Execution of NEOM Projects

Key Points

• Execution Approach: NEOM projects are executed in phases, focusing on modular construction, advanced technology, and sustainability, with a significant emphasis on renewable energy and innovative urban planning.
• Compliance Requirements: NEOM must adhere to Saudi Arabia’s Vision 2030 goals, international standards like the Equator Principles, labor laws, environmental regulations, and transparency guidelines to ensure ethical and sustainable development.
• Challenges: High costs, human rights concerns, environmental impact, and transparency issues pose significant compliance challenges.

Execution of NEOM Projects

NEOM, a flagship initiative of Saudi Arabia’s Vision 2030, is a massive urban development project in the northwest of the country, spanning 26,500 km². Launched in 2017 by Crown Prince Mohammed bin Salman, it aims to create a futuristic, sustainable city with regions like The Line, Oxagon, Trojena, and Sindalah. Here’s how these projects are being executed:

Phased Development and Modular Construction

NEOM’s execution is structured in phases to manage its ambitious scale. The project, originally planned to have major parts completed by 2020, has faced delays, with only Sindalah Island opening in October 2024, three years behind schedule and at three times its initial cost. The Line, a 170-km linear city, was scaled back to 2.4 km for its first phase, with completion now targeted for 2034, though Saudi officials deny these adjustments. Over one-third of NEOM’s construction uses modular techniques, allowing for off-site manufacturing to enhance efficiency and reduce on-site disruptions. This approach is expected to generate an annual demand for modular technology exceeding $1 billion after the initial phase.

Advanced Technology and Sustainability Focus

NEOM is designed as a “living laboratory” for innovation, integrating cutting-edge technology into its execution. The project prioritizes sustainability, aiming to be powered by 100% renewable energy through solar, wind, and hydrogen sources. For instance, a $186 million solar panel factory in Tabuk supports NEOM’s energy needs, while a hydrogen-based ammonia plant by Green Hydrogen Company uses battery storage and energy transmission infrastructure. Water scarcity is addressed through solar-powered desalination plants, such as one developed with Solar Water Plc, which operates on a zero liquid discharge system to minimize marine impact. The Line is planned as a car-free city, relying on autonomous electric vehicles and public transport to reduce air pollution, with air quality monitored by advanced systems.

Key Regions and Progress

• The Line: A 170-km linear city (scaled back to 2.4 km for Phase 1) designed to house 9 million residents, featuring mirrored skyscrapers and a pedestrian-centric layout. Only two buildings were completed by July 2022, with the first half-mile section now targeted for 2034.
• Oxagon: A floating industrial complex and port, envisioned as the largest of its kind, focusing on advanced manufacturing and logistics. It aims to connect to The Line and Neom Bay Airport, with the onshore portion expected by 2030.
• Trojena: A mountain tourism destination with a ski resort, set to host the Asian Winter Games in 2029. It features 36 km of ski slopes and a year-round moderate climate.
• Sindalah: A luxury island resort on the Red Sea, the first region to open in 2024, offering high-end resorts and an 86-berth marina for the yachting community.

Execution Partners and Workforce

NEOM collaborates with international firms like Mott MacDonald, which manages city infrastructure for The Line’s Phase 1, and Bureau Veritas, providing quality compliance services for three years across projects like renewable energy plants and rail infrastructure. The workforce includes thousands of employees from over 100 nationalities, with communities already established on-site. However, labor practices have drawn criticism, with reports of 21,000 migrant worker deaths since 2016, highlighting significant human rights concerns.

Financial Backing

NEOM is primarily funded by Saudi Arabia’s Public Investment Fund (PIF), which has allocated $500 billion, supplemented by local and global investors. The project’s total cost is estimated to exceed $8.8 trillion, making it one of the costliest infrastructure initiatives globally. Financial constraints, including a 20% budget cut in April 2024 due to declining oil revenues, have led to scaling back ambitions, such as reducing The Line’s resident target from 1.5 million to 300,000 by 2030.

Compliance Requirements for NEOM Projects

NEOM’s execution must comply with a range of Saudi and international standards, given its scale, environmental goals, and global investment. Here are the key compliance requirements:

Alignment with Vision 2030

NEOM is a cornerstone of Saudi Arabia’s Vision 2030, which aims to diversify the economy away from oil. Compliance involves meeting Vision 2030’s sustainability and economic diversification goals, such as achieving net-zero carbon emissions by 2030 and creating 460,000 jobs. This requires NEOM to prioritize renewable energy, with 95% of its land set aside for conservation, and to foster innovation across 14 sectors like biotech, design, and construction.

