Saudi Arabia’s Us$20bil megaproject won’t slow

RIYADH: Saudi Arabia is pushing ahead with a Us$20bil tourism and culture project in its capital despite the kingdom’s fiscal crisis, counting on a rebound in pent-up consumer spending when the global pandemic abates.

Officials have allocated funds for the mega-project in Riyadh, called “Diriyah Gate,” and Crown Prince Mohammed bin Salman told planners to move “full speed ahead, no slowdown,” according to Jerry Inzerillo, chief executive officer of the project’s development authority. Several parts of the project are in construction and the first phase should be completed by the end of 2023, he said.

“We don’t know the economic impact of Covid-19 over a 12, 24 or 36-month period,” Inzirello said in an interview this week. “But I can tell you one thing I know from his majesty the crown prince: It will not affect the planning of the principal city of Riyadh.”

The world’s largest oil exporter is facing a double crisis after spiking coronavirus cases and energy market turmoil saddled the government with a budget deficit that could rise to around 15% of gross domestic product this year.

Officials have nearly doubled their borrowing plans and implemented a series of austerity measures, including raising a value-added tax from 5% to 15%. Even some of the programmes under Prince Mohammed’s plan to diversify away from oil are facing spending cuts.

But the government is still investing heavily in other elements of the prince’s plan, called “Vision 2030.” Officials recently announced a Us$4bil tourism development fund and are moving ahead with several mega-projects, including Qiddiya, an entertainment city planned near the capital. Similar efforts in the past have struggled to get off the ground, such as a Us$10bil financial district in Riyadh.

Diriyah Gate plans to turn the ancestral home of the royal family into a sprawling tourism, culture and entertainment destination, with 20 hotels, 12 museums and a golf course built around a Unesco World Heritage Site. The project is a high priority for King Salman, a local history buff, and Prince Mohammed, his son, who is the kingdom’s de facto ruler.

The money to build it will come from the government as well as Saudi, Gulf and foreign investors, but if they hesitate in the current climate, the state could front funds to get it done faster, Inzirello said. Excavation is underway for major infrastructure and the first hotel.