MAIN QUESTION: “WILL NW-EUROPEAN INSTITUTIONAL INVESTORS, BANKS AND HIGH-TECH COMPANIES ATTEND TOO?” The next weeks a media offensive is expected to be unleashed by US-Asian-Russian investment banks, institutional investors and high-tech companies vying for a share in Saudi Arabia’s ongoing economic diversification plans. Saudi King Salman and Crown Prince Mohammed bin Salman will courted again by the “crème de la crème” of New York, Chicago, Hong Kong, Moscow, and London financial markets.
Today’s statement made by US investment bank JPMorgan that Saudi Arabia is eligible to be included in JP Morgan’s key bond index from September 30 2019 does not come as a surprise. JP Morgan's EMBI bond index is a key performance benchmark for emerging market investors. The latter move follows already made statements that the Kingdom will be included into the FTSE and MSCI Emerging Markets Index. After years of being flushed with romantic pictures coming from the World Economic Forum meeting in the Swiss Alps, it seems now that real money makers and companies are looking at the “Davos in the Desert”, Saudi’s capital Riyad, where sun meets money.
The early indications are very positive, between 23-25 October Riyadh will again be flocked by over 3500 institutional investors and high-tech companies as the Future Investment Initiative 2018 (FII2018) will hit the town. The list is already impressive, bringing in names such as Blackrock, CitiBank, CreditSuisse, Softbank, Siemens, Olayan, Emaar, McKinsey etc, to Saudi Arabia to discuss the future of the Oil Kingdom, as it is stepping up its plans for an economic diversification until 2030 of unknown dimensions. As FII2017 already has shown to the attendees, the Kingdom is heading towards a totally new future, under the leadership of King Salman and Crown Prince Mohammed bin Salman.
As presented in Saudi Vision 2030, set up by Crown Prince Mohammed bin Salman, the Kingdom will be weaned off from its oil addiction, heading towards a sustainable high-tech future, delivering not only economic growth and strength but also the hard-needed 6 million jobs for young Saudis.
To support the latter endeavor, the global financial elite has been invited to come to the Kingdom, experience its drastic changes and full entry to the 21stCentury. As main supporter of this endeavor, the Saudi sovereign wealth fund PIF, in close cooperation with the Saudi Ministry of Economy, Ministry of Finance, Ministry of Infrastructure and the Ministry of Petroleum and Mines, has set up a program showing the upcoming strategic investment sectors being targeted. Based on Vision 2030, which is built on a strategy of Saudization of production and knowledge, in-Kingdom development and the inclusion of all Saudis, which means opening the total economy to female Saudis too, main targets set are impressive.
FII 2018 will bring together financial, technical and visionary parties discussing:
- Investing in Transformation – focusing on how the world’s top investors are creating new cities and transforming economies;
- Technology as Opportunity – considering how technologies are enabling new economic opportunities through personalization and industrialization at scale; and
- Advancing Human Potential – looking at a world where humans and machines work together to create safer, more productive and happier lives.
These focus areas will built upon progress made after FII2017, where the Public Investment Fund Program (2018-2020), one of twelve Vision 2030 Vision Realization Programs, was launched, targeting economic diversification and transforming the Kingdom into a global investment powerhouse. Some prime examples of FII2017 were the so-called Giga Projects, such as NEOM, the city of the future. At the 2017 edition, future initiatives also have been announced with Blackstone, SoftBank, Virgin Galactic, The Spaceship Company and Virgin Orbit. During FII2018 more focus will be put on issues surrounding the Cities of the Future (demographic shifts, megacities, industrial shifts, education, design, and partnerships to build a more sustainable future), Connectivity (AI-driven autonomous vehicles, corporate investments, and large-scale infrastructure), Energy (large scale changes to the current energy landscape) but also Tourism, Health-Tech, Media, and Talent (Education, as this is a major concern and stumble-block for diversification).
The coming months, FII2018 could be setting the scene for the long-awaited list of projects in the Kingdom, which are expected to be in infrastructure, high-tech, manufacturing, energy and agriculture. In contrast to FII2017, which has become known as the Giga Project Party, FII2018 could be presenting the building stones on which the Kingdom will need to be built. International investors and companies should be keeping an eye on all, as a major emerging market is presenting itself. Investments are needed, but projects are available. The Kingdom will now be reaping the reward of being included in the FTSE and MSCI Emerging Markets Index, opening the doors for all.
The main interesting question the coming weeks to be answered is “will European, and especially NW Continental (Netherlands, Belgium, Germany) or Former Eastern European (Poland, Tsechia, Hungaria, Rumania, Ukraine) also be attending. Looking at FII2017, global finance and technology was present, but Europeans were lacking in the attendance. The UK, Italy, Swiss and French, were present, but the Dutch, Germans or Eastern Europeans were absent. This time reasons to attend are clear, incentives to participate also. Saudi Arabia’s inclusion in the main Emerging Markets Indexes, combined with increased openness of the Saudi Stock Market, supported by 100% full foreign ownership of Saudi-based entities, present an opportunity of a life-time. In contrast to several critical reports on the Saudi economy, or stability of the Royal Family, a vibrant economy is starting to show signs of impressive growth. The need for foreign direct investments (FDI) is clear, as the multitrillion projects lines currently being presented or prepared to hit the market, will need not only financing but additionally long-term partnerships. For European institutional investors, pension-funds and banks, after being hit by sour going economic results in Turkey, Brazil and other regions, Saudi Arabia, and its surrounding region (UAE, Bahrain, Egypt), could be a welcome and stable new opportunity. Projected IPOs of government of semi-government owned entities, such as airports, ports or industry, present an attractive possibility. At the same time, taking into account continuing European emphasis on a full inclusive society (female-male), Corporate Social Responsibility (CSR) or Sustainability (Going Green), Saudi Arabia presents a grassroot opportunity to invest and shape the future of the Kingdom.
In a month, FII2018 reporting will be a critical assessment of the Kingdom’s future. Hopefully, this time reports will include the support and part-taking of high-tech manufacturing, energy, infrastructure and financial names from the Low Countries (Netherlands), Germany and even Poland, the Baltic or Balkan. It is now time to make clear in the Kingdom that Silicon Valley, London’s financial center or Chinese-Indian-Russian state-owned entities, are not the only solution. High-tech, fin-tech, AI/IOT, security and defense, agriculture and food, are the historical strong points of Europe’s oldest economies. Thinking small is sometimes the best. For this, the support and attendance of Dutch financial giants such as ABNAMRO, Rabobank, ING, ROBECO or pension-funds such as ABP, PGGM, is needed. The same goes for Germany and the Eastern Europeans too.
The invitations to attend are available, entry visas are easy for FII2018, now get rolling. If still anxious, remember the first Saudi Central Bank was an affiliate of one of the parent companies of Dutch bank ABNAMRO. NW Europeans have been involved before, now is the time to re-enter. Saudi Arabia will not come to you, as the world leaders already calling Riyadh daily and trade-delegations are blocking the airports of Riyadh, Jedda and Dammam. Not to be left behind or trying to eat the left-overs left by Washington, Moscow, Beijing, Delhi or even London-Paris, the Dutch-Germans and Former Eastern Europeans need to get their feet from the ground and warm up relations with their Saudi counterparts. It will be worthwhile.
Inshallah, Anna Shoufik fi Riyadh!
