RIYADH: Saudi Arabia holds an investment conference next week that is set to be overshadowed by the Israel and Hamas war, in a reminder of the challenge facing the kingdom as it bids to attract foreign investors, be they Western companies or newly courted Chinese business.
The conflict could upset the stability of the Middle East just as Saudi Arabia pours hundreds of billions of dollars into a vast economic transformation plan.
More than 5,000 people have registered to attend the annual Future Investment Initiative (FII) and only two have withdrawn due to current events, the FII Institute told Reuters.
“FII7 is going ahead as planned,” it said. “The news about conflict in the Middle East is awful, and demonstrates why it is so important for leaders and policy makers to come together to tackle global issues that confront humanity,” it added.
Swiss bank UBS has banned travel within the region for staff but is so far the exception, and several banking sources in the Gulf region said they had no plans to cancel.
A worsening of the conflict or contagion into the wider region could change this. One Chinese speaker told Reuters the fighting had made several Chinese attendees reluctant to make the trip though he was still planning to attend.
The kingdom has historically been a rich source of funds. Last year, Saudi Arabia accounted for almost 40% of investment banking fees from the MENA region, according to LSEG data.
Crown Prince Mohammed bin Salman has sought to lift the kingdom’s geopolitical profile with a view to securing investment and trade alliances, seeking dialogue and de-escalation with former regional foes, and pivoting to Eastern partners amid strains with US President Joe Biden’s administration.
This year’s forum is meant to demonstrate that eastward shift. Seventy speakers will be from Asia, of whom 40 will be Chinese, FII Institute CEO Richard Attias told Reuters.
“This year’s FII mirrors the global shifts in economic power towards the east, where China, India, and Southeast Asian trading nations are taking a central role”, Attias said. “The Middle East is increasingly recognised as a pivotal point in this shift.” Indian business tycoon and chairman of Reliance Industries, Mukesh Ambani is due to speak, as is Neil Shen, head of Sequoia China - an arm of Silicon Valley venture capital company Sequoia, and HOPU Investments chairman Fang Fenglei among others.
Big Wall Street financiers will be there, too: JP Morgan CEO Jamie Dimon and Citi’s Jane Fraser as well as senior global banking figures with a strong Asia presence like HSBC and Standard Chartered are all on the attendee list.
“By maintaining working relationships with both east and west, and by prioritising national interest over choosing political sides, Saudi hopes to capitalise on, and grow, economic ties with multiple players,” said Alice Gower, director of geopolitics at Azure Strategy in London.
Saudi Arabia is halfway through an ambitious economic transformation plan - Vision 2030 - to wean the economy off oil by creating new industries, generate jobs for citizens, and to lure foreign capital and talent. FII is partially aimed at attracting foreign direct investment to help fund this initiative, a daunting task as total FDI flows in this year’s second quarter were down 21.2% compared with last year, investment ministry data showed. Total FDIs for the first half of 2023 were at 14.3 billion riyals ($3.8 billion).
James Swanston, emerging markets economist at Capital Economics, said sovereign dollar bond spreads over US treasuries in Saudi Arabia have only widened 20 basis points since the conflict began and remain at low levels.