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Fri 13 Sep 2019 12:23 AM

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Let me entertain you: the new Saudi Arabia

The kingdom is increasingly turning to untapped sectors like sports and entertainment, in a bid to help boost foreign direct investment

Let me entertain you: the new Saudi Arabia

At a stunning and verdant golf course, dozens of hardened professionals are plying their trade at Saudi Arabia’s first international golf tournament, carefully putting or driving balls into the distance, an army of attentive caddies in tow. Nearby, hundreds of workers are busy setting up the stage for the evening’s entertainment: American superstar Mariah Carey.

This, I blurt out to my Saudi hosts, is not how I imagined my first time in the kingdom.

Golf means business. It’s a perfect opportunity for us: 90 percent of Fortune 500 CEOs play golf

“We’ve been hearing that a lot,” Khaled Tash, the deputy governor for marketing and communications of the Saudi Arabian General Investment Authority (SAGIA), smiles and tells me. “This is the new Saudi Arabia.”

Tash’s comments come at a transformative time for the kingdom, with authorities actively trying to woo foreign investors and complete their larger Saudi Vision 2030 goals of diversifying its economy away from petrochemicals and building new sectors – often from scratch – ranging from sports to massive theme parks and tourist attractions.

Saudi Arabia’s King Salman and officials witness the foundation stone laying ceremony at the Qiddiya entertainment park near Riyadh on April 28, 2018

The campaign, however, has not come without challenges, partly stemming from foreign perceptions of Saudi Arabia and concerns about human rights. The October 2018 murder of Jamal Khashoggi (for which Saudi authorities have arrested 18 people), for example, sparked fears that foreign investment would dry up, particularly following the highly publicised pullout of a number of global CEOs from the Future Investment Initiative conference in Riyadh the same year.

“I’m not in a position to talk about what happened and how it impacted us,” Tash notes. “But, looking at the numbers, as far as we are concerned, FDI [foreign direct investment] more than doubled in 2018, with a 127 percent increase.”

These numbers, Tash says confidently, speak for themselves. In addition to the increase in FDI – which brought the total to $3.5bn in 2018 – Saudi authorities recorded a 99 percent increase in new investor license requests and a 100 percent growth in requests to boost investments from current investors. In the first half of 2019, the number of new investor licenses was already double that of 2018.

It’s becoming more interesting for foreign investors to come here and experience Saudi Arabia in a different way

For Saudi authorities, the initial hesitance of some foreign companies to be involved in the kingdom in the wake of Khashoggi’s assassination proved to be little more than a blip on the radar. Major international banks whose chief executives pulled out of the “Davos in the Desert” conference – such as JPMorgan chase and Goldman Sachs – are now back in the kingdom, courting the Saudi officials for roles in oil giant Aramco’s highly coveted IPO.

“Our ambitions are much higher. Doubling is not enough for us,” Tash adds. “We’d like to do more.”

A new way of doing business

For Saudi officials, achieving these targets requires a new approach. Long gone are the days when roadshows and international visits sufficed. This, Tash explains, is where events such as the Saudi International golf tournament come into play, by helping tee up foreign investors and letting them see the kingdom first-hand.

Formula E is returning to Saudi Arabia, with crowds of up to 100,000 expected for the November event

“Golf means business,” Tash says, parroting signs posted all over the Royal Greens Golf and Country Club in King Abdullah Economic City (KAEC), where the tournament was held. “It’s a perfect opportunity for us: 90 percent of Fortune 500 CEOs play golf, and 93 percent say that on the golf course they’ve made some of their biggest, most notable deals. It’s an opportunity for us to promote investment.”

The tournament, however, is just the tip of the iceberg. From motorsports to WWE wrestling and boxing, the world’s would-be investors are increasingly being exposed to the kingdom through its sporting events.

One of the best examples, Tash says proudly, was the Italian Supercup held in Jeddah in January, when 65,000 adoring fans piled into Jeddah’s King Abdullah Sports City to watch Cristiano Ronaldo’s Juventus take on AC Milan.

The pace is moving forward at a much faster speed

“It’s a historic number in Saudi sports. That’s the kind of activation we want to draw the attention of the business community,” he says. “It’s becoming more interesting for foreign investors to come here and experience Saudi Arabia in a different way… it’s about how we leverage the big events to attract the right people. This is how business is done.”

Entertainment to the forefront

As Tash tells it, the impact of what he terms ‘up-and-coming sectors’ on the wider economy is only just beginning to be felt. As an example, he points to another rapidly emerging sector: entertainment, in which over 500 companies were established and registered in 2018 alone.

Saudi officials have repeatedly expressed optimism that foreign firms will get in on the act as the kingdom works to shake off perceptions that it remains ultra-conservative by hosting events that range from theatrical performances to magic shows and NBA basketball exhibition games.

Saudi officials are looking at ways to develop the sport of basketball in Saudi Arabia

“I hope companies, banks, businessmen, artists and all sectors put their hands together. There are golden opportunities,” Turki Al Sheikh, chairman of the General Entertainment Authority (GEA), said earlier this year. “This is a big door for tens of thousands, if not hundreds, of thousands of jobs and for tens of billions, if not hundreds of billions, [of Saudi riyals].”

Just one sub-sector of the entertainment sector – the cinema business – is projected to contribute SAR1bn ($266.59m) to the kingdom’s GDP and create 1,000 direct jobs by 2020.

At the heart of Saudi Arabia’s entertainment expansion is Saudi Entertainment Ventures – SEVEN – which was launched by Saudi Arabia’s Public Investment Fund (PIF) in 2017. It was the first entity licensed to operate cinemas in the kingdom and, in April 2018, launched the first cinema in Saudi Arabia in over 35 years as part of a joint venture with US-based AMC Group. By the end of the year, it expects to have eight cinemas operating in the kingdom.

