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Saudi Arabia and other Gulf states can weather a global economic storm, SALT New York Conference hears

NEW YORK CITY: The Arab Gulf states are well equipped to ride out the global economic storm because they have embraced diversification by stepping away from oil dependency and exploring alternative revenue drivers, according to experts attending this week’s SALT New York fintech conference.

Speaking to Arab News on the sidelines of the event on Monday, Noor Sweid, managing partner at international venture capital firm Global Ventures, said the key to surviving and thriving in the current economic climate is to diversify.

“Diversification is always the key,” said Sweid. “They are diversifying very well in the Gulf. The governments have been for many years trying to diversify away from oil economies, and that is really translating now.”

Rabia Iqbal moderates a panel consisting of Sufyan Al-Issa from IFC, CEO of Investopia Mohammed Al-Zaabi, Amer Bisat from BlackRock, and managing partner at Global Ventures Noor Sweid. (Supplied)

Pointing to the Saudi agritech firm Red Sea Farms, Sweid said the company is flourishing, having launched in Saudi Arabia before expanding globally to address the challenges of energy management, food security, and climate change through vertical farming technology.

“They have managed to find a way to reduce the amount of power required to desalinate the water required for the purposes of vertical farming by about 90 percent,” she said.

Established at the King Abdullah University of Science and Technology in Thuwal, Red Sea Farms is working to reduce the carbon and water footprint of the food sector by designing, developing and delivering sustainable agriculture technologies for harsh environments.

The SALT New York conference opened on Monday against a backdrop of economic turbulence. (Supplied)

Sweid believes the wider Gulf region has huge potential in the domain of tech innovation owing to its “very young demographic across the region working very hard to solve problems using mass technology,” including drone deliveries, digital health, and energy management.

She was not alone in highlighting the benefits of a youthful population. “Saudi Arabia has some really good fundamentals with a young population that has growing income and greater diversity,” Michael Stirling, CEO and chairman of Stirling Infrastructure’s investment board, told Arab News.

The CEO and chairman of Stirling Infrastructure’s investment board Michael Stirling. (Supplied)

“Saudi Arabia is a country that is attracting progressively greater international attention.”

In 2016, Saudi Crown Prince Mohammed bin Salman announced Vision 2030 — a wide-ranging social reform and economic diversification agenda — aimed at branching the Kingdom’s economy out into new sectors, from leisure and tourism to financial services.

FASTFACTS

• SALT is a global thought leadership and networking forum encompassing finance, technology and geopolitics.

• SALT’s biannual events and technology solutions connect asset managers and entrepreneurs with owners, investment advisers and policy experts.

Six years on, Vision 2030 has inspired a whole generation of young entrepreneurs to explore tech-based solutions, creating high-skill jobs and raising aspirations. By diversifying its economy in this way, the Kingdom has also fortified itself against oil price shocks.

In fact, by comparison with other regions of the world, the Gulf is especially resilient to shocks and is progressing well with several high-profile mega-projects, including Saudi Arabia’s NEOM smart city and the constellation of luxury resorts taking shape on the Red Sea coast.

Setting aside the more problematic Middle Eastern countries, including his native Lebanon, Amer Bisat, managing director and head of sovereign and emerging markets investments at BlackRock, told a SALT New York session that Saudi Arabia and the UAE almost appear “boring” precisely because they have been so well managed and have been able to ride out the global economic storm.

Managing director and head of sovereign and emerging markets investments at BlackRock Amer Bisat. (Supplied)

“Even if these countries’ economies do drop, they are much better equipped to cope with any downturns,” he said.

The SALT New York conference opened on Monday against a backdrop of economic turbulence — a byproduct of the COVID-19 pandemic and its associated lockdowns and supply chain disruptions, not to mention the damage caused by the war in Ukraine.

The virtual economy in particular has experienced a monumental drop, with cryptocurrencies plummeting in value and investors losing millions on a market that offers no tangible goods.

