STREAMING NOW: Watch Now

Business backlash over Khashoggi threatens Saudi Arabia's economic dreams

One year ago, with more than 3,500 business leaders and government officials in attendance in Riyadh, Crown ...

Posted: Oct 12, 2018 5:36 PM
Updated: Oct 12, 2018 5:36 PM

One year ago, with more than 3,500 business leaders and government officials in attendance in Riyadh, Crown Prince Mohammed bin Salman announced that Saudi Arabia was open for business.

The kingdom unveiled plans to build a $500 billion metropolis. The mood was upbeat. Bin Salman promised global CEOs and foreign investors that Saudi Arabia was heading down a new path of tolerance and engagement with the rest of the world.

Al-Waleed Bin Talal

Automotive industry

Banking, finance and investments

Business and industry sectors

Business executives

Business figures

Business, economy and trade

Company activities and management

Continents and regions

Financial markets and investing

Jamal Khashoggi

Labor and employment

Middle East

Middle East and North Africa

Misc people

Motor vehicles

Product development

Product innovation

Product management

Riyadh

Saudi Arabia

Self-driving cars

Technology

Workers and professionals

Companies

SoftBank Group Corp

Many were convinced, including Colony Capital CEO Tom Barrack, who told CNN at the time that the government was committed to creating an environment that would be "transparent, secure, stable and understandable."

Now businesses and CEOs are distancing themselves from Saudi Arabia over the disappearance of journalist Jamal Khashoggi, threatening the country's bid to transform its oil-dependent economy.

Turkey claims to have evidence that Khashoggi, a US resident and columnist for the Washington Post, was murdered inside the Saudi consulate in Istanbul early this month — an accusation the kingdom strenuously denies.

But the unexplained disappearance of Khashoggi, a former Saudi government adviser turned critic, has already prompted some big-name business partners to cut ties with projects that are central to bin Salman's hopes of building a modern economy with technology at its core.

British billionaire Richard Branson has pulled back from two projects to develop Red Sea tourism and has suspended talks with the Saudi government about a $1 billion investment in his space companies.

"I had high hopes for the current government ... and its leader Crown Prince Mohammed bin Salman," Branson said in a statement.

"What has reportedly happened in Turkey ... if proved true, would clearly change the ability of any of us in the West to do business with the Saudi government."

Saudi Arabia's plan to develop 100 miles of sandy coastline while protecting the Red Sea environment was one of the first detailed initiatives to emerge from bin Salman's Vision 2030, an ambitious program to end the kingdom's addiction to oil.

Advisers quit mega city project

A second flagship project — building a futuristic zero-emissions mega city known as NEOM — is also running into trouble.

Dan Doctoroff, CEO of Alphabet (GOOGL) subsidiary Sidewalk Labs, Silicon Valley entrepreneur Sam Altman, Tim Brown, CEO of design company IDEO, and Ernest Moniz, a former US energy secretary and the CEO of Energy Futures Initiative, have said they won't work with NEOM, at least for now, despite being listed as members of its advisory board.

NEOM and the Public Investment Fund of Saudi Arabia did not respond to requests for comment.

The NEOM project was announced at last year's conference in Riyadh, dubbed "Davos in the desert."

But events since then have shaken investor confidence. Just days after the conference, Saudi authorities arrested dozens of royals, officials and prominent business people -— including billionaire investor Prince Alwaleed bin Talal — accusing them of corruption.

Many were held for weeks in Riyadh's Ritz-Carlton hotel before they were released after agreeing to hand over cash, real estate and other assets worth more than $100 billion. In February, Saudi officials went on a roadshow in a bid to calm nervous foreign investors.

There have been more disappointments since. Plans for a blockbuster IPO of state oil giant Aramco have been shelved indefinitely. A listing would have demonstrated a new level of transparency in Saudi markets, as well as generating significant funds for investment in other areas.

