While it’s working hard to diversify and modernize its economy, Saudi Arabia is stumbling in its effort to establish a financial center in the kingdom. Emblematic of the problem is the fact that Riyadh’s King Abdullah Financial District, begun a decade ago, has more skyscrapers than tenants.
Crown Prince Mohammad bin Salman’s Vision 2030 plan to turn the kingdom into an investment powerhouse, ballyhooed at first, is meeting more skepticism as MBS, as the crown prince is known, launches ever larger visions. Investors are beginning to question not only the $2 trillion valuation of Saudi Aramco but whether the IPO of 5 percent of the shares of the state-owned oil company will happen at all.
Last year Riyadh fell backward a notch on rankings of global financial centers, according to the London-based Z/Yen Group’s Global Financial Centres Index, which is based on surveys of professionals working in the market. What makes the story in Riyadh interesting is why establishing a financial sector is turning into such a struggle. After all, the Kingdom has massive wealth — the most recent display of it being the possibility, reported by Elon Musk, that Saudi Arabia’s sovereign wealth fund has approached him to invest enough money to turn Tesla into a private company.
A look at the city in the Middle East that has succeeded in establishing a financial center, Dubai, offers some clues to where Riyadh might be falling short. The keys are delivering on the small, steady steps of reform; the changes in tax and legal codes that enable business and finance; and building a culture and society open enough to draw a global expat community.
Read the full article by Elizabeth MacBride on CNBC, August 21, 2018