By Rob Cox
NEW YORK (Reuters Breakingviews) - The key number to emerge from Saudi Arabia’s big financial confab last week wasn’t a sum of money, or an economic target, but a year - 1979. To thousands of foreign dignitaries, journalists and his own subjects, Crown Prince Mohammed bin Salman vowed to return the kingdom his family has ruled since 1932 to the more moderate society that prevailed before the siege of the Grand Mosque 38 years ago. He may need the global financial community’s help to make it happen.
Saudi has doled out money to global institutions for decades, hoping to generate income for its monarchy. Now the crown prince is turning the tables. At the Future Investment Initiative conference in Riyadh, the heir to the throne exhorted global entrepreneurs, business leaders and money managers to put some of their treasure to work in the kingdom. A precondition for that should be that Saudi modernizes, improving the role of women and establishing a more just criminal justice system.
The pitch is sinking in. “The opening up of Saudi Arabia - to try to take things back to before 1979 - is brave, it’s bold,” Richard Branson said at the so-called “Davos in the desert” hosted by the country’s Public Investment Fund last week. The Virgin Group founder is considering backing tourism enterprises along Saudi Arabia’s unspoiled coastline on the Red Sea. “Young people want it, the women want it and I think most sensible men want it too.”
Nobody seems to want it more than the crown prince, who at 32 is closer in age to more of his subjects than his father, King Salman bin Abdulaziz. Reforming the economy is existential for the House of Saud. If the country cannot provide a hopeful vision for the 33 million people – just under two-thirds of whom are under the age of 30 - the current king could very well be the last. Balancing Islamic traditions and foreign innovations and money – without a bloody revolution – is a demanding transfiguration.
This is why the crown prince’s reference to 1979 was huge – not just because it came during a panel led by a female American journalist. “We will not spend 30 years of our lives dealing with extremist ideologies. We will destroy them today and immediately,” he said to thunderous applause. “Saudi was not like this before 1979. Saudi Arabia and the entire region went through a revival after 1979. All we are doing is going back to what we were: a moderate Islam that is open to all religions and to the world.”
Some history helps to understand the importance of that statement. Just a few weeks short of 38 years ago, armed religious militants stormed and occupied the Grand Mosque of Mecca – the holiest place in the Muslim world – and demanded the overthrow of the royal family. The siege lasted for two weeks and was resolved with the assistance of French commandos who converted to Islam so they could enter the mosque, according to Lawrence Wright’s account in the “The Looming Tower: Al Qaeda and the Road to 9/11.”
Following the siege, and public beheadings of 63 rebels, King Khalid bin Abdulaziz doubled down on religion. He expanded the role of conservative religious clerics in Saudi life and allowed Wahhabi leaders to impose sweeping restrictions on cinemas, musical performances and the mingling of genders, among other things. Last week, the crown prince effectively called the last 38 years lost.
The prince must move cautiously enough to accommodate hard-liners, but fast enough to keep his youthful people from rebelling against Saudi’s income inequality. Already the country’s religious police have seen their powers curtailed, and in September the government said it would relax the prohibition on women driving. Though attendees of the conference, arriving in chauffeur-driven Mercedes, applauded talk about making Saudi moderate again it’s not evident they reflect the will of the masses.
That explains NEOM – the city on the Red Sea that the crown prince promised to build from scratch with $500 billion of oil booty. NEOM’s laws and rules will be different from Saudi Arabia’s and determined by the entrepreneurs who populate it, the crown prince says. Though that may not include lifting the prohibition on alcohol, or removing the death penalty for cases of homosexuality or blasphemy, it appears to be a way for him to offer an alternative to the more conservative lifestyle that has governed Saudi since 1979.
NEOM will need global validation - and money. The Vision Fund, in which the kingdom has said it would invest $45 billion alongside SoftBank and others, has already stepped up, pledging to take a stake in the Saudi Electric Co, a utility that will help power NEOM. Though it’s an odd way to channel some of the state’s own money back into the country, bringing along foreign investors could be seen as a validation of the kingdom’s plan.
The crown prince, in an interview, denied that there is any quid pro quo for global investors, like SoftBank, to reinvest funds into Saudi Arabia. “We don’t want to squeeze investors. If we cannot offer good opportunities in Saudi that means no one would come,” he said. “We think we really have great opportunities in Saudi Arabia. We want to shape it and to invest in it ourselves and also to allow people all over the world to invest in it.”
His charms are having an effect. BlackRock and Blackstone Group, with whom the kingdom has invested $20 billion in a fund dedicated to infrastructure, are opening offices in Riyadh, the crown prince told Breakingviews. That should be a sign that their leaders, Larry Fink and Steve Schwarzman, respectively, believe in the crown prince. But there is a flip side to this.
Should the crown prince fail to dismantle the gender apartheid of his predecessors the money managers – and indeed other investors like SoftBank or Branson’s Virgin - could find themselves needing to explain to their own shareholders and customers why they are invested in the kingdom. With the two Wall Street firms alone commanding $6 trillion of assets, that’s a pretty strong incentive for them to help keep the crown prince to his word.
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