Crown Prince Mohammed bin Salman and Masayoshi Son, SoftBank chairman, in Riyadh on Tuesday © Reuters

Saudi Arabia unveiled a $500bn plan on Tuesday to create a vast economic zone in the kingdom’s north-west, the most ambitious and expensive project in Riyadh’s efforts to diversify the oil-dependent economy.

Details of the new city, called Neom, were released as Crown Prince Mohammed bin Salman hosted some of the world’s most powerful investors and bankers at a conference designed to showcase his vision to modernise the conservative kingdom and lure investment to the country.

Among the hundreds of business leaders in attendance were the chief executives of JPMorgan, BlackRock, Raytheon and Siemens, revealing the financial pulling power of the kingdom as Riyadh insists it is on schedule to privatise Saudi Aramco, the state oil company, next year.

However, the kingdom has been hit hard by low oil prices with economic growth expected to fall to 0.1 per cent this year, according to the International Monetary Fund. And Riyadh has previously struggled to implement far more modest projects that had similar goals of creating private sector jobs and helping wean the economy off its addiction to oil.

Prince Mohammed will oversee Neom, which will have its own regulatory environment and is intended to be financed by a combination of government spending, funding from the Public Investment Fund (PIF), the $230bn sovereign wealth fund, and private sector investment.

It will cover an area of 26,000sq-km on Saudi Arabia’s Red Sea coast and link in to neighbouring Jordan and Egypt. Its target is to attract investment in new technologies, including renewable energy and robotics, and contribute $100bn to gross domestic product by 2030.

The megaproject illustrates the ambitions of Prince Mohammed, who launched a National Transformation Programme last year with the aim of privatising state assets, creating 1.2m private sector jobs and reducing unemployment from 11.6 per cent to 9 per cent by 2020. But the challenge he faces was underlined last month when Riyadh announced it was redrafting the plan, stripping out some areas earmarked for change and extending the timeline of other targets.

It is also not the first time that the kingdom has outlined multibillion dollar plans for the creation of investment zones with relaxed social regulations to lure foreign investment A decade ago, it announced the launch of six new cities, but only one, King Abdullah Economic City, developed to any meaningful scale, while the others were either scrapped or downgraded.

Prince Mohammed insisted Neom, which is to be powered by renewable energies, would be different.

“We are under pressure to achieve something new in a short time . . . We don’t want to see, 15 years from now, that we missed opportunities that we could have included in the early plans for Neom,” he told the conference. “This challenge worries me, but I have no doubt that with hard work and in partnership with many around the world and inside Saudi Arabia, we will overcome this challenge.”

He also sought to allay concerns that his plans would be stymied by resistance from the powerful religious establishment or extremism, saying the country would restore a more “tolerant culture” that existed before the rise of Islamist movements after the 1979 Iranian revolution.

“Seventy per cent of the Saudi population are under 30. Honestly, we won’t waste 30 years of our life in dealing with any extremist ideas. We will destroy them today and immediately,” Prince Mohammed said.

Masayoshi Son, SoftBank founder, said the Japanese company would back the new project and was looking to invest in the kingdom’s electricity utility, Saudi Electricity Company.

“Through this investment in SEC we will make it into the next generation of new solar energy,” Mr Son said.

The PIF, which could become the world’s biggest wealth fund with the privatisation of Aramco, said last year it would invest $45bn in partnership with SoftBank to launch a new technology fund.

Amin Nasser, Aramco’s chief executive, said preparations for sale of 5 per cent of Aramco in 2018 were under way. But he said any final sign-off on the initial public offering would have to come from the kingdom’s highest authorities.

Klaus-Christian Kleinfeld, former chairman and chief executive officer of Arconic and Alcoa, the US companies, signed a contract with the Saudi crown prince on Tuesday to become chief executive of Neom.

A map published on the project’s website shows that the new economic zone would include the Red Sea islands of Tiran and Sanafir. The two islands have been under the control of Egypt, which in April 2016 agreed to hand them over to Saudi Arabia. Cairo’s decision sparked protests in Egypt and legal challenges in Egyptian courts.

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