Saudis spend a lot when they travel, and there’s money that can be kept here in the kingdom, frankly. I think that’s the hope

“Our goal is to have 50 open by 2022,” says SEVEN’s CEO Bill Ernest, a 25-year veteran of the Walt Disney Company. “That’s about 450 screens. It is no small undertaking.”

The cinemas, along with SEVEN’s plans for 20 large-scale entertainment complexes across the kingdom, are already attracting significant interest from foreign firms which hope to earn some of the estimated $20bn spent by Saudis on entertainment abroad every year.

“Saudis spend a lot when they travel, and there’s money that can be kept here in the kingdom, frankly. I think that’s the hope,” Ernest tells Arabian Business. “There’s a lot of interest, world class interest, from groups that want to come in and be a part of this. When you diversify the economy, I think it has a knock-on effect and is great for the country as a whole.”

Saudi Arabia’s first ever Comic-Con event was held in Jeddah on February 16, 2017

While just how “great” the effect is remains to be seen, Saudi Arabia’s PIF believes that SEVEN’s collective projects alone will provide 22,000 direct jobs and contribute $2.13bn to the Saudi economy by 2030.

The kingdom’s GEA, for its part, has said that it believes investment into entertainment infrastructure will reach $64bn over the next decade, adding nearly $5bn to GDP and generating 224,000 new jobs by 2030.

Boosting investor confidence

At events such as the Saudi International, officials are quick to point out that foreign investors will only park their dollars in Saudi Arabia if they are confident that their investments are safe.

We like to be called the future forward economy and we’re getting there

This confidence, however, has been repeatedly shaken by events ranging from geopolitical tensions in the Arabian Gulf to the kingdom’s widespread anti-corruption crackdown and the murder of Khashoggi in Istanbul.

Certainly, there remains work to be done. Saudi Arabia is still ranked 92th out of 190 countries – between Tonga and St. Lucia – on the World Bank’s ease of doing business index, while it also comes in 141st place when it came to starting a business.

Even with the 127 percent increase in FDI, the kingdom’s $3.5bn still pales in comparison to the UAE’s $10.5bn, and is just a small chunk of the Saudi record of $39.5bn achieved in 2008. Saudi Vision 2030 calls for FDI to form 5.7 percent of GDP by 2030 – which, if it had been achieved in 2018, would have required $44.6bn.

Khaled Tash, deputy governor for marketing and communications of SAGIA

To address issues of investor confidence, earlier this year SAGIA unveiled seven core “investor principles”, which include ensuring equality between Saudi and foreign investors, enabling sustainability and transparency when addressing investor complaints, facilitating access procedures for foreign workers and providing equal investment incentives.

“It’s something new. We always have the rules and regulations, but what the investment principles are trying to achieve is to make sure that there is an overarching kind of guidance on the economic reforms and on the regulations,” Tash explains. “Each of the seven principles is actually closely benchmarked to a global best practice or a target that we have agreed with the World Bank or the WEF (World Economic Forum).”

Tash is quick to point out that, despite the challenges, there is much to be optimistic about. For one, Saudi authorities have identified over 500 economic reforms that they need to accomplish, almost half of which were done by the first quarter of the year.

Turki Al Sheikh, chairman of the General Entertainment Authority (GEA)

“That, by itself, is a big accomplishment. It’s not going to take us that long to finish the other half,” he says. “The pace is moving forward at a much faster speed.”

These efforts have not gone unrecognised. The World Bank, for example, ranked Saudi Arabia as the fourth largest economic reformer within the G20, citing a number of reforms the kingdom has undertaken over the last year.

“The World Bank expert who was leading the team on Saudi Arabia was actually really surprised when we told him that we’re going to do a lot of things in six months. He said it would maybe take three or four years,” Tash recalls. “He came back six months later and he saw that we did what we planned to do, and he was impressed.”

Bill Ernest, CEO of Saudi Entertainment Ventures (SEVEN)

Tash says he believes that the Saudi strategy will help others be impressed as well. “We’re committed to moving forward. We like to be called the future forward economy, and I think we’re getting there,” he says.

Event licensing

In a bid to encourage investment in the sector, in early September the General Entertainment Authority unveiled a new online system that can process entertainment license applications at the touch of a button.

The new licensing system covers activities and venues including live shows and performances, events, theme parks, entertainment centres, live entertainment in coffee shops and restaurants, ticket sales and talent management.

The GEA partners with both public and private sectors in order to reduce government spending on the entertainment and leisure sectors.

Saudi Arabia’s Vision 2030 aims to reduce the kingdom’s reliance on oil and energy revenues and create employment opportunities for its growing population. 

Reaching for the stars

According to recently released foreign lobbying registration documents in the United States, high-level Saudi officials have held a slew of meetings in the US to help develop the kingdom’s sports sector.

Among the meetings that were arranged by Los Angeles-based international consulting firm Churchill Ripley Group was an encounter between Princess Reema Bint Bandar Al Saud - the first female head of the Saudi Federation for Community Sports – and former NBA basketball star Kobe Bryant. According to the documents, the two discussed “the development of basketball” in Saudi Arabia.

Other meetings attended by Princess Reema and General Sports Authority Chairman Prince Abdulaziz bin Turki Al Faisal included the CEO of World Surf League and the commissioners of Major League Baseball and the National Hockey League. Additionally, Prince Abdulaziz was reported to have met with representatives of New York’s Madison Square Garden to discuss “stadium infrastructure.”

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