Saudi Arabia likewise plans to invest heavily in fintech and innovation, but it is leveraging its own wealth. For instance, state-owned company Alhamrani Group is investing in blockchain and has established a company called Ateon, a solutions provider and systems integrator in the fintech space that focuses on blockchain and cybersecurity. One of the company’s initiatives was automating the record-keeping for the VAT, which is designed to be collected in Saudi Arabia at every step of a product’s life cycle, said Husam Yaghi, Ateon president.
“A big chunk of that Vision 2030 is that digital transformation in fintech,” said Yaghi. Saudi Arabia’s central bank has also joined Ripple, the cryptocurrency that major banks, including Santander, Bank of America and UBS, are using to make global financial transactions easier.
Saudi Arabia is also using a tactic other petrochemical states, like Kuwait, have tried: investing in companies abroad, or becoming a co-investor with leading foreign companies, to spur industry at home. Before the Tesla headlines — which the Saudis have so far been quiet on — MBS announced back in March a deal with SoftBank’s Vision Fund to develop a $5 billion solar project, the world’s largest, though the fund didn’t name a location.
The project, for which SoftBank is investing $1 billion, is expected to have the capacity to produce 200 gigawatts of energy by 2030. Saudi Arabia, meanwhile, invested $250 million in the Vision Fund from the Saudi Public Investment Fund. (The Financial Times recently reported that the Public Investment Fund may be falling short on some of its infrastructure investment goals, perhaps because of the delay in the Aramco IPO.)
What Saudi Arabia hasn’t been able to do is establish rapid trust and innovation like Dubai did. It turned itself into a city that tourists wanted to visit, expats wanted to live in and where the native-born population wanted to work. It’s estimated that 70 percent of its population is from other countries. To the extent that those transplants were professionals with established networks to their home countries or regions, Dubai has benefited.
The emirate has also leveraged its status as an underdog to inspire its native-born population. Dubai is getting set to hold the World Expo in 2020, which is expected to draw more than 17 million people. The leftover infrastructure is expected to offer another economic boost to the city. Siemens, for instance, has committed to moving its global logistics headquarters to office space in the Expo, which will also have a 5G network.
The Dubai government is well aware of the well-financed efforts a few hundred miles away. “We look around us every day very carefully,” said Marjan Faraidooni, head of legacy at Expo 2020 Dubai. “It just fuels us to be more creative. If other cities want to be more competitive, it will drive us more. Dubai does not have oil reserves. We were driven to be competitive globally.”
When it comes to building a finance sector in an emerging market, nothing trumps the elusive trust factor. Lacking codified investment and corporate laws, emerging markets’ leaders have to develop a reputation for following through on what they say. Dubai’s leadership — Sheikh Mohammed bin Rashid — has established trust with outside investors. When he has launched initiatives, he has largely followed through, Yeandle said.
So far, Saudi Arabia hasn’t developed that kind of track record. MBS has said the kingdom will build a $500 billion innovation city, Neom, whose economy will be linked to Jordan and Egypt. The plans to nurture innovation and technology are drawing interest from across the region, said Vera Futorjanski, a futurist who worked with the Dubai Future Foundation, but like other initiatives, the plans are only plans at this point.
To many foreigners, Saudi Arabia is still mostly a closed door — it’s still difficult even to get a visa there. And MBS is an unknown character, as is the extent to which the crown prince can counter, or wants to counter, religious extremists who might try to block social and economic reform as it becomes more difficult, said one source in the country.
MBS made world headlines when the kingdom allowed women to drive, but at the same time, the women who advocated for the change for years before the driving ban was lifted have been jailed. In other words, it’s one thing to announce reforms and another to actually see them through. “You will only invest in a place, and put your money in a place, if you trust the people who work there and the institutions that govern their behavior,” Yeandle said. “Whilst Saudi has massive and undisputed wealth, there is a sense of being an untried centre, which in a pretty autocratic country is beholden to their leader.”