Analysts say most of the factors behind this drop are “macro,” which means they relate to the economy as a whole rather than any flaws in the crypto market. Record-high inflation, rising interest rates, and a loss of confidence have all contributed to the crypto crash.

In his opening remarks to the conference, Anthony Scaramucci, founder and managing partner of investment management company SkyBridge, reflected on the difficult business environment investors have had to contend with since the pandemic, but said he is nonetheless continuing to invest.

The founder and managing partner of investment management company SkyBridge Anthony Scaramucci. (Supplied)

“I am already seeing my investment improve in value,” Scaramucci later told Arab News on the sidelines. “I think we all have to recognize that we are going through a cyclical bear (down) market.” Nevertheless, he acknowledged “we have got things that we really haven’t seen since the 1970s.”

Part of the problem is inflation, fueled by a drop in supply, labor shortages, and demands for higher salaries to help workers cope with rising prices. Asked when he expects the global economy to rebound, Scaramucci told Arab News: “I think this time next year we will see a very aggressive recovery.”

Sam Bankman-Fried, CEO of FTX, addresses attendees by video link. (Supplied)

Despite the downturn in the market, there was nevertheless an upbeat mood on the opening day of the conference. Addressing attendees by video link, Sam Bankman-Fried, CEO of FTX, one of the world’s largest crypto-trading platforms, said he remains optimistic about digital assets because “more regulatory clarity is coming.”

He said this will help “unlock the asset class” for a number of institutions that want to get involved in the sector.

Frank Chaparro, editor-at-large at The Block, a website dedicated to cryptocurrency news, said he believes crypto’s “winter has thawed and that spring is upon us.”

Editor-at-large at The Block, a website dedicated to cryptocurrency news, Frank Chaparro. (Supplied)

“We don’t know how long this winter is going to last,” he told Arab News, but insisted people should not focus on the present value of cryptocurrencies and should instead acknowledge the signs of hope on the horizon.

“It’s hopeful because it is a unique dynamic space,” he said. “So if anything this is a great time to build because we are not getting distracted by price and we can focus on doing the work.

“We have to think about what we have just got out of. We have got out of a massive price decline. We saw liquidity sucked out of the system, we saw leverage sucked out of the system. This was a dramatic collapse.”

Referring to the collapse of the Terra (LUNA) crypto token in May this year, which wiped billions of dollars off the market, Chaparro said: “LUNA was a dramatic collapse, the likes of which we have never really seen — a coin going from $50 billion market cap to zero effectively.”

Although people should not expect a “v-shaped rebound,” Chaparro said “patience is warranted.

“Optimism, just as in life, is always important.”

SALT is a global thought leadership and networking forum encompassing finance, technology and geopolitics. Its biannual events and technology solutions connect leading asset managers and entrepreneurs with top asset owners, investment advisors and policy experts.

Founded in 2009 by SkyBridge, SALT brings together 2,000 of the world’s foremost investors and thinkers for three days of high-level collaboration and networking.

The UAE’s Minister of Economy Abdulla bin Touq Al-Marri. (Supplied)

During a conference session on Monday, it was announced that Abu Dhabi will host Investopia, one of the biggest financial events in the MENA region, in March next year.

The announcement was made during a session in which Abdulla bin Touq Al-Marri, the UAE’s minister of economy, and Mohamed Al-Shorafa, chairman of the Abu Dhabi Department of Economic Development, set out how the country had refocused its economy away from oil and gas by embracing industries like fintech.

Al-Marri said the UAE had introduced some of the world’s first regulations for cryptocurrency as part of its road map to modernizing its economy.

The chairman of the Abu Dhabi Department of Economic Development Mohamed Al-Shorafa. (Supplied)

“Last year we announced our vision for the next 50 years. We are a country of visions, and our leaders are visionaries,” said Al-Marri.

The country has enacted a slew of new laws, including the decriminalization of bouncing cheques and the 100-percent-ownership law, which allows onshore control of companies by non-Emiratis, to create a more favorable business environment for foreign investors.

Al-Marri said the UAE’s aim is to develop the economy from a regional player to being truly global.



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