U.S. Department of State
The Crown Prince's Vision 2030 plan is designed to diversify the Saudi economy, leading it away from dependence on oil revenues.
The success of these steps will be vitally important for the transformation of the Middle East into a stable, effective part of the world economy of the 21st century. To achieve these important goals, the global financial community must feel that investment in the kingdom will face risk factors that are fully defined and considered manageable.
Unfortunately, the recent actions taken by bin Salman, at least for the time being, undermine the very basics of the requirements of the security system. The unofficial detention of hundreds of members of the royal family of Saudi Arabia, high-ranking government officials and influential business magnates has broken Saudi Arabia's ties with the global business community. The detentions began to take place only a month after the completion of a major global investment forum in the same Ritz hotel. A lot of billionaire oligarchs were delighted with the prospects that the strong leadership of Saudi Arabia drew, sharply expanding its participation in the world financial markets.
In fact, it was difficult to come up with a worst period for detentions. What should magnates think when they see Prince Miteb, the son of the former king and a candidate for the throne, being handcuffed while keeping him at gunpoint, and kept in custody until he agrees to hand over a billion dollars allegedly received from contracting the National Guards. At the same time, the press reported that bin Salman bought a private yacht worth $ 400 million and paid $ 450 million for a picture of Van Gogh, sold recently at an auction in London.
Saudi Arabia has held the most dramatic series of social and financial reforms in modern history. Women's empowerment is in full swing. The government, at last, is reducing the authority of representatives of the religious establishment.
It is imperative that the rule of law be more transparent. In the kingdom, the royal family determines the rules and norms of society's life, while the royal family itself is exempted from their execution. But for fundamental changes, the Saudi authorities must restore at least transparency and the rule of law in the world of finance, business and commerce.
Although reforming the system and reducing corruption are important, the way it is done is no less important. Recent detentions, perhaps, originally seemed a good way to return many billions of dollars, but they also undermined the norms that global investors rely on. And not only foreign investors were in a panic from these events: many Saudis fled the country in fear that they might be detained.
Media are reporting a fairly large outflow of wealth of Saudi Arabia, especially in the form of cash and other forms of liquid assets. Meanwhile, the kingdom is suffering from a huge budget deficit and is spending huge amounts of foreign exchange reserves to cover billions of subsidies to maintain low prices for electricity and gasoline. Now is not the time to frighten entrepreneurs, whose resources are needed to expand the economy.
Bin Salman will find it difficult to reform the situation with corruption in the kingdom, make the sphere of the market and business more transparent and legalized, and employ the maximum number of Saudis that are now over 30. It is almost impossible until the economy recovers at least some predictability.
Imagine a major US defense contractor who, during the last 35 years, worked inside the Saudi National Guard (SANG), suddenly discovering that the SANG commander is in custody. The relations that have developed with the business partner of Saudi Arabia, who is both the commander of the SANG and a member of the royal family, are completely destroyed. Now the American firm is likely to lose the contract, which it has been developing for 35 years.
Now, imagine the same situation with hundreds of Saudi trade representatives, partners, and in some cases investors/owners, who were detained for allegedly extensive corruption operations.
Today, relations between companies, managers and employees that have been created for decades are not simply destroyed. Perhaps for a long time the Saudis and bin Salman will not be able to restore the confidence necessary to convince investors, both Saudi and foreign, that their funds, assets and rights are protected by the rule of law.
source: reuters.com, bloomberg.com
The success of these steps will be vitally important for the transformation of the Middle East into a stable, effective part of the world economy of the 21st century. To achieve these important goals, the global financial community must feel that investment in the kingdom will face risk factors that are fully defined and considered manageable.
Unfortunately, the recent actions taken by bin Salman, at least for the time being, undermine the very basics of the requirements of the security system. The unofficial detention of hundreds of members of the royal family of Saudi Arabia, high-ranking government officials and influential business magnates has broken Saudi Arabia's ties with the global business community. The detentions began to take place only a month after the completion of a major global investment forum in the same Ritz hotel. A lot of billionaire oligarchs were delighted with the prospects that the strong leadership of Saudi Arabia drew, sharply expanding its participation in the world financial markets.
In fact, it was difficult to come up with a worst period for detentions. What should magnates think when they see Prince Miteb, the son of the former king and a candidate for the throne, being handcuffed while keeping him at gunpoint, and kept in custody until he agrees to hand over a billion dollars allegedly received from contracting the National Guards. At the same time, the press reported that bin Salman bought a private yacht worth $ 400 million and paid $ 450 million for a picture of Van Gogh, sold recently at an auction in London.
Saudi Arabia has held the most dramatic series of social and financial reforms in modern history. Women's empowerment is in full swing. The government, at last, is reducing the authority of representatives of the religious establishment.
It is imperative that the rule of law be more transparent. In the kingdom, the royal family determines the rules and norms of society's life, while the royal family itself is exempted from their execution. But for fundamental changes, the Saudi authorities must restore at least transparency and the rule of law in the world of finance, business and commerce.
Although reforming the system and reducing corruption are important, the way it is done is no less important. Recent detentions, perhaps, originally seemed a good way to return many billions of dollars, but they also undermined the norms that global investors rely on. And not only foreign investors were in a panic from these events: many Saudis fled the country in fear that they might be detained.
Media are reporting a fairly large outflow of wealth of Saudi Arabia, especially in the form of cash and other forms of liquid assets. Meanwhile, the kingdom is suffering from a huge budget deficit and is spending huge amounts of foreign exchange reserves to cover billions of subsidies to maintain low prices for electricity and gasoline. Now is not the time to frighten entrepreneurs, whose resources are needed to expand the economy.
Bin Salman will find it difficult to reform the situation with corruption in the kingdom, make the sphere of the market and business more transparent and legalized, and employ the maximum number of Saudis that are now over 30. It is almost impossible until the economy recovers at least some predictability.
Imagine a major US defense contractor who, during the last 35 years, worked inside the Saudi National Guard (SANG), suddenly discovering that the SANG commander is in custody. The relations that have developed with the business partner of Saudi Arabia, who is both the commander of the SANG and a member of the royal family, are completely destroyed. Now the American firm is likely to lose the contract, which it has been developing for 35 years.
Now, imagine the same situation with hundreds of Saudi trade representatives, partners, and in some cases investors/owners, who were detained for allegedly extensive corruption operations.
Today, relations between companies, managers and employees that have been created for decades are not simply destroyed. Perhaps for a long time the Saudis and bin Salman will not be able to restore the confidence necessary to convince investors, both Saudi and foreign, that their funds, assets and rights are protected by the rule of law.
source: reuters.com, bloomberg.com
