be hired, and many others on a permanent basis. Some of these employees will be needed to develop attractions, such as a planned cruise industry, and build both luxury and economy lodging; others will be trained in more mundane occupations, such as tour guides.
Given the futuristic features and largesse of this project, other global tourist centers may feel pressured to modernize their own attractions or be relegated obsolete by comparison.
Trillion Dollar Club
This year, Saudi Arabia has joined a very exclusive club, one whose members have trillion-dollar economies. Only 18 other countries qualify for entry; the US tops the list, followed by China and Japan.
Until this year the Saudis had the world’s 19th largest economy – impressive, but still not quite large enough for admission. But so far, this year has been a very good one for oil producers because of sanctions imposed on Russian oil exports, OPEC’s agreement to cut production by 100,000 barrels/day, and other developments that will limit oil production.
Going forward, these developments will obviously benefit the Saudis (and other producers), and in fact already are. In the second quarter, for example, the Kingdom’s oil revenues soared by almost 90%, generating a hefty budget surplus of $20.8 billion. Analysts forecast that the good times will continue until at least the end of the year.
Oxford Economics expects the Saudi economy to pass the $1 trillion milestone this year; the Saudis are optimistic about a much longer time frame than that and think it will increase to $1.7 trillion by 2030.
They also believe they can attract 55 million tourists a year by 2030 – more than half the number that currently visit France, which is the most popular tourist site in the world. This means a lot of work will have to be done between now and then, as only 6.5 million foreigners visited in the first half of 2022. It also suggests the Kingdom will have to modify its views on issues like women’s rights and non-believers.
Let It Ride
The Saudis and bin Salman are making a humongous bet that they could move the country from one focused on energy to one that will be a tourist haven. They are confident the Kingdom can attract billions in foreign investment, become a center that develops high tech, and attract talent from around the world. They may be right.
But first they will have to develop something of a much more sobering nature: a state-of-the-art defense network to protect against terrorism, missile attacks, and other military threats. This will be no small feat, as the Kingdom, its riches, and strategic assets are already a very attractive target to certain hostile powers, and defending strategic projects that stretch across 75 miles will be a herculean task.
Having great wealth may not be the great blessing it appears to be, because along with it come endless threats, peril, and worry. The Saudis already know this because of their humongous energy deposits, but these lessons will be reinforced as The Line rises from the ground.
The Saudis have embarked on a journey few countries have ever dared to take before. We’ll soon find out if they’re up to this task.
Sources: dw.com; forbes.com; investopedia.com; nypost.com; wsj.com; zerohedge.com