Riyadh will flip from No-Go to FOMO for business

London (Reuters) – Riyadh may be about to pivot from global no-go to FOMO. The Saudi Arabian capital has long been seen by international bankers and executives as a place to visit for work, before weekending in the UAE’s more western-friendly hub, Dubai. That crowd may develop a nagging fear of missing out.

Economically, Saudi dwarfs regional Gulf peers. Its $700 billion GDP in 2020 was double the UAE’s, with three times the population. Its domestic stock market’s $2.6 trillion market capitalisation is over four times those of Abu Dhabi, Dubai and Qatar combined.

There’s also loads of work. In the next four years, Saudi wants to raise $55 billion via privatisations read more , and that doesn’t include further asset or equity sales by $1.9 trillion oil giant Aramco (2222.SE). Nor does it encompass disposals by the $450 billion Public Investment Fund, which recently sold down a big chunk of its 70% stake in $61 billion Saudi Telecom Company (7010.SE). Crown Prince Mohammed bin Salman envisages $3.2 trillion of public and private investment over the next decade to shift the domestic economy away from oil. read more

Big western banks are keeping quiet about whether they will follow the 44 multinationals, including Novartis (NOVN.S), Unilever (ULVR.L) and Deloitte, and establish regional headquarters in Riyadh. Part of that is a desire not to offend the UAE, where Dubai harbours fee-generative privatisation plans of its own. Riyadh’s relative lack of good schools remains an issue. And it’s also only three years since the crown prince faced international condemnation for the murder of Jamal Khashoggi in Istanbul, which U.S. intelligence agencies believe he sanctioned. read more

One basic reason why JPMorgan (JPM.N), Goldman Sachs (GS.N) and co may overcome their reluctance is that the Saudi government has made it clear those who don’t move by end-2023 will struggle to win the kingdom’s business. But fading overseas scepticism is another pull factor. The number of foreign investors registered at the Tadawul has more than doubled from 6% in 2019, and Saudi’s foreign direct investment inflows rose during the pandemic.

Riyadh may also become less of a social desert. Gigs by Miami rapper Pitbull, World Wrestling Entertainment matches, and Saudi ownership of the Newcastle United football club reduce the cultural distance with the west. More importantly, cafes and restaurants where men and women can mix are now commonplace. One long-term Saudi observer thinks even the final taboo – drinking alcohol – may soon get a better workaround. If so, Dubai’s pre-eminence will be sorely tested.

Context News

– Saudi Arabia’s Public Investment Fund (PIF), the country’s sovereign wealth fund, is considering selling part of its 70% stake in Saudi Telecom Co (STC), the state fund said on Sept. 30.

– PIF, the main engine of Crown Prince Mohammed bin Salman’s Vision 2030 to wean the economy off oil, said it had appointed Goldman Sachs, HSBC, Morgan Stanley and SNB Capital to advise on the deal.

– The planned sale of Saudi Arabia’s largest telecoms operator will target international and local institutional investors, as well as retail investors, PIF said, adding it would maintain a majority stake of more than 50% in the company.