Can anything stop SoftBank from investing $billions in Saudi?

November 20, 2017 12:28 pm


When the going gets tough the tough gets going. This is how SoftBank Group Corp is approaching the Saudi market.

According to Bloomberg, SoftBank plans to invest as much as $25 billion in Saudi Arabia over the next three to four years, as the Japanese company deepens investment ties with the Kingdom.

SoftBank aims to deploy up to $15bn in the $500bn NEOM, a 100 per cent renewable energy city by the Saudi Red Sea, and $10bn in state-controlled Saudi Electricity Co. (SEC), the later as part of a previous MOU between the two parties stating efforts to expand the utility to allow it to produce renewable energy.

Saudi primed to attract investors with new $500bn NEOM development

The new deal exceeds on its own total foreign direct investment (FDI) in Saudi Arabia, which reached $7.45bn in 2016, according to data from the Organization for Economic Cooperation and Development, as reported by Bloomberg.

This comes right after a corruption crackdown that rattled investors who questioned the timing of the high-profile Saudi arrests just after the Davos in the Desert, where SoftBank was present.

Watch: $33bn personal Saudi wealth at risk

Why is SoftBank so determined?

Long-term thinking

SoftBank has been luring Saudi to its own investment platforms for a while, helping raise $45 billion from the PIF towards the $100bn technology fund, it call Vision Fund.

SoftBank is pitching in $28bn, while UAE’s Mubadala has pledged $15 billion, according to Reuters.

NEOM is four to five years away from being implemented and awaiting investment support that will witness the PIF, local and international investors raise the astounding $500bn needed to build more than 26,000 sq kms allocated to urban development stretching into Jordan and Egypt.

“For SoftBank, the potential Saudi investments come as it expands from technology investments to asset management […] (and) now plans further acquisitions to potentially create a $300 billion asset management arm,” Bloomberg News reported in September.

Crown Prince Mohammed bin Salman told Reuters in an interview in October that the $500 billion mega-city of NEOM would be floated on financial markets alongside oil giant Saudi Aramco, as part of the Kingdom’s drive to diversify its economy away from oil.

Read: Did anyone see the Saudi clampdown on corruption coming?

Updates on the arrests

Saudi royal family members, officials and businessmen were detained on corruption charges in the country’s wide crackdown early November. On November 13, Saudi Arabia’s U.N. Ambassador Abdallah Al-Mouallimi said that all would be granted due process.

Among the high-level detainees is Prince Alwaleed bin Talal.

Watch: Saudi fixed income outlook positive, but geopolitical anxiety is big concern

Reuters said that those held faced various accusations from money laundering, to extortion, bribery and exploiting public office for personal gain, while a Saudi anti-corruption committee was given the power to seize companies, funds and other assets ahead of criminal inquiries.

The Saudi Central Bank has put up to $33bn of personal wealth at risk for the richest detainees, Bloomberg reported.

Human Rights Watch has also called on Saudi authorities to “immediately reveal the legal and evidentiary basis for each person’s detention and make certain that each person detained can exercise their due process rights”.

Attorney General Saud al-Mojeb said in a statement that trials would be held “in a timely and open manner” and that the probe was “merely the start of a vital process to root out corruption.”

Member of the anti-corruption committee, Khalid al-Mehaisen, said that preliminary investigations were happening over the past three years, leading up to the arrests.

Purging campaign continues

ABC News reported that a dozen more people were taken into custody by Saudi authorities soon following the first wave of arrests, bringing to 201 the number of detainees, in a sweep that Saudi investigators proclaim revealed $100bn or more in corruption.

An estimated 1,700 individual bank accounts were frozen, said ABC.

Daily Saudi Al Okaz said that Al Mojed ensured that business activities were proceeding normally in the Saudi Kingdom and that they would not be affected by the investigations.

“Only personal bank accounts have been suspended and companies and banks have the freedom to continue transactions and transfers as usual,” he said.

Over the past weekend, Saudi authorities have reportedly detained about two dozen military officials and several businessmen, widening a crackdown, according to CNBC who quoted the Wall Street Journal.

 

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Hadi Khatib
By Hadi Khatib
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.



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