Confidence has 'dropped through the floor'

Now the unexplained disappearance of Khashoggi has international executives rattled, just as the kingdom prepares for this year's edition of the Riyadh conference, the Future Investment Initiative.

"This is the dealbreaker," said Neil Quilliam, senior research fellow at London-based think tank Chatham House. "No one thought [Vision 2030] would be entirely successful, they maybe gave it sort of a 50% success rating, now that's really dropped off and business confidence has really dropped through the floor."

Uber CEO Dara Khosrowshahi, Viacom (VIAB) CEO Bob Bakish, and Arianna Huffington have withdrawn from the conference. Most of the event's media partners, including CNN, have pulled out.

Khosrowshahi's announcement is particularly significant because Saudi Arabia's sovereign wealth fund is a big shareholder in Uber. In 2016, it invested $3.5 billion in the ride-hailing startup.

The kingdom is becoming a major investor in global technology. SoftBank and Saudi Arabia joined forces in 2016 to create the SoftBank Vision Fund, raising nearly $100 billion to spend on tech businesses. Its latest investments include $2.25 billion for GM's (GM) self driving unit.

Saudi Arabia is also investing $1 billion in Lucid, a potential rival to Tesla (TSLA). It already owns nearly 5% of Elon Musk's electric-car maker.

SoftBank (SFTBF) CEO Masayoshi Son is the global tech CEO with the deepest involvement in Saudi Arabia's efforts to transform its economy.

Until early Friday, he was listed as a speaker at the investment conference, as were the head of SoftBank's international business, and the CEO of the SoftBank Vision Fund. The online program was stripped of all names later in the day, and the speaker list was removed entirely from the website.

SoftBank has not yet responded to multiple requests for comment about the Khashoggi disappearance.

New York Coronavirus Cases

County data is updated nightly.

Cases: 2506247

Reported Deaths: 55965
CountyCasesDeaths
Kings33129910834
Queens31382710273
Suffolk2383183590
Nassau2136033286
Bronx2067916745
New York1674924632
Westchester1433882338
Erie1054771938
Richmond882931930
Monroe835191180
Orange57192909
Rockland52859779
Onondaga51456755
Dutchess35411497
Albany30510386
Oneida28347582
Broome24121403
Niagara23795397
Saratoga20034197
Ulster17179277
Schenectady16525227
Rensselaer14618167
Putnam1242096
Chautauqua12281172
Oswego11449112
Chemung10740153
St. Lawrence10354124
Steuben9972173
Ontario9244110
Jefferson867574
Cayuga8582107
Sullivan839483
Wayne801884
Cattaraugus7586112
Genesee6904132
Herkimer6671125
Clinton663138
Tompkins646359
Fulton6228102
Madison6092102
Montgomery5865138
Livingston564971
Warren537181
Cortland528479
Tioga501271
Columbia4966111
Chenango463586
Allegany454296
Washington453367
Otsego452654
Greene434286
Wyoming433657
Orleans428087
Franklin417920
Lewis355038
Delaware350747
Seneca271663
Schoharie227221
Essex224531
Yates158827
Schuyler151317
Hamilton4343
Unassigned14424
Out of NY0310
Utica
Cloudy
47° wxIcon
Hi: 46° Lo: 42°
Feels Like: 45°
Oneonta
Cloudy
43° wxIcon
Hi: 47° Lo: 42°
Feels Like: 37°
Herkimer
Cloudy
47° wxIcon
Hi: 48° Lo: 42°
Feels Like: 45°
Old Forge
Cloudy
47° wxIcon
Hi: 41° Lo: 35°
Feels Like: 45°
WKTV Radar
WKTV Temperatures
WKTV Severe Weather
NEW Game Day Deals each week
Chapter Aesthetic October Giveaway
Cool To Be Kind 2021
Looking for work or looking to hire? Check out the WKTV Job Fair!
Saluting Those Who Are Proud 2 Serve