Saudi Arabia's New Murabba project to lure global investors, but at what cost?


Al-Monitor Pro Members


Dr. Robert Mogielnicki

Senior Resident Scholar, Arab Gulf States Institute in Washington 


March 7, 2023

Bottom Line:

Ambitious project announcements — such as New Murabba and its “immersive, experiential destination” of The Makaab — are becoming an increasingly common feature of Saudi Arabia’s developmental aspirations. New Murabba’s location on the outskirts of the capital Riyadh raises the political stakes associated with the development, increasing the likelihood that strong state support will be forthcoming. Yet many observers question the feasibility of building the “world’s largest modern downtown” by the 2030 deadline given the large supply of other nascent development projects in the country. There is no doubt, however, that New Murabba will further increase the funding obligations of the Public Investment Fund (PIF), the country’s $620 billion sovereign wealth fund.

Background Facts:
  • The recently established New Murabba Development Company (NMDC), which is backed by the PIF, will oversee this new downtown development project.
  • Crown Prince Mohammed bin Salman is chairman of NMDC.
  • Located in the northwest of Riyadh, the project plans to cover an area of 19 square kilometers and accommodate hundreds of thousands of residents. More than 25 million square meters of expected floor area will include around 104,000 residential units, 9,000 hotel rooms, and other retail space.
  • The project planners envision a plethora of sustainability-focused, high-tech, cultural and entertainment offerings, which serve as common dimensions of Saudi development initiatives under the leadership of Crown Prince Mohammed bin Salman.
  • At the heart of the development project is The Mukaab, a cubic landmark large enough to fit 20 Empire State buildings and hold “incredible state-of-the-art entertainment, dining and retail.”
  • The completion date for the project is 2030 — an important year for Mohammed bin Salman’s Saudi Vision 2030 agenda as well as the Saudi bid to host World Expo 2030.
  • Neom was announced in October 2017 and is only now moving “from the strategy and planning phase to execution,” according to a Neom CEO letter series from February 2023. New Murabba is, of course, a different project and does not have to contend with the logistical challenges of developing a remote location. Yet the desired timeline for completion nevertheless appears tight.
  • New Murabba may emerge as a domestic rival to Neom, potentially pulling away financial and human resources from existing initiatives. Neom has long been considered a top development priority for Crown Prince Mohammed bin Salman and the Saudi government. Analysts and observers refer to Neom as the crown prince’s “pet project,” and its reported $500 billion price tag reinforces its high prioritization.
  • The emergence of another high-tech development initiative under the PIF’s institutional umbrella, and which intends to serve as the “new face of Riyadh,” will likely heighten domestic competition for state support and foreign investments.
  • To ensure a more balanced development approach across the country, the PIF launched the Saudi Downtown Company in 2022. The company oversees downtown projects in 12 Saudi cities.
  • Saudi officials expect New Murabba to add around $48 billion to non-oil gross domestic product and create 334,000 direct and indirect jobs by 2030.
  • The announcement of the new project takes place amid a broader strategy to double Riyadh’s population over the decade from 2020-2030. In July 2020, the president of the Royal Commission for the City of Riyadh unveiled a $800 billion plan to improve the livability of the capital and boost economic growth.  
Alternative Scenarios:

Scenario 1: New Murabba eclipses the country’s existing giga- and mega-project portfolios and swiftly becomes a central development pillar of Saudi Vision 2030.

Any state-backed project to build an iconic, new face of Riyadh certainly deserves the attention of observers and analysts. Yet, the Saudi government is unlikely to gamble the success of Vision 2030 on an experimental development initiative — if the trend continues, many more such projects are likely to be announced in Saudi Arabia over the coming years. Planners are taking a risk that the “world’s first immersive, experiential destination….[with] ever-changing environments,” is what Riyadh’s current residents and future visitors to the country actually want.

It is likely that New Murabba will feature more prominently in Saudi Arabia’s country vision beyond 2030, when the project status and economic contribution is clearer. In the meantime, New Murabba will remain part of the PIF portfolio and Riyadh development strategy.

Scenario 2: New Murabba fails to garner the state financing and private investments needed to succeed. The project never moves to the implementation stage or becomes a white elephant.

Although Saudi Arabia’s government registered a strong fiscal year in 2022, a smaller surplus is expected in 2023. Brent crude prices are likely to retreat from a high of $100.94 per barrel in 2022 to $83.63 in 2023 and $77.57 in 2024, according to the US EIA. Historic levels of foreign direct investment into Saudi Arabia since 2008/09 have been decreasing, stagnating or dependent upon a small number of large deals in the oil and gas sector.

Yet the Saudi government can marshal funds from a variety of sources to support this initiative. Beyond the PIF, which has benefitted previously from capital injections and asset transfers from the government, the Saudi government could allocate more capital expenditures toward the project or dip into other state-owned funds at its disposal. The government may also press national champions to support New Murabba through public-private partnerships like the Shareek Program which holds in its portfolio some of the country’s largest companies.

Conclusion – Most Likely Scenario:

The project is still in its early days — the crown prince only announced NMDC on Feb. 16, 2023. Figures associated with New Murabba, especially cost projections, are either scarce or nonexistent. Whatever the costs, state support is likely to be forthcoming, given the higher political stakes attached to a project located in the capital of Riyadh. The conceptual, planning and early implementation stages of this project will be welcomed by global architecture firms, developers, and construction companies. However, an increasing supply of nascent Saudi giga- and mega-projects will not necessarily increase the valuation potential and attractiveness to investors over the medium and long terms. Without successful examples of completed projects, a crowded project pipeline may produce the opposite effect.

Contributor Background:

Dr. Robert Mogielnicki’s professional affiliations span top-tier research institutes, academic institutions, NGOs and consultancies. He is a Senior Resident Scholar at the Arab Gulf States Institute as well as an Adjunct Assistant Professor at Georgetown University and a Professorial Lecturer at George Washington University. He serves as an Adviser with Freedom House and an External Consultant with Eurasia Group. Dr. Mogielnicki is the author of "A Political Economy of Free Zones in Gulf Arab States" (Palgrave Macmillan 2021), and he is currently working on an edited volume about the political economy of sovereign wealth funds in the Middle East and Asia. He is a Term Member at the Council on Foreign Relations and a member of the Board of Advisers at Henley & Partners, an investment migration firm. The Middle East Policy Council listed Dr. Mogielnicki in their inaugural 40 Under 40 awards for influential Middle East experts. He holds a DPhil from Magdalen College, University of Oxford.

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