Saudi Arabia: Open for business

Crown Prince Mohammad bin Salman (MbS) opened the Future Investment Initiative (FII) in Riyadh on 24 October, aimed at shining the spotlight on its efforts to diversify revenue streams and overhaul its economy and society.

The highlight of the event arranged by the Public Investment Fund (PIF) which drew over 3,500 people from 88 countries, was the announcement by MbS of the creation of a new USD 500B independent economic zone to be built on the border with Jordan and Egypt by 2025.

The 26,500 km2 zone, known as NEOM, to be powered entirely by renewable energy, will focus on industries including energy and water, biotechnology, food, advanced manufacturing and entertainment. Adjacent to the Red Sea and the Gulf of Aqaba and near maritime trade routes that use the Suez Canal, the zone will serve as a gateway to the proposed King Salman Bridge, which will link Egypt and Saudi Arabia. MbS appointed Klaus Kleinfeld, a former CEO of Siemens AG and Alcoa Inc, to run the NEOM project.

The PIF already holds about USD 110B of assets in listed Saudi companies and has investments with Blackstone Group LP and Softbank Group Corp. In early October, it set up a real-estate refinancing firm with a mandate of USD 20B in deals in five years.

The PIF is also embarking on a number of major projects including the development of semi-autonomous islands off Saudi Arabia’s Red Sea coast, where the kingdom’s ultraconservative rules on gender segregation and women’s dress might not apply. On 10 October, the PIF established the “Fund of Funds”, a new USD 1B investment vehicle designed to provide SMEs with access to capital by investing in venture capital and private equity funds.

These steps are of high importance given that about 99% of businesses in Saudi Arabia are SMEs providing 64% of total employment. This is also in line with the kingdom’s drive to raise the contribution of SMEs from the current 20% of GDP to 35%.

The fund is also creating a company to build new hotels and prime real estate around Muslim holy sites in Mecca and Medina. It launched an entertainment investment company to cater to the needs of Saudi Arabia’s youth and oversee the development of a Six Flags theme park outside Riyadh.

Mbs also promised that the kingdom will return to what it was before -- “a country of moderate Islam that is open to all religions and to the world.”

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