The GCC is entering a period of economic redesign. The region’s sovereign wealth funds are directing large amounts of capital into smart city projects because they see them as practical tools for long-term growth.
As global demand shifts toward cleaner energy, these funds are trying to reduce dependence on oil by creating new economic systems that can compete globally.
The result is a coordinated effort to build cities that support new industries, attract talent, and anchor future revenue streams.
Why Smart Cities Are Now an Economic Requirement
For decades, national growth across the GCC depended on hydrocarbons. That model is becoming less reliable as countries invest heavily in renewable energy and reduce long-term oil consumption.
Smart cities are now positioned as economic engines that can support non-oil sectors at scale.This shift is already visible in regional data.
Non-oil activity grew by 3.7 percent in 2024 and is expected to support average growth of 3.5 percent in 2025 and 4.2 percent in 2026. Governments and funds see this as proof that diversification is gaining momentum. Smart city infrastructure is meant to speed up that trend by giving businesses the digital systems, logistics, and regulatory clarity they need to expand inside the region rather than abroad.
Saudi Arabia’s Vision 2030 and the Scale of State Capital
Saudi Arabia’s Vision 2030 demonstrates how deeply national planning is tied to digital systems. Sixty six of its ninety six goals relate to data, broad digital capability, or artificial intelligence. NEOM is the most visible example. It is a multibillion-dollar program designed as an economic ecosystem with its own industries and long-term revenue potential.
Financing depends heavily on the Public Investment Fund. The fund aims to reach one trillion dollars in assets under management by the end of 2025 and has made NEOM a central priority. This priority status signals that the project is not a real estate initiative. It is part of a long-term plan to create a fully new set of industries inside the Kingdom.
Adjustments, Delays, and the Reality of Delivery
The scale of these ambitions has created practical challenges. Timelines for major NEOM assets, including The Line, have been revised. The full build out is now projected for 2045. By late 2025, only 2.4 kilometers of the planned structure had been completed. Reports of an eight-billion-dollar write-down added pressure to the fund’s budget and raised questions about sequencing and resource allocation.
These issues led the Public Investment Fund to adjust its strategy. After years of funding around one hundred companies across many sectors, the fund is now concentrating its activity into six focused ecosystems. This shift is not a retreat. It is an attempt to manage capital more carefully so the largest projects receive the attention and liquidity they require.
Other GCC States Are Following Their Own Models
While NEOM receives global attention, the rest of the GCC is also building digital-ready cities, but with different approaches.
The UAE has spent two decades developing areas such as Dubai Internet City, Masdar City, and key digital government programs. These initiatives focus on regulatory clarity, business services, and clear pathways for foreign companies entering the region. Doha and Manama have also increased spending on digital infrastructure to support finance, logistics, and research sectors.
These efforts show that smart cities are not a single model. Each state is choosing a different mix of planning, regulation, and capital deployment to build future industries.
Why Sovereign Wealth Funds See Smart Cities as Economic Multipliers
Smart cities are not only construction programs. They are structured to create long-term economic effects. This requires active investment in commercial activity, not only in roads and buildings.
The NEOM Investment Fund reflects this shift. It invests in businesses that can succeed inside NEOM and generate ongoing economic activity. Joint ventures are set up to support supply chains, create local manufacturing, develop skilled jobs, and support exports. This approach is designed to ensure the region benefits from both the construction phase and the decades of activity that follow.
Sovereign wealth funds across the GCC share this goal. They want cities that can support digital services, clean energy production, advanced logistics, and knowledge-based industries. These sectors help reduce fiscal dependence on hydrocarbons and anchor the region more firmly in global markets.
What This Means for the Region’s Future
Smart city spending is not going away. It will continue as long as governments see it as a practical path to diversification. The main challenge now is improving delivery timelines, strengthening local talent pipelines, and coordinating regulatory frameworks across the region.
If these elements align, the GCC could build a set of cities that rival major global hubs in efficiency, talent attraction, and commercial depth. If these elements remain fragmented, the region may face delays and higher development costs.
Either way, sovereign wealth funds have already committed the capital and set the agenda. The next decade will determine how well these cities convert long-term investment into sustained economic performance.
