BY GEORGE HAY

The Saudi Arabian capital, Riyadh, 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, and that doesn’t include further asset or equity sales by $1.9 trillion oil giant Aramco. 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. 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.

Big western banks are keeping quiet about whether they will follow the 44 multinationals, including Novartis, Unilever 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.

One basic reason why JPMorgan, Goldman Sachs 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.

First published December 2021