Thursday, November 09, 2017

ANALYSIS: This is just the start of the Saudi crackdown's financial ripple effect

After sweeping arrests, investments inside - and outside - the kingdom are in question. Will the events draw investors - or scare them away?

Less than a week old, Saudi Arabia’s anti-corruption drive has snared dozens of princes, including three of the country’s wealthiest people.
The arrests are being portrayed as a clean up of the kingdom’s investment environment to realise economic reforms. Even those fiercely critical of the way it’s been conducted acknowledge the need for a system overhaul.
The sweep is also clearly a move by Crown Prince Mohammed bin Salman to consolidate power, leaving some skeptical that corruption is the sole motivator – if at all.

Yet for investors trying to read the signs from the outside, whatever the machinations and motivations behind the arrests, it brings reforms that have been needed for ages.
“Clearly, the clamp down on corruption is a good thing as the Saudi economy has been hindered by corruption for many decades,” said Jason Tuvey, a Middle East economist at London-based Capital Economics.
“For one, small firms have struggled to compete with large firms that previously had a close relationship with the royal family, but also individuals and businesses had to rely on an army of brokers to cut through bureaucracy.”
Still the detention of 11 princes, four ministers and dozens of others on Saturday, including Prince Alwaleed bin Talal, may have a chilling effect on investment – both inside and outside the kingdom - in the near term until there is more clarity over whether the drag net will widen.

After all, just days after it served as the site of the kingdom’s "Davos in the Desert", a foreign investment conference, the six-year-old Ritz Carlton essentially became a prison, an overnight conversion that has to have rattled onlooking investors.
Likewise, from Twitter to Citigroup to Apple, many of those thought to be detained inside the hotel hold significant stakes in multinational corporations. Questions have even been raised about whether London’s Savoy Hotel, owned by bin Talal, could become Saudi government property.
While the ramifications have not yet been significant and have yet to fully unfold, one clear epicentre is Lebanon, which is on edge after Prime Minister Saad Hariri’s resignation from Riyadh on the same day as the arrests, and given the close economic ties between the two countries.

Click on the link to read the article in Middle East Eye 

To read in French


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