- U.S. executives head toward government despite political discord.
- Riyadh is trying to expand its oil-based economy.
- Investment levels are lower than planned
- For now, the oil windfall will help government development
Dubai, Oct 23, 2011 (AFP) – A public spat between the United States and Saudi Arabia will not deter top Wall Street executives and US business leaders from an investment event that begins on Tuesday, where the kingdom will seek deals to reduce its economy’s dependence on oil. .
President Joe Biden has promised “consequences” for US-Saudi relations with the OPEC+ decision this month, which Riyadh hopes will serve market stability.
It was the latest shadow cast on the annual Future Investment Initiative (FII) event, which was marred by the 2018 assassination of Saudi journalist Jamal Khashoggi and the pandemic in 2020. Riad opened the event with “Davos in the Desert.”
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FII in the year It has recovered from the turmoil caused by the assassination of Khashoggi by Saudi agents in 2019, drawing big names from financial, defense and energy companies with strategic interests in the world’s top oil exporter, while receiving relatively little foreign income.
More than 400 U.S. delegations are expected to attend this week, FII Institute CEO Richard Attias told Reuters, adding that it would be the largest foreign delegation ever.
This year’s edition, to be held Oct. 25-27, will feature speakers including JPMorgan chief Jamie Dimon, Pimco vice chairman John Stuzinski and a BNY Mellon executive who still plan to attend, spokespeople for the companies told Reuters.
Top executives from Goldman Sachs, Blackstone, Bridgewater Associates, Boeing and Franklin Templeton are on the agenda. Goldman Sachs declined comment, while others did not respond.
JPMorgan and Goldman Sachs made nearly $77 million and $42 million in investment banking fees in Saudi Arabia last year, according to Refinitiv data. JPM is currently at the top of the league standings at over $39 million in 2022.
“For the most part, I don’t see American companies avoiding Saudi Arabia because of the recent political tensions,” said Adel Hamaiziya, managing director of Highbridge Consulting and a visiting fellow at Harvard University.
“US companies will be an important partner for Saudi investment and development plans in traditional sectors but also in the ‘new’ fields of tourism, entertainment, EV production, technology and the nascent domestic defense industry,” Hamaiziya said.
FII is a showcase for Crown Prince Mohammed bin Salman’s Vision 2030 development plan to wean the economy off oil by creating new industries, creating jobs for millions of Saudis and attracting foreign capital and talent.
Despite the opening of the kingdom to new sectors, foreign direct investment is still lagging behind. As Boeing won an $80 million defense contract last year, FedEx announced a $400 million, 10-year investment plan in the Arab world’s largest economy.
At 15.3 billion riyals ($4.07 billion), foreign direct investment in the first half of the year was about a fifth of the $19.3 billion expected in 2021, including $12.4 billion in Aramco oil pipeline infrastructure.
In the year This is below the national strategy’s target of $100 billion per year by 2030.
Even after Riyadh issued an ultimatum to companies to locate regional headquarters in the kingdom by 2024 or lose lucrative government contracts, uncertainty has persisted over the regulatory and tax environment, as well as high operating costs and a shortage of skilled local labor.
“FDI flows are stagnant and low, less than 1% of GDP, and some of the big names that have invested have had modest success even with government support,” said Justin Alexander, director of global source Khalid Economics and Gulf analyst. Partners.
This has led the Saudi government and the Public Investment Fund to try to fulfill the Crown Prince’s pledge of diversification, aided by the windfall of the petrodollar.
A worsening global economic outlook and oil market volatility have raised the stakes for the government’s pursuit of Vision 2030, which includes a $500 billion project to build a giant tech economic zone on the Red Sea, NEOM, which will eventually house nine million people. .
Neil Quilliam, associate partner at Chatham House, said: “Government is not in a position to drive economic development indefinitely but there is no real option for the time being because local businesses are not qualified to play that role and foreign investment continues to be discouraged.”
($1 = 3.7575 riyals)
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Reporting by Rachna Uppal and Yousef Saba, editing by William McLean
Our Standards: The Thomson Reuters Trust Principles.