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YWR: Saudi Mash Up

Investment Conference Call

Erik: That’s great Abi. The update is helpful. Sounds like the new businesses kick in by Q3 which sets you up to grow earnings in ‘24 even if fertiliser prices are weak. So thank you again for the call.

Abi: I’m glad it was helpful. If you have further questions we can always do a follow up. And I’m sorry we had difficulty with the scheduling. It’s just I’ve been traveling to Saudi a lot and it made it hard to find a time.

Erik: You’ve been to Saudi?

Abi: Yes. Actually, I’m in Saudi now. Have you ever been?

Erik: No. But, sounds like I should.

Abi: You definitely should. It’s really booming. All the big companies are opening offices here. And we are seeing lots of opportunities. Things have totally changed. The country is diversifying and opening up. I’m a woman and I have no problem wearing smart casual clothes in meetings and going to parties in Riyadh.

Erik: Wow. Thanks for the advice. Sounds good and fun.


Trojena

It’s easy to mock MBS. A young prince gets the keys to the Kingdom and the biggest pot of money in the world and right away does stupid things like building a ski resort in the desert and proclaiming he wants to build his version of the pyramids.

It reminds one of that line in Syriana. Years ago the Saudis were poor nomads in the desert, and with this nonsense they’ll be poor nomads again.

Or maybe not…

Neom

Maybe it’s actually a game changer. Maybe it’s a big deal if a young leader has a bold plan and the resources to transition his economy away from being entirely reliant on resource extraction. And if he wants to try new things no one has ever done before, like a futuristic city, built in a straight line, maybe it’s a good thing. Win or lose, Saudi is learning and moving the ball forward. Who are we to sit in London or New York and judge? What have we done lately that is really challenging and different?

Nothing.

It’s also easy to focus on the high profile projects like Neom, and judge them as likely failures, while missing all the positive grass roots initiatives in Vision 2030.

In Vision 2030 Saudi is working across the board to build up tourism as a major industry by improving airports and transportation, interesting sites and museums and a streamlined visa system to make visiting easier.

The Kingdom is also working to be a leader in sports by privatising their football clubs and bringing in high profile players. Also give credit to the top oil producer in the world targeting to be a leader in EV car manufacturing and green hydrogen. And it goes on. From healthcare, to telecommunications to education and the environment; Vision 2030 has specific targets and deliverables for everything.

The goal is to diversify the Kingdom away from oil, and it’s working. Non-oil tax revenues are up from 10% in 2010 to 37%.

And GDP is growing at 4%, which is pretty good considering Saudi is voluntarily reducing production of it’s main export.

And women. They are part of Vision 2030 as well. The goal was for woman to reach 30% of the labor force, but they’ve already surpassed that. Woman are 36% of the labor force and growing.

This rise clearly reflects the understanding of the importance of women’s participation in the workforce, and the success of women’s empowerment plans and initiatives launched by the Government over the past years. This has enabled women to pursue their effective participation and expand their presence in national development in all fields.

Source: Budget Statement FY 2024

This prioritisation of women is a MASSIVE cultural change that has shocked everyone. They are still getting used to it. And it turns out that under all those abayas there are some good looking women. Saudi women who are energised, excited and enjoying the new Kingdom. It seems Saudi has found a new source of energy. Woman power.

No photo description available.

Bringing Iran to the Party

There is a network effect to waking up of Saudi. There was already buzz around the growth of Dubai and Abu Dhabi, but adding Saudi to the mix is creating excitement across the region. The Western side of the Persian Gulf is pumping.

But there’s a chance Iran could join the party too. MBS has broken with the religious disagreements of the past and is working on how Saudi Arabia can do business with Iran. And why not?

“Why do we always have to be fighting? Let’s do business instead.”

It’s an olive branch.

“Come to the table. There is a place for you too. The future of Iran doesn’t have to be a binary choice between Axis of Evil, or US puppet. There is a middle path. We are figuring it out ourselves and will help you find it too.”

We think the Middle East is in turmoil, but it’s the opposite. A broad based Middle East renaissance is under way.

How do we play it?

I don't know the specifics today. Today we just need to appreciate Vision 2030 is a long-term positive with regional network effects and we want to be on the right side of it.

Saudi stocks? A bit expensive, but maybe. Saudi real estate in cities like Jeddah could be interesting. Possibly Dammam too. And Saudi government bonds in US$’s could be a nice yield play.

Maybe get started by reading the MOF 2024 budget statement and seeing all the initiatives underway. It might give you some ideas.

Or, watch the YWR video version above. It’s more fun.

Have a great weekend!

Erik

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YWR: Your Weekend Reading
YWR: Your Weekend Reading
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