Relax and invest, Saudi prince tells investors after corruption crackdown

The message delivered in the January meetings underscores a difficult balancing act for Prince Mohammed and his team as they try to reform the country.

February 20, 2018 06:40 pm | Updated 06:45 pm IST - RIYADH/DUBAI

 Saudi Arabia’s Crown Prince Mohammed bin Salman

Saudi Arabia’s Crown Prince Mohammed bin Salman

Three months after Saudi Arabia detained scores of people in a crackdown on corruption, its rulers are trying to reassure investors that the kingdom remains open for business.

Foreign and local investors have long complained about corruption, and confronting it is an important part of reforms unveiled by Crown Prince Mohammed bin Salman to transform the country and reduce the economy's reliance on oil exports.

Yet some business leaders were unsettled by the swoop on top princes, businessmen and government officials in November because of the secrecy around the crackdown and their suspicions that it was at least partly politically motivated.

But top officials, including Prince Mohammed had met senior local businessmen last month to reassure them that the crackdown was mostly over and that it was safe to do business.

At the World Economic Forum in Davos last month, Saudi officials highlighted the positives of the detentions, dismissing worries about the way the crackdown was conducted but conceding that it might have been sold slightly differently.

“It's true we could make mistakes . Saudi Arabia is not a perfect country. It is like any other country. But the ... road to success is always under construction and the whole momentum of Saudi Arabia is going toward that end,” Minister of Commerce and Investment Majid bin Abdullah al-Qasabi ahd told a Davos session.

Attorney General Saud al-Mojeb has described the sweep as “an independent judicial process” and “part of an overhaul to ensure transparency, openness and good governance".

The message delivered in the January meetings underscores a difficult balancing act for Prince Mohammed and his team as they try to reform the country.

They must deliver change, and one way to do that is by tackling corruption in Saudi Arabia's opaque business world. But the judicial system is underdeveloped and the crackdown contrasted sharply with Western-style due process.

The government has said that financial settlements made with the detainees in exchange for their freedom have raised more than $100 billion, mostly in the form of land, stakes in businesses and other illiquid assets rather than cash.

But only a handful of specific allegations against those detained have been revealed.

Yet the secrecy of the crackdown -- during which detainees were held inside the same opulent hotel where days earlier investors had rubbed elbows at an international business conference -- could undermine transparency promises.

MEETINGS

The January meetings between Saudi officials and the local business community were held in multiple locations including the capital Riyadh and Jeddah.

The primary message was that another wave of mass detentions is not on the cards, which is a relief to businessmen who worried that authorities might now take the same approach to the next echelon of the Saudi business world.

“They were told the anti-corruption campaign is done: continue with your business as normal and invest in the economy,” said one of the sources, a senior banker.

The Saudi authorities define corruption relatively narrowly. While they want to improve Saudi business practices, the officials told business leaders, they will not try to change that culture so radically that normal business ties are damaged, the sources said.

That was a relief to many businessmen in a country where personal relationships often help determine transactions between companies.

Businessmen and economists in contact with the government do not expect a firesale of seized assets to raise money. That should minimise pressure on the Saudi real estate and stock markets, they said.

Cash is likely to trickle slowly into government coffers, and authorities are not expected to interfere hugely in most of the companies in which they have obtained stakes, said an economist. .

The meetings with the crown prince have calmed the nerves of some attendees, but others remain worried that they could be detained at any time.

“The whole business community is traumatised,” said a Saudi businessman.

The government has demonstrated that it is willing to move quickly and ruthlessly to seize the assets of people it believes have acted wrongly.

 

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