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

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.

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.

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.