Saudi Arabia forum set to attract US business leaders despite tensions

• Despite political friction, US officials head to the Kingdom
• Riyadh seeks to diversify oil-dependent economy
• Investment levels remain below target
• Oil windfall is driving state development for now

DUBAI (Reuters) – A public spat between the United States and Saudi Arabia will not deter Wall Street executives and U.S. business leaders from major investment events that begin on Tuesday. .

President Joe Biden vowed there would be “consequences” for US-Saudi relations over OPEC+’s decision this month to cut oil production targets.

The controversy is the latest shadow cast on the annual Future Investment Initiative (FII), which has been hit hard by the 2018 Western boycott over the 2018 murder of Saudi journalist Jamal Khashoggi and the 2020 pandemic. It became a far cry from. The first event that Riyadh called “Davos of the Desert”.

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The FII recovered in 2019 after a ruckus by Saudi agents over the murder of Khashoggi, attracting heavyweights from financial, defense and energy companies with strategic interests in Saudi Arabia, the world’s largest oil exporter. The influx from foreign countries was relatively small.

More than 400 U.S. delegates are expected to attend this week, FII Institute CEO Richard Attias told Reuters, adding that this was the largest number of foreign delegates.

This year, it runs from October 25-27 and features JP Morgan boss Jamie Dimon, Pimco vice chairman John Stazynski and BNY Mellon executives as speakers, but they’re still going. A spokesperson for both companies told Reuters it is planned.

Top executives from Goldman Sachs, Blackstone, Bridgewater Associates, Boeing and Franklin Templeton are on the agenda. Goldman Sachs declined to comment; the rest did not respond.

JP Morgan and Goldman Sachs made about $77 million and $42 million respectively in investment banking fees in Saudi Arabia last year, according to Refinitiv data. JPM will remain at the top of the league table in 2022 and so far he has made over $39 million.

Adel Hamazir, managing director of Highbridge Advisory and a visiting fellow at Harvard University, said, “For the most part, I don’t think US companies are actively avoiding Saudi Arabia because of recent political tensions. do not have.

“U.S. companies will be key partners for Saudi investment and growth plans, not only in traditional sectors, but also in ‘new’ areas such as tourism, entertainment, EV production, technology and the nascent local defense industry. wax.

The FII is a showcase for Crown Prince Mohammed bin Salman’s Vision 2030 development plan, which aims to move the economy away from oil by creating new industries that will create jobs for millions of Saudis, and attract foreign capital and talent. attract the

FDI Flat

Foreign direct investment still lags behind its targets, although there have been moves in new areas with the opening up of the kingdom. Just as Boeing won an $80 million defense contract last year, FedEx announced plans to invest $400 million over 10 years in the Arab world’s largest economy.

Inward FDI in the first half of the year was 15.3 billion riyals ($4.07 billion), about one-fifth of the $19.3 billion secured in 2021. This included his $12.4 billion investment in Aramco’s oil pipeline infrastructure.

This is well below the 2030 target of $100 billion a year under the national strategy to bring foreign direct investment to almost 6% of GDP by 2030.

Even after Riyadh has presented companies with an ultimatum to locate regional headquarters in the Kingdom by 2024 or lose lucrative government contracts, the regulatory and tax environment, high operating costs and a skilled local labor force remain. Uncertainties remain, such as the shortage of

“FDI flows are stubbornly flat and low, at less than 1% of GDP, and some of the prominent names that have invested in them are backed by government support,” said Justin Alexander, Gulf analyst and director of Karij Economics at Global Sources. Even if there is, it has had only modest success.” partner.

This has left the Saudi government and public investment fund to try to deliver on the crown prince’s promise of diversification, aided by the petrodollar windfall.

The deteriorating global economic outlook and oil market volatility have increased the need for governments to pursue Vision 2030. Vision 2030 includes his $500 billion project to build a gigantic high-tech economy in the Red Sea called NEOM, which he will eventually house 9 million people. .

“Governments can’t afford to push economic development indefinitely, but domestic firms are ill-suited to fill that role for the time being, and FDI continues to disappoint,” said Neil Quilliam, Associate Fellow of Chatham House. So there is no real alternative,” he said.

($1 = 3.7575 riyals)

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Reporting by Rachna Uppal and Yousef Saba, Editing by William Maclean

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