Al Saud to Build Five Palaces amid Budget Deficit

At an international conference last October, Saudi Crown Prince Mohammed bin Salman unveiled plans to build a new city and business zone, known as NEOM and dubbed a city of the future, which officials say will be backed up by more than $500 billion in investment, Reuter reported.
 
Speaking on condition of anonymity, the sources said that the palaces for the king, crown prince and other senior royals, to be located on the Red Sea coast about 150 kilometers west of the city of Tabuk, are among the first contracts awarded for the mega city.
 
The construction giant Saudi Binladin Group has been mandated to build one of the palaces after some of its owners were targeted in bin Salman’s so-called anti-corruption purge, the sources said.
 
They said that banks have started offering financing facilities to builders of the palaces, but said they could not confirm the cost of the buildings.
 
According to officials, NEOM, with its own judicial system and legislation designed to attract international investors, is to focus on industries such as energy and water, biotechnology, food, advanced manufacturing and tourism.
 
Some companies, including Japan’s Softbank, have express their preparedness to invest in NEOM, but major, concrete business investments have not yet been announced.
 
Critics say the project is wasteful and ineffective in addressing the problems of the Saudi economy, including unemployment and dependence on oil.
 
The palaces add to the list of lavish spending by bin Salman, which his opponents say discredits his claims that he is fighting corruption.
 
Austerity measures were introduced by the government in response to the sharp drop in oil prices and revenues.
 
Saudi Arabia’s earnings from petroleum exports shrank to $134 billion in 2016, from $322 billion in 2013, the last full year before oil prices slumped (“Annual Statistical Bulletin”, OPEC, 2017).
 
As spending outstripped income, the country’s foreign reserves were depleted by $116 billion in 2015 and another $81 billion in 2016, according to statistics from the Saudi Arabian Monetary Agency.
 
Saudi Arabia’s official foreign assets have fallen by a third to $500 billion at the end of April 2017, from a peak of $746 billion in August 2014.