Journal De Bruxelles - Mideast war clouds outlook at Saudi 'Davos in the desert'

For the second year in a row, the mood at the glitzy Future Investment Initiative, sometimes referred to as "Davos in the desert", was clouded by Israel's wars with Hamas in Gaza and Hezbollah in Lebanon.

This year's three-day event is expected to draw more than 7,000 delegates including TikTok CEO Shou Zi Chew and the chief executives of Citigroup and Goldman Sachs.

The Gulf has been "a bright spot in the region" but there is no question the ongoing wars have been a drag on growth, Muhammad al-Jasser, chairman of the Islamic Development Bank, told a panel on Tuesday morning.

"The potential that was sitting there waiting to be cultivated is evaporating with all these conflicts and this level of uncertainty," said Jasser, former governor of the Saudi central bank.

Last year's FII took place just weeks after Hamas's unprecedented attack on southern Israel triggered the war in Gaza, with high-level speakers warning about economic turmoil should the fighting draw in other countries.

A year later, those fears have materialised, as Israel presses operations against Hezbollah in Lebanon and carries out tit-for-tat strikes with Iran.

Saudi investment minister Khalid al-Falih said on Tuesday the kingdom was inevitably harmed by hostilities in the region, including attacks by Yemen's Huthi rebels on vessels in the Red Sea.

"We are the centre of the Middle East," Falih said.

"And we feel the pain that is happening at a human level and we see the disruptions in the Red Sea."

- Wealth fund shift -

The Future Investment Initiative (FII) debuted in 2017 as a showcase for Saudi de facto ruler Crown Prince Mohammed bin Salman's dream of diversifying the economy of the world's largest crude exporter away from oil.

The primary engine of Prince Mohammed's Vision 2030 has been the sovereign wealth fund, known as the Public Investment Fund (PIF), which has more than $900 billion in assets under management.

PIF governor Yasir al-Rumayyan told a panel on Tuesday that it would reduce the portion of its overseas investments after years of splashy deals including in sports and entertainment.

Describing how the PIF had grown over the past decade or so, Rumayyan said its share of international investments had jumped from less than two percent to 30 percent.

"Now our target is to bring it down to a range between 18 to 20 percent," he said, without specifying a timeline.

"Having said that, the absolute dollar amount, it's still growing."

Rumayyan's announcement came as scepticism mounts over the Gulf kingdom's most ambitious development projects, such as a futuristic mega-city known as NEOM.

Authorities have reportedly scaled back 2030 size and population targets for NEOM, which is meant to feature a ski resort and twin skyscrapers 170 kilometres (105 miles) long.

On Sunday, NEOM announced the opening of its "first physical showcase", a luxury Red Sea island known as Sindalah featuring restaurants, hotels and yachting berths.

"There was so much scepticism over NEOM in the Western media that the Saudis had to do something to demonstrate their commitment," said Jim Krane of Rice University's Baker Institute.

"The early opening at NEOM is probably designed to embarrass the naysayers by telling the world that Saudi Arabia is moving ahead. It's a 'doubters beware' message."

Saudi Finance Minister Mohammed al-Jadaan said in May that "shocks" including the war in Gaza were prompting officials to "re-prioritise" some aspects of Vision 2030.

- 'Show must go on' -

While most speakers on Tuesday refrained from overtly political messages, American economist Jeffrey Sachs used his speaking slot to issue a full-throated call for the establishment of a Palestinian state.

"Why is there war in Gaza and in Lebanon and possibly spreading to Iran and further in this region? Because there's no state of Palestine, obviously," he said.

"Because Israel blocks it, the United States blocks it, and until there is, there's going to be no peace in the region."

FII Institute CEO Richard Attias told a press conference in Riyadh this month that the gathering is not meant to focus on "politics" and should instead tackle big-picture investments "to build a better world".

"We are an independent platform and we don't want to be, forgive me for the word, polluted by any political events," said Attias, former producer of the World Economic Forum in Davos, Switzerland.

"I am curating events for 35 years now, and I learnt one thing: The show must go on."

On Tuesday Attias announced that this year's FII would be his last as CEO of the institute.

E.Janssens--JdB