The Saudi Arabian government has begun to award contracts for the development of a huge business zone in the northwest of the country, asking local construction companies to build five palaces there, sources close to the matter told Reuters.

Crown Prince Mohammed bin Salman announced plans for the 26,500 square km (10,230 square mile) zone, known as NEOM, at an international investment conference in Riyadh last October. Officials said public and private investment in the area was eventually expected to total $500 billion.

The palaces for the king, crown prince and other senior royals, to be located on the Red Sea coast about 150 kilometres (95 miles) west of the city of Tabuk, are among the first contracts awarded for NEOM, said the sources who declined to be named as an official announcement has not yet been made.

Robots may outnumber humans in a new pioneering city billed by Saudi Arabia as "a new blueprint for sustainable life", which would be entirely powered by renewable energy, and served by driverless vehicles and vertical farms.

The city called NEOM is to span an area of 26,500 square kilometres, stretching across the borders of northwest Saudi Arabia into Jordan and Egypt. It is designed to operate as an independent economic trade zone with its own laws, and is to become the first private business zone to span three countries.

Saudi Arabia will pump $500 billion (£382 billion) from its sovereign wealth fund, the Public Investment Fund, into nine key investment sectors in the city: energy and water, mobility, biotech, food, technological and digital sciences, advanced manufacturing, media, and entertainment.