Despite tensions, Saudi forum will attract U.S. business leaders

  • Despite political friction, U.S. executives head to kingdom
  • Riyadh strives to diversify oil-dependent economy
  • Investment levels remain below target
  • For now, oil windfall helps states push

DUBAI, Oct 23 (Reuters) – A public spat between the United States and Saudi Arabia will not deter Wall Street executives and U.S. business leaders from participating in a flagship investment event starting on Tuesday as the country seeks deals to reduce its economy Dependence on oil.

President Joe Biden has vowed to have “consequences” on U.S.-Saudi relations over this month’s OPEC+ decision to cut oil production targets, which Riyadh argues will help stabilize markets.

The dispute is the latest in the shadow of the annual Future Investment Initiative (FII), which has been hit by Western backlash over the 2018 murder of Saudi journalist Jamal Khashoggi and the 2020 pandemic, making it a far cry from 2017, which Riyadh calls “a desert in the desert”. Davos” inauguration.

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The FII resumed in 2019 after the uproar over the killing of Khashoggi by Saudi agents, attracting prominent figures from financial, defense and energy companies with strategic interests in the world’s largest oil exporter, but with relatively little foreign inflows.

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

This year’s edition runs in October. Spokesmen for the companies told Reuters that JPMorgan Chase President Jamie Dimon, Pacific Investment Management Co. Vice Chairman John Stuzinski and a BNY Mellon executive served as speakers on the 25th and 27th. , they still plan to go.

Executives from Goldman Sachs, Blackstone, Bridgewater, Boeing and Franklin Templeton are all on the agenda. Goldman declined to comment and the rest did not respond.

JPMorgan and Goldman Sachs spent nearly $77 million in investment banking in Saudi Arabia last year and $42 million, respectively, according to Refinitiv data. JPMorgan remains at the top of the list with over $39 million in assets through 2022.

“I don’t see U.S. companies actively avoiding Saudi Arabia because of recent political tensions,” said Adel Hamaizia, managing director at Highbridge Advisory and a visiting scholar at Harvard University.

“U.S. companies will be important partners in Saudi investment and growth plans, both in traditional sectors and in ‘new’ areas such as tourism, entertainment, electric vehicle production, technology and the burgeoning local defense industry,” Hameziah said .

FII showcased Crown Prince Mohammed bin Salman’s Vision 2030 development plan, which aims to create jobs for millions of Saudis by creating new industries and attract foreign capital and talent, Thus freeing the economy from dependence on oil.

Foreign direct investment was flat

Foreign direct investment remains behind target, despite changes in new sectors as the kingdom opens up. FedEx announced a $400 million 10-year investment plan in the Arab world’s largest economy, following Boeing’s $80 million defense contract last year.

Foreign direct investment inflows in the first half of the year stood at 15.3 billion riyals ($4.07 billion), about a fifth of the $19.3 billion received in 2021, including a $12.4 billion investment in Saudi Aramco’s oil pipeline infrastructure.

That’s well short of the 2030 target of $100 billion a year, according to a national strategy that aims for foreign direct investment to approach 6 percent of GDP by 2030.

Even after Riyadh issued an ultimatum to companies to set up a regional headquarters in Saudi Arabia by 2024 or lose a lucrative government contract, uncertainty remained about the regulatory and tax environment, high operating costs and a lack of skilled local labor.

Justin Alexander, Economics and Gulf analyst at Global Sources Khalij, said: “FDI flows have remained flat and low at less than 1% of GDP, with some prominent investment firms having only modest success even with government support. “partner.

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

A deteriorating global economic outlook and volatility in oil markets have increased the risk of the government’s implementation of Vision 2030, which includes a $500 billion project to build a huge high-tech economic zone called NEOM in the Red Sea, ultimately designed to house 9 million people .

“Governments cannot drive the economy indefinitely, but there is currently no real alternative because domestic firms are not fit to play the role and foreign direct investment continues to disappoint,” said Chatham House associate fellow Neil Quilliam. .

(1 USD = 3.7575 rials)

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

Our Standard: The Thomson Reuters Trust Principles.

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