Global financiers head to Riyadh investment bash in shadow of war

DUBAI: Global financiers are poised to flock to Saudi Arabia’s annual flagship investment conference next week as a tightening of the kingdom’s purse strings and a deepening of regional conflict cloud the outlook.Among those expected to descend on the Future Investment Initiative (FII) in Riyadh are top CEOs, including Goldman Sachs’ David Solomon, BlackRock’s Larry Fink, Citigroup’s Jane Fraser and the London Stock Exchange’s Julia Hoggett.The high-profile event, first held in 2017, fills an opulent hotel in the capital of the world’s top oil exporter with the aim of promoting Crown Prince Mohammed bin Salman’s (MbS)ambitious economic agenda and demonstrating the kingdom’s influence on the global economy.In addition to geopolitical worries over an escalating Middle East conflict, which has threatened to embroil the region’s oil facilities, the shadow of domestic belt-tightening and sputtering growth also hangs over the event’s eighth edition.The forum, which is headed by Yasir Al Rumayyan, the governor of Saudi Arabia’s nearly $1 trillion Public Investment Fund (PIF), is an opportunity for Riyadh to draw in foreign investment to support the kingdom’s massive economic overhaul known as Vision 2030.Aurangzeb explores climate financing, trade deals with global institutionsBut for many attendees the draw has also been Saudi Arabia’s cheque book, not just signing their own.“Many managers are reconsidering FII. Saudi (Arabia) has clearly told them, we know you want our money, but how are you participating in our future? Most managers don’t have an answer to that,” said Marius Vygantas, founder of Soling Partners, a firm that advises global asset managers on the Middle East.Gaza, Lebanon warsThe summit has been overshadowed by geopolitical events in the past. Last year it was just weeks after Hamas’ deadly Oct. 7 attack on southern Israel that prompted a retaliatory war that’s left much of Gaza, the coastal enclave ruled by Hamas, in ruins.The war has killed tens of thousands, spread to neighbouring Lebanon and upended Washington-led negotiations for Saudi Arabia and Israel to establish ties.At last year’s event, some American executives spoke publicly in support of Israel, and JPMorgan Chase CEO Jamie Dimon urged Saudi Arabia not to abandon a United States-led initiative to normalise relations with Israel.Blinken on new quest for Saudi ties with IsraelSaudi Arabia has repeatedly called for a ceasefire in Gaza and, more recently Lebanon, fearing that the escalating conflict will lead to a conflagration that threatens regional stability.Many western executives had also previously boycotted FII in the wake of the 2018 killing of journalist Jamal Khashoggi.A U.S. intelligence assessment concluded MbS had authorized the killing but the Crown Prince denied involvement.Prince Mohammed has since repaired his international image. Today, Saudi Arabia’s de facto ruler is seen by many of his global counterparts as a key partner, including in resolving the protracted Israeli-Palestinian conflict. Earlier this month, heattended the European Union’s first summit with Gulf states.Foreign investmentThis year, the forum is hosting a “New Africa Summit” with speakers from the continent’s mining and banking sectors. Gulf states have increasingly entered the race for critical minerals in Africa as they diversify away from oil.Spearheaded by Crown Prince Mohammed and aimed at ending Saudi reliance on hydrocarbons, Vision 2030 depends on hundreds of billions of dollars to develop new sectors and more sustainable revenue streams, while expanding the private sector and creating jobs.IMF lowers Saudi Arabia’s 2024 growth forecast to 1.5%“The Saudis are prioritising domestic investment over just about everything else. If the slate of Vision 2030 projects are going to work, the Saudis really need foreign investors to fly in and pony up,” said Jim Krane, research fellow at Rice University’s Baker Institute in Houston.The government has a target to attract $100 billion in FDI by 2030, equivalent to almost 6% of its GDP. FDI is on an upward trend, but midway through Vision 2030, FDI numbers indicate that it could struggle to meet the objective for the turn of the decade.The PIF is central to this economic agenda. It has embarked on dozens of ventures across the kingdom and partnered with global firms to build mega-projects such as NEOM, an area roughly the size of Belgium to include a futuristic city and ski slope in the desert and hyper-luxury tourism spots like Red Sea Global, and the “entertainment city” Qiddiya.But amid lower oil prices and production that have dampened the government’s earnings, the kingdom has begun a spending review under which some projects will be delayed or scaled back, and others prioritised.That has put more pressure on international funds, that have traditionally looked to Saudi Arabia for money to invest elsewhere, to commit billions of dollars to the domestic transformation.BlackRock this year agreed to set up a multi-asset class investment platform in Riyadh, anchored by a $5 billion investment from the sovereign wealth fund.Last year, deals worth $17.9 billion were agreed at FII, according to the Saudi state news agency, and organisers say they expect $28 billion in deals to be announced this year.