Saudi Arabia will need to learn from the past for future mega-project success

03 September 2018 3 min. read

Saudi Arabia will need to learn from past mistakes with respect to its current pipeline of mega-projects, writes Dan Cooper, head of real estate development strategy and investment for Deloitte in the Middle East, in the summer edition of the firm’s local Point of View magazine.

Zooming in on the $500 billion NEOM city project, the bold 26,500 square kilometer modern land development on the Red Sea coast which serves as the centerpiece of Saudi Arabia’s ambitious economic diversification agenda – designed to boost foreign direct investment and stimulate employment in key growth sectors – Cooper argues that overall success will be dependent on whether the Kingdom has learnt from the shortcomings of past mega-projects.

These previous infrastructure projects, such as Riyadh’s King Abdullah Financial District (KAFD) and Jeddah’s King Abdullah Economic City (KAEC), Cooper contends failed to reach their full intended potential in attracting investment and stimulating enterprise and employment due to changing market dynamics and often a lack of alignment with immediate market requirements. To rectify the short-falls this time, Cooper says the government should pay closer attention to external market conditions.

“To succeed this time around, Saudi Arabia needs to scale and phase the planned mega projects in line with anticipated market demand, clearly differentiate the offer from current and planned competing schemes in the region and build a legal and regulatory environment that enables the foreign investment required to deliver these projects,” the Dubai-based director for Deloitte’s Middle East real estate and construction practice states in the Point of View thought piece.

Neom City Saudi Arabia

Meanwhile, Cooper’s cross-firm colleague Bart Cornelissen, who was recently promoted to managing partner of Monitor Deloitte in the Middle East, has pointed to potential lessons to be learned from further afield, this time with respect to the Kingdom’s slated $200 billion, 200GW solar power farm development backed by Softbank – which is intended to power NEOM and is by far the world’s largest proposed project of its type at 200 times the capacity of the next largest contender.

“Saudi Arabia has until now never attempted something on this scale using public financing,” Cornelissen told leading local industry publication Construction Week, adding that the only means to ensure project costs were kept under control was to build a consortium of stakeholders – with the alignment of goals difficult but not impossible. Saudi Arabia could learn, for example, a lot from how some countries in Northern Europe have approached consortia building when constructing their wind farms."

“These projects have many different key stakeholders and participants,” Cornelissen explained, citing a range of specialist infrastructure development requirements from engineering to construction to project management which could be contracted from differing firms. “Denmark, the Netherlands, and Germany have been very successful in making sure all these stakeholders come together successfully… The Saudi government now has to properly look into how it’ll secure financing, how to develop the field, and how to operate and maintain a huge project like this.”