When writing the article, I was at the legendary Ritz-Carlton, Riyadh.
Ritz-Carlton is like an isolated island, without any tall buildings around. But the hotel is heavily guarded, and requires several rounds of security check by armed men before entering the venue.
Inside the fence is Ritz-Carlton
Gate Entrance to the gate
Entrance to the conference room
This luxury hotel in the desert has witnessed many historic moments. Last year, Ritz-Carlton was blocked for three months, where some prominent businessmen were demanded to handle part of their assets to the state for alleged corruption charges.
Prince Alwaleed bin Talal, the richest man in Arabia, was also held there before negotiating a release.
Saudi Arabia has long planned to hold Future Investment Initiative 2018 (FII) there. The agenda was set long ago, and speakers all arranged their schedules for the meeting ahead of time. However, the reporter event put Saudi Arabia under the criticism by the Western world. As a result, more than half of the CEOs of top companies and institutions who had agreed to come cancelled their travel, including that of World Bank, Google, and Uber.
Momentum Works received the invitation letter from FII in early stage. Our headquarter is in Singapore. I am permanent representative in Dubai, and it is most convenient for me to go to Riyadh, so I accepted the appointment from the boss with honor.
The Saudi visa is one of the hardest one to apply for. Since the travel visa has not been released, the visa application requires the invitation letter issued by the Saudi side, the letter of no-objection from the company you work for, and a lot of documents such as the company qualification.
As a woman, I also need to submit the letter of no-objection signed by my husband. The FII invitation letter issued by the government was very helpful and I received the visa on the same day of document submission.
Due to the barrier of visa, it is very hard for outsiders see the real Saudi Arabia.
After a 2-hour flight, I travelled from Dubai to Riyadh. Well, it’s like taking a time machine and going back to Dubai 20 or 30 years ago.
It is said that Saudi Arabia is filthy rich, but the urban construction in Riyadh is not ostentious and you can count modern skyscrapers in sight with one hand. I heard the subway was under construction and thus many roads were blocked. Many buildings were surrounded by barbed wire. And people told me it was because that some years ago, there were still frequent terrorist attacks in Riyadh, so the government now has very strict security.
Road view in Riyadh, with only one tall building in the distance
Slogan of Saudi Vision 2030 is everywhere
During the meeting, the sky was gray all the time. It was like a layer of sand covering the roads, buildings and cars.
But in Ritz-Carlton, it was like entering another world. I had seen luxurious style in Dubai, but was still amazed by this:
Can you tell it’s just a bathroom?
Front hall (poor quality due to the low pixel of my mobile phone)
I even wonder whether Ritz-Carlton is so world-known is because it is the most luxurious and grand place in Saudi Arabia that can be used for big events.
Saudi ‘Circle of Friends’
One the second afternoon of FII (Oct 24), the crown prince spoke briefly, saying, “now we know who are our friend”.
As FII was boycotted and many influential guests withdrew, Saudi Arabia had to urgently contact new guests to make up for the missing. Many guests confirmed their participation only two days before the start of the meeting.
Masayoshi Son, PIF’s closest ally, did not deliver a speech during the meeting. But he was said to be in Saudi Arabia at the time and attended only the private dinner before the meeting.
Those who attended the meeting under such circumstances are undoubted “true friends” for Saudi Arabia. Many people think the conference is de-graded, while I hold opposite opinion. It was designed as an investment conference, but has been “upgraded” to a government summit of Saudi allies.
Imran Khan took office as Pakistani Prime Minister only a few months ago. He was once a famous cricket player, and is very close to Saudi Arabia. Just one month after forming the new administration, Khan signed a $10bn deal with Saudi Arabia. As a result, Saudi Arabia becomes the third strategic partner in the China-Pakistan Economic Corridor.
This is the second visit to Saudi Arabia by Khan since he took office. Pakistan, with 210 million people, is facing the worst debt crisis in history and is on the brink of default.
Pakistan received a $6 billion loan from Saudi Arabia during this tour. But that is clearly a drop in the bucket. In November, Khan will head to China for a visit.
Naturally, leaders of Gulf States came to support Saudi Arabia. In geopolitics, Saudi Arabia and Iran have been competing for regional leadership. The rest of Gulf States firmly stand for the Saudi Arabia, and Qatar, as the only country with different opinions, has been isolated for more than a year.
First from right: Ruler of Dubai
First from left: President of Senegal
Lebanese PM Saad Hariri who is also a Saudi national attended FII. In last November, rumors said Hariri was under house arrest by Saudi Arabia. Therefore, crown prince MBS joked at the conference, “this time, Hariri only stays in Saudi Arabia for two days, so I hope there are no more rumors of him under house arrest.”
Second from right: Lebanon PM
Second from left: crown prince of Bahrain
Several African heads of government also attended, including that of Ethiopia, Gabon and Senegal.
At the meeting, Saudi Arabia also announced a $500 million contribution to the China-Russia Investment Fund (RCIF). The fund has thus become a trilateral investment fund as Russia and China had each contributed $1bn before.
At the meeting, MBS talked about some ambitious goals set by Saudi Arabia. He said that all the big projects in Saudi Arabia were going well, and the employment data had been increasing. As for the scale of PIF, it reaches 300 billion this year, and will be 500 billion in 2020 and 2 trillion in 2030.
PIF’s outbound investment has paid off. When PIF first invested $3.5 billion in Uber in 2016, Uber was valued at $60 billion. Uber has recently been valued at as much as $120 billion. Uber is planning an IPO and PIF will be rewarded soon.
