Saudi forum expected to draw U.S. business leaders amid tensions

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DUBAI — A public spat between the United States and Saudi Arabia will not deter top Wall Street executives and American business leaders from a flagship investment event starting Tuesday where the kingdom will seek agreements to reduce the dependence of its economy on oil.

President Joe Biden has promised « consequences » for US-Saudi relations following an OPEC+ decision this month to cut oil production targets, which Riyadh has defended as serving market stability.

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The dispute was the latest shadow to cast over the annual Future Investment Initiative (FII), which has been hit by a Western boycott over the 2018 murder of Saudi journalist Jamal Khashoggi and the pandemic in 2020, leaving it far behind. from that of 2017. inaugural event that Riyadh called « Davos in the desert ».

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FII recovered in 2019 after outcry over the killing of Khashoggi by Saudi agents, attracting big names from financial, defense and energy companies with strategic interests in the world’s top oil exporter, but garnered relatively meager foreign entries.

More than 400 American delegates are expected this week, Richard Attias, CEO of the FII Institute, told Reuters, adding that it was the largest representation from a foreign country.

This year’s edition, which runs October 25-27, features JPMorgan boss Jamie Dimon, Pimco VP John Studzinski and a BNY Mellon executive as speakers, and they’re still planning to go, spokespersons for the companies told Reuters.

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

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JPMorgan and Goldman Sachs collected nearly $77 million and $42 million respectively in investment banking fees in Saudi Arabia last year, according to Refinitiv data. JPM remains at the top of the charts in 2022 with over $39 million to date.

« For the most part, I don’t see American companies actively avoiding Saudi Arabia due to recent political tensions, » said Adel Hamaizia, managing director of Highbridge Advisory and a visiting scholar at Harvard University.

« American companies will be an important partner in Saudi Arabia’s investment and growth plans, in traditional sectors, but also in ‘newer’ areas, including tourism, entertainment, electric vehicle production, technology and a nascent local defense industry, » Hamaizia said.

The IFI is a showcase for Crown Prince Mohammed bin Salman’s Vision 2030 development plan to wean the economy off oil by creating new industries that also generate jobs for millions of Saudis, and to attract foreign capital and talent.

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Foreign direct investment still lags behind targets, although there has been movement into new sectors as the kingdom opens up. While Boeing landed an $80 million defense contract last year, Fedex announced a 10-year, $400 million investment plan in the country, the Arab world’s largest economy.

At 15.3 billion riyals ($4.07 billion), inward FDI for the first half of the year was about a fifth of the $19.3 billion secured in 2021, which included an investment of 12.4 billion dollars for Aramco’s pipeline infrastructure.

It is well below the $100 billion per year target set for 2030 as part of a national strategy targeting foreign direct investment equivalent to nearly 6% of GDP by 2030.

Uncertainty persists around the regulatory and tax environment, as well as high operational costs and the lack of skilled local labor, even after Riyadh gave companies an ultimatum to set up regional headquarters in the kingdom of Morocco. 2024 or lose lucrative government contracts.

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« FDI flows have remained stubbornly flat and low, below 1% of GDP, and some of the notable names that have invested have had only modest success, even with government support, » said Justin Alexander , director of Khalij Economics and Gulf analyst at GlobalSource. The partners.

That left the Saudi government and the Public Investment Fund trying to deliver on the crown prince’s diversification promises, aided by a boon in petrodollars.

The deteriorating global economic outlook and volatility in the oil market have raised the stakes for the government in pursuing Vision 2030, which includes a $500 billion project to build a massive high-tech economic zone on the Red Sea called NEOM, intended to house nine million people. .

« The government cannot afford to stimulate economic development indefinitely, but at the moment there is no real alternative because domestic companies are not suited to play this role, and FDI continues to disappoint » , said Neil Quilliam, associate researcher at Chatham House. ($1 = 3.7575 riyals) (Reporting by Rachna Uppal and Yousef Saba, editing by William Maclean)



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