Chilled by Khashoggi Death, Saudi Summit Ends With Few Deals

(Bloomberg) -- The international outcry over the murder of U.S.-based columnist Jamal Khashoggi turned Saudi Arabia’s star turn on the world’s business stage into a sedate, mostly regional, affair.

Missing from the second edition of the Future Investment Initiative were global captains of industry, eye-popping contracts and even the inveterate optimism that dealmakers bring to such events. The $50 billion of signed agreements compares to more than half a trillion worth in 2017.

For the foreign investors who did show, the Khashoggi crisis cast a long shadow -- not just over the gathering but about doing business in the region’s biggest economy. The buzz in Riyadh wasn’t about futuristic cities, robots and money-making opportunities but about how 33-year-old Crown Prince Mohammed bin Salman would address the matter. Investors and Saudi officials talked about a "hideous crime," a "regrettable and abhorrent act." 

"At minimum, it’s going to have a chilling effect and trigger a pause on people’s willingness to announce investments into the kingdom," said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former Obama administration official, by telephone from New York. "Whether it’s going to be short-lived or not, it’s unclear," he said. 

No Shows

Last year, the who’s who of global business descended on the three-day event that was quickly dubbed the "Davos in the desert." Wall Street luminaries and investors embraced the program tagged Vision 2030, the brainchild of the crown prince to diversify the Saudi economy away from oil. 

Read more on Saudi Arabia’s economic challenges

Vision 2030 not only promised economic reform, but also the initial public offering of state-owned oil giant Saudi Aramco and multi-billion-dollar investments in futuristic new cities. For Wall Street bankers, it promised a pot of fees. For money managers, Riyadh was promising petrodollars to invest anything from Uber to Tesla. For others, the opportunity was to develop the local economy, building everything from cinemas to power plants. The call was potent. 

This year, not so much in the wake of the Khashoggi killing -- which even the Saudis’ most powerful ally, Donald Trump, has questioned. As the conference opened on Tuesday, Turkish President Recep Tayyip Erdogan rejected the official account that the death resulted from an interrogation of an insider-turned-critic gone wrong.

"Everyone is afraid," whispered a Western executive who lives in the region and asked not to be named to preserve his business links in Saudi Arabia. Few of the executives who traveled from outside the Middle East agreed to be quoted on the record.

‘Chilling Effect’

The grand targets already looked unreachable. The Aramco IPO was delayed to 2021 from 2018; business confidence was rocked by the crackdown that put dozens of officials and businessmen under jail for months at the Ritz-Carlton hotel, the same five-star venue that hosted the investment conference. 

Foreign direct investment in Saudi Arabia plunged last year more than 80 percent to just $1.4 billion, the lowest in 14 years. The official target is $19 billion annually by 2020. Domestic economic growth has slowed and unemployment is on the rise. Moreover, Riyadh is mired in political troubles, from the war in Yemen to a diplomatic crisis in Qatar to the brief kidnapping of the prime minister of Lebanon. 

While the likes of Jamie Dimon and Steve Schwarzman didn’t attend, there were plenty of locals to fill the 1,400-seat main conference room and put on a brave face.

‘On Track’

"Vision 2030 is absolutely on track, absolutely," said Economy Minister Mohammad Al Tuwaijri, adding that the Aramco IPO will happen too. 

Aramco Chief Executive Officer Amin Nasser told reporters he didn’t anticipate any problems in completing a gigantic financing of as much as $70 billion to complete its takeover of the chemicals company Sabic. In fact, Aramco accounted for most of the deals done at the conference, known as the Future Investment Initiative, signing contracts worth $34 billion, two-thirds of the total.

In 2017, Riyadh announced multiples more, including the promise to pour $500 billion into building NEOM, a brand-new city that would serve as a catalyst to attract foreign technology companies into the kingdom. 

Missing from this year’s haul was a $20 billion power-plant deal with Siemens AG floated by Crown Prince Mohammed in the days before the event. The German company’s CEO, Joe Kaeser, skipped the conference.

The gathering instead turned into a regional affair, rather than the star spangled global confab. Some participants were asked to come at the last minute -- perhaps a strategy to fill the spaces recently emptied by the withdrawal of many American executives. The result was a full house for the opening and to listen to Prince Mohammed. But at other times at the King Abdulaziz Convention Centre, there were far more empty seats than people. 

Many of the attendees were investors and executives who already had deep ties to Saudi Arabia.

For David Hamod, president of the National U.S.-Arab Chamber of Commerce, the long-term relationship with Saudi Arabia was too important to risk by skipping the conference. Yet, he conceded that Khashoggi’s killing has been a shock for all, and, he said, "we don’t know what the long-term implications will be.”

--With assistance from Dinesh Nair and Vivian Nereim.

To contact the reporters on this story: Javier Blas in Riyadh at jblas3@bloomberg.net;Matthew Martin in Riyadh at mmartin128@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net, Keith Campbell

©2018 Bloomberg L.P.