Environmental and Sustainability Standards

• Net-Zero Carbon Goals: NEOM aims to be a net-zero carbon city by 2030 and climate-positive thereafter, removing more CO₂ than it emits. This involves using renewable energy sources (solar, wind, hydrogen) and minimizing environmental impact through zero liquid discharge desalination plants. However, the carbon footprint of building in a desert environment, including mirrored skyscrapers, raises concerns about true sustainability.
• Equator Principles: As a mega-project, NEOM must adhere to the Equator Principles, which guide environmental and social risk management. This includes assessing the impact of desalination plants on marine ecosystems and managing the energy-intensive construction process.
• Biodiversity Conservation: NEOM includes a 25,000 km² natural reserve to protect endangered species like the Arabian Oryx and Nubian Ibex. Compliance with Saudi Green Initiative standards involves relocating wildlife and ensuring their adaptation, as seen in the December 2022 release of animals into the reserve.

Labor and Human Rights Compliance

• Labor Laws: Saudi Arabia’s labor reforms under Vision 2030 have removed some restrictive practices, like requiring sponsor consent for migrant workers to change jobs. However, NEOM has faced allegations of labor abuses, including 21,000 migrant worker deaths since 2016, reported by ITV’s documentary. Compliance with international labor standards, such as the OECD Guidelines for Multinational Enterprises, requires rigorous oversight of subcontractors to ensure ethical working conditions.
• Human Rights Concerns: The forced eviction of the Huwaitat tribe, with reports of lethal force and executions of dissenters, has drawn criticism from the UN. NEOM must comply with human rights frameworks, ensuring fair treatment of local communities and workers.

Transparency and Governance

• OECD Guidelines: The OECD Guidelines for Multinational Enterprises emphasize transparency in large-scale projects. NEOM’s lack of public disclosure on funding and progress risks mismanagement and corruption, especially with PIF’s $925 billion investment. Regular progress reports and funding transparency are required to maintain public and investor trust.
• Corporate Governance: NEOM operates as an independent economic zone with its own laws and regulations, offering 100% foreign ownership and zero corporate tax. Compliance with global standards involves aligning with international investment norms, as advised by consultancies like Dezan Shira & Associates, to attract foreign direct investment (FDI).

Quality and Operational Compliance

• Quality Standards: Bureau Veritas provides quality compliance services for NEOM, ensuring construction aligns with design and project decisions. This includes quality control, vendor services, QA management, and auditing across projects like renewable energy plants and rail infrastructure.
• Regulatory Compliance: NEOM must navigate Saudi Arabia’s evolving regulatory landscape, including tax laws and business setup procedures. Compliance with local cultural practices and legal frameworks, such as avoiding content that conflicts with Islamic principles, is also critical.

Geopolitical and Security Compliance

• Red Sea Conflict: Houthi attacks and piracy in the Red Sea pose security risks to NEOM’s infrastructure and tourism goals. Compliance with international maritime security standards is necessary to protect supply chains and trade routes, especially for Oxagon, a logistics hub.
• Geopolitical Risks: NEOM’s reliance on FDI makes it vulnerable to geopolitical instability. Diversifying investments across multiple sectors, as recommended by Middle East Briefing, ensures compliance with risk management strategies.

Challenges in Execution and Compliance

• High Costs and Scaling Issues: NEOM’s $8.8 trillion cost, coupled with budget cuts due to low oil prices, has led to scaling back, such as reducing The Line’s length. This challenges financial compliance and investor confidence.
• Human Rights Violations: The treatment of migrant workers and the Huwaitat tribe raises serious compliance issues. International firms like Mott MacDonald and Bechtel, involved in NEOM, face reputational risks due to their silence on these allegations.
• Environmental Concerns: Despite sustainability goals, the energy-intensive construction and desalination plants pose environmental risks, challenging NEOM’s net-zero claims.
• Transparency: NEOM’s opacity, with limited official updates, risks non-compliance with international transparency standards, potentially leading to mismanagement or fraud.

Conclusion

NEOM projects are executed through phased development, modular construction, and advanced technology, aiming for sustainability with renewable energy and innovative urban planning. Compliance requirements include aligning with Vision 2030, adhering to environmental standards like the Equator Principles, ensuring labor and human rights compliance, maintaining transparency per OECD guidelines, and meeting quality and regulatory standards. However, challenges like high costs, human rights concerns, environmental impact, and lack of transparency pose significant hurdles. Addressing these through rigorous oversight and ethical practices is crucial for NEOM’s success as a global model for sustainable urban development.