Uber CEO cancelled the trip in last minute (photo from the Internet)
At the meeting, Yasir al-Rumayyan, the managing director of PIF, said that currently about 10 percent of PIF’s funds were used for overseas investment, and that proportion would reach 50 percent by 2030.
Through the SoftBank Vision Fund, PIF has invested in about 50 to 60 companies. Currently, Saudi Arabia is very satisfied with the change brought by SoftBank Vision Fund. Saudi Arabia itself is relatively underdeveloped as far as internet business models are concerned. But after investment, many invested companies came to Saudi Arabia, and brought a lot of jobs there. Uber is an exact case.
Inside Saudi Arabia, PIF aims to boost investment in tourism and entertainment. PIF currently has three major projects in Saudi Arabia: NEOM mega-city, Red Sea tourism project and Qiddiya entertainment zone.
The three projects cost a lot. And NEOM alone needs more than $500 billion. The three CEOs of above projects all delivered speeches at the meeting, but only disclosed that projects were moving forward, without specific details such as funding.
During my stay in Saudi, I asked many people a same question, “do you think Saudi Arabia is changing?”
Most people replied, “well, it depends.”
The new crown prince MBS has proposed many ambitious plans, but sometimes he acts paradoxically. Since taking office, for example, he has advocated greater freedom for women, increasing their share of the workforce and lifting restrictions on female driving.
But the falling out between Saudi Arabia and Canada is about Saudi women’s rights. In July, Saudi Arabia arrested Samar Badawi. Samar is committed to ending the male guardianship system, and calls for equality between men and women. She is now a Canadian citizen.
Therefore, Canada condemned Saudi Arabia, but unexpectedly, Saudi Arabia expelled the Canadian ambassador and blocked the diplomatic channels with Canada. Relations between the two countries are still deteriorating.
In the middle is the famous Saudi feminist Samar Badawi (photo from the Internet)
Here comes the question, does Saudi Arabia really want to give women freedom?
It is true in other areas, reform along with retreat.
The root cause is the structure of Saudi power. The Saudi king possesses executive, legislative and judicial powers, and takes ultra-conservative Wahhabism as the fundamental basis of power.
Saudi royal family has benefited from such regime, possessing power and vast wealth. As rulers, they are hesitant about opening up: because if the people are more open-minded, they will demand more; and conservative Wahhabis would not allow them to be open.
Of the six Gulf States, Saudi Arabia is the largest market, with a population of more than 30 million and a per capita GDP of more than $20,000 dollars.
Many foreign and Chinese Internet companies who set Middle Eastern headquarter in Dubai are targeting the Saudi market.
On the last day of FII (October 25), Wadi, a Middle Eastern e-commerce company, announced to receive $30 million in financing. Wadi has targeted at the Saudi market since establishment, and its financing statement said Wadi would invest more in Saudi Arabia.
PIF and Dubai real-estate mogul Alabbar jointly invested $1 billion in establishing an e-commerce company named Noon, whose headquarter is in Riyadh. Mumzworld, the mother and baby e-commerce business we introduced in previous article, also announced to explore Saudi market after receiving financing.
During the interval among meetings, I went to visit Li Jun, a Chinese who has lived in Riyadh for over a decade. Li once worked for a Chinese communications company and is now working on an e-commerce start-up for the Saudi market.
Li talked about his views on Saudi e-commerce:
- Saudi e-commerce will soon enter fierce competition. Local e-commerce Noon has recently increased its spending on advertising and promotion, with a strong momentum. Souq, which was acquired by Amazon, is now in the final stage of the integration with Amazon, and it is likely that the “Souq.com” brand will directly change to Amazon.
Amazon and Noon will have more competition in the future. Amazon’s direct entry into the Middle East will facilitate the development of the local e-commerce industry. Noon has the support of the Saudi and UAE governments, and its founder Alabbar is very determined to develop local e-commerce in the Middle East.
Mohamed Alabbar is a world-famed Dubai entrepreneur, who developed Dubai Mall, and is now developing e-commerce in the Middle East
- There is little space left for Chinese e-commerce. Basically solely relying on in Saudi market, Jollychic was valued at $1 billion, which is due to the peculiarities of Saudi market: as the threshold is too high, big companies don’t prioritize Saudi market, giving Chinese start-ups e-commerce opportunities.
Jollychic parcel received in Saudi Arabia
But now, Amazon directly competites with Noon, and several other Chinese companies such as Shein, ClubFactory and Fordealare encroaching on Jollychic’s market share.
There is a ceiling to the vertical sectors that Chinese e-commerce companies focus on, with limited capacity to grow. They couldn’t only rely on the single market of Saudi Arabia or the Middle East alone.
- The biggest barrier for Saudi e-commerce is logistics and supply chain. During the peak season in the past few years, all e-commerce companies encountered the problem of logistics explosion. Both Souq and Noon build their own logistics. They have more advantages in this aspect, while Chinese e-commerce companies must have a logistics system they can control.
I asked Li, “what do you think about the future of Saudi Arabia?”
“The changes are too dramatic to predict what the government will do next. There is a lot of resistance to reform, but if the market opens up, the chances are really great,” he said.
During FII meeting, you could see many young volunteers looking like college students. They are all energetic, polite and active as college students in all countries.
During my stay in Riyadh, I travelled through Uber. As I don’t know Arabic, I was worried about meeting drivers who could not speak English. However, it was a surprise that all Uber drivers I met were able to communicate in English fluently.
“Riyadh will be more open”
A driver told me that he went to language school to learn English every week. He said Dubai set a good example to the rest of the Middle East, and Riyadh would one day be like Dubai.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected]