Saudi Arabia had a good Davos, judged at least from the public relations angle. The team sent by the Kingdom was top-level, if just below the royal echelons, and used the public platforms of the World Economic Forum (WEF) to good effect to get across the message of transformation, modernization and diversification.
The Saudi attendees at Davos were focused and self-confident, more so than in previous years. Here are five areas where — in my opinion — the Saudi team got their message across in an effective way.
1. The National Transformation Plan (NTP) 2020 is a work in progress. I mean that in the literal sense, not to signify a project that could be put off until some indefinite date in the future when it may or may not be completed. The importance of the NTP was hammered home by Saudi ministers and executives at a number of events. All were in agreement that its central platforms of economic diversification and corporate privatization were central to the longer-term Vision 2030 strategy and that there was firm resolve to see it through. That message went down well with the global elite, which has recently been hearing some skeptical views on whether the NTP 2020 will be seen through.
2. The initial public offering of Saudi Aramco remains the single most crucial element of the transformation. Khalid Al-Falih, minister of energy, industry and mineral resources, as well as the chairman of Aramco, was adamant about this on the sidelines of the forum’s formal sessions. The IPO is an imperative for the Kingdom partly for symbolic reasons, as it has become the public and tangible expression of the willingness to change. But it is also a crucial financial factor in the diversification program. The funds released by the biggest market flotation in history will both help bridge the public-sector budget deficit and provide resources for other elements of the diversification. The timing of the IPO is still to be finalized, but the fact that the Saudi authorities are edging closer to the appointment of a team of financial advisers means that there will be more clarification on this soon.
3. International investors are taking an increasingly optimistic view of the Kingdom’s progress toward transformation. At one Davos session on the Vision 2030 strategy, two of the most important business leaders in the world spoke strongly in support of the Kingdom’s plans.
Representing the world of finance was Larry Fink, chief executive of BlackRock, who praised the newfound confidence he sees in the Kingdom; for big industry, Andrew Liveris, chairman of Dow Chemical, said that the Kingdom’s levels of corporate governance were improving dramatically, especially in financial transparency, which he said was as good as anywhere else in the world, including the US.
4. There is a new spirit of optimism in the oil industry. On one top-level panel, Al-Falih said that while there remained many variables and geopolitical risks in global energy markets, they are closer to a rebalancing than at any other time over the past two years. He also held out the prospect of further production cuts and an extension to the current agreement on production levels. Both are positive for the oil price in 2017, and are a sign that the Organization of the Petroleum Exporting Countries (OPEC) has finally got its act together. In an unpredictable world, this mitigates one important variable.
5. The Saudi Public Investment Fund (PIF) is going to be a mainstay of the Kingdom’s transformation. Al-Falih reaffirmed that the PIF would eventually be the biggest sovereign wealth fund in the world, with $2 trillion of assets (of which a big chunk will come from the Aramco IPO). PIF executives and their advisers were on the sidelines at Davos explaining the role of the new strategy — like the $3.5 billion investment in Uber and the $45 billion in SoftBank’s Vision Fund — and the part PIF will play in the transformation as a catalyst for economic diversification.
6. Saudi Arabia will become a “softer” place. This, in some ways, is the biggest challenge the Kingdom faces as it sees the transformation through. Again, it was left to the impressive Al-Falih to put the case. He said that he wanted Saudi Arabia to be a “more pleasant place to live,” and that it should become a model of tolerance for Muslim societies. He also saw greater gender equality as a key part of the Vision 2030 and a boost for the Saudi economy. Of course, all this is challenging and there could be many a slip in execution. But it does no harm to have the global elite on your side.
By Frank Kane
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