Saudi Arabia considers public offering to fund Mecca megaproject
Saudi Arabia has asked US investment bank Lazard for ways to fund construction of its $500bn futuristic desert-city Neom, as well as a $27bn megaproject in the holy city of Mecca.
Saudi Arabia's Public Investment Fund (PIF) is considering selling debt from the projects and an initial public offering on the Saudi stock exchange. The sovereign wealth fund is chaired by Crown Prince Mohammad bin Salman and has more than $600bn in assets.
Bloomberg first reported Lazard was advising the sovereign wealth fund on Neom.
Neom is a centrepiece of the crown prince's efforts to transform the oil-rich kingdom's economy away from petrodollars.
The project includes a 170km straight-line city, touted to be 33 times the size of New York City, an eight-sided city that floats on water, a ski resort with a folded vertical village, and other eyebrow-raising ideas, such as flying elevators and an urban spaceport.
The project has been moving slowly and there has been little headway on some of the more lavish initiatives such as flying cars. Meanwhile, employees at Neom have complained of a toxic work culture.
Neom CEO Nadhmi al-Nasr once threatened to "pull out a gun and start shooting if he wasn't told who was to blame" for two e-sports companies cancelling a partnership with Neom over human rights concerns.
Mecca megaproject
On Tuesday, Reuters reported Lazard was also developing financing options for Masar, a 1.2 million square metre urban development project in the western part of Mecca.
The project is centred around the construction of a 3,650-metre pedestrian boulevard leading to Al Haram Mosque, flanked on each side by new roads. The development will include retail, commercial, and residential units, with a focus on tourism. A new bus and metro line will also be constructed.
About two million people visit Mecca each year to perform the Islamic pilgrimage of Hajj. Saudi Arabia has hoped that its existing religious tourism industry will give it an edge as it looks to diversify the sector and compete with established regional tourism players such as the UAE and Egypt.
The new project is expected to receive 80 percent of visitors to Mecca as well as more than 60 percent of vehicles arriving from Jeddah.
According to Reuters, Masar was planning an IPO for next year, but the timing may be pushed back as financiers try to determine the value of the project.
Working on Neom and Masar is a coup for Lazard, which has been cultivating the Saudi market since it hired Citigroup’s former chief executive in the kingdom, Wassim al-Khatib, who was a central player in Aramco's record $29.4 bn initial public offering in 2019.
Saudi Arabia is enjoying an economic boom on the back of rising energy prices and business reforms. The IMF predicts Saudi Arabia will have the fastest rate of growth among G20 countries this year.
Unlike previous oil-fuelled upswings, which traditionally saw an increase in handouts to citizens and public salaries, this time round the kingdom is investing in its economic diversification.
Western executives across industries have flocked to Saudi Arabia as the country opens up its economy, demonstrating the extent to which the kingdom's business environment has been immune from rising tensions with Washington and criticism from human rights groups.
Middle East Eye propose une couverture et une analyse indépendantes et incomparables du Moyen-Orient, de l’Afrique du Nord et d’autres régions du monde. Pour en savoir plus sur la reprise de ce contenu et les frais qui s’appliquent, veuillez remplir ce formulaire [en anglais]. Pour en savoir plus sur MEE, cliquez ici [en anglais].
