In this photo released by Saudi Press Agency, SPA, Saudi Crown Prince Mohammed bin Salman and the others attend the opening ceremony of Future Investment Initiative Conference in Riyadh, Saudi Arabia, Tuesday, Oct. 24, 2017. Saudi Arabia's Crown Prince defended his bold reform plans, including the kingdom's decision to lift the ban on women driving, saying that "we were not like this in the past." (Saudi Press Agency via AP)

INTERNATIONAL - The $500billion (R7.1trillion) mega-city planned by Saudi Arabia will be floated on financial markets alongside oil giant Saudi Aramco as part of the kingdom’s drive to diversify away from oil, the crown prince saidon Wednesday.

The 26500 square km business and industrial zone, named NEOM, will extend into Jordan and Egypt. It was unveiled on Tuesday at an international investment conference. The surprise announcement is the latest - and most extraordinary - in a slate of privatisation programmes led by the floating of oil giant Saudi Aramco. The sales are designed to boost the Saudi economy and create jobs for millions of young people.

“The first capitalist city in the world This is the unique thing that will be revolutionary,” Crown Prince Mohammed bin Salman said. 

“Without a doubt, at the end of the day NEOM will be floated in the markets. The first zone to be floated in the public markets. It’s like floating the city of New York.” Prince Mohammed also said the Saudi Aramco IPO (initial public offering) was on track for next year, dismissing reports of delays and adding it could be valued at more than $2trillion.

The 32-year-old spoke on the sidelines of the Future Investment Initiative conference, which has attracted nearly 4000 delegates from around the world to Riyadh this week.

Switching between English and Arabic, sometimes in the same sentence, the prince seemed most excited discussing his plans for the new city.

Growth

Adjacent to the Red Sea and Gulf of Aqaba and near maritime trade routes that use the Suez Canal, the zone will be a gateway to the proposed King Salman Bridge, linking Egypt and Saudi Arabia.

NEOM will be fully owned by Saudi Arabia’s sovereign Public Investment Fund (PIF) until its listing, and will attract investments from companies in renewable energy, biotechnology, advanced manufacturing and entertainment, the PIF has said. “It won’t be listed in the markets until the idea is mature enough,” Prince Mohammed said. “It might be after 2030, it might be before, but the idea and the strategy is to float it eventually.”

The new city will not follow the rules and regulations enforced in the rest of Saudi Arabia, which imposes sharia law based on a strict Wahhabi interpretation of Islam. It will offer residents a more liberal lifestyle, allowing musical concerts and entertainment in a remote corner of the desert kingdom. The country has already started to relax some long-standing rules, including what was an effective ban on women driving.

He said the name mixed “neo”, meaning new, with M, the first letter of the Arabic word for future. The new city is part of the crown prince’s Vision 2030 plan to overhaul the economy of Saudi Arabia, Opec’s largest producer, and provide jobs for an overwhelmingly young population, amid a global oil price decline since 2014. Economic growth has slowed and the economy may shrink this year as the government introduces austerity measures.

“The idea is not to restructure the economy as much as to seize the opportunities available that we didn’t address before. We have high capacity and we use only a little.”

Prince Mohammed was next in line for the throne in June after the king, his father, removed a more senior prince from the succession. He has pledged to transform Saudi Arabia economically and socially.

“Vision 2030 is about a lot of big opportunities, so Aramco is one of them, NEOM another opportunityWe have a lot of huge projects we will announce in the next few years.”

He said PIF would generate higher returns than other big investment funds.

Qatar and Yemen

The prince said Saudi Arabia’s dispute with neighbouring Qatar had not affected investment. “Qatar is a very small issue,” he said. Saudi Arabia and three Arab allies cut diplomatic and transport ties with Qatar this year over accusations that Doha supported Islamist “terrorists”.

- REUTERS