00:00The Crown Prince of Saudi Arabia, Mohammed bin Salman, came to Washington this week.
00:04As far as you know, what was his agenda?
00:07Well, just the arrival and the welcoming ceremony already has been a great success for the Crown Prince
00:14to be welcomed in an unprecedented way to the White House with this military band,
00:23military on horseback, escorting him into the White House in the flyover.
00:28The president personally walking him through already shows both the respect that the president has for him
00:36and the partnership that the United States is demonstrating with the kingdom.
00:41Under Vision 2030, the Crown Prince has put a priority on diversifying the economy.
00:47This year, for the first time ever, 55% of GDP actually comes from the non-oil sector.
00:54So as they look to attract data centers, for example, they just don't want to be host to them.
01:01They want to build out a whole infrastructure around data centers to be an electricity and cheap energy supplier
01:09to building out the whole AI network, to attracting AI networks, to being the world's leader in e-games.
01:15One of the benefits that Saudi Arabia has is, obviously, it's one of the largest countries in the Middle East,
01:21and so they can provide space for manufacturing data centers to provide that technology.
01:28There's low-cost energy for building up the AI infrastructure,
01:32so they've been in discussions to build out their own AI infrastructure.
01:36They have their own domestic champions that they're building out, like Humane.
01:40But also, they're looking to be the e-sports and e-gaming capital of the world.
01:46And so they spent a lot building out that infrastructure, in part because they have such a young population,
01:52but also it's an opportunity for them to show their own technological capabilities.
01:57Saudi Arabia is a wealthy country.
02:00At the same time, maybe not quite as wealthy as it was before because the price of oil is somewhat suppressed.
02:05That's where it gets a lot of its revenue for them.
02:08Does it have to cut back at all on its investment ambitions, given where its fiscal situation is?
02:14Well, that's an excellent point, and clearly, their revenues are still highly dependent on the price of oil.
02:19And we have seen a cutback in recent years on some of the mega projects.
02:24So we've seen that in the case of Neom, where they've cut back on the grand ambitions and slimmed down the project,
02:30but also then focused in on other things like the Saudi Expo, where they are putting a lot of money and capital into that project.
02:40I think they're also being smarter about how they're spending their money.
02:44Originally, they brought in a lot of outside consultants and spent millions and millions of dollars on plans and strategies
02:51and ideas of how to build or how to make these mega projects successful.
02:56They're not so dependent on those outside consultants anymore.
02:59We've seen really a move to much more specialty insights that they're seeking from outside experts and taking a lot on themselves.
03:08The Crown Prince, as you say, set out a very ambitious agenda for 2030.
03:13Do they have enough of a track record yet to know whether they're on track for where they need to get to?
03:18So Vision 2030 was a very ambitious all-of-nation plan, one of the most ambitious transformations in the world,
03:26and it was a very aggressive timeline.
03:29When we look at some of the indicators, for example, attracting foreign investment,
03:35what they've had to do is transform their regulatory structure.
03:39That, even though it is moving forward, they've been able to streamline a lot of the regulations.
03:45They've opened up sectors to 100 percent ownership by foreign firms.
03:49It's not one-sided.
03:52Western investors are responding to the friendlier tone and are at least dipping their toes into the kingdom.
03:58In the past year, tech companies like Tesla and Scale AI have moved operations and offices there.
04:05Stephen Cook of the Council on Foreign Relations says Saudi Arabia is opening up with some limits.
04:11Saudi Arabia is now open for business.
04:14Of course, there are restrictions.
04:15This is Saudi Arabia, after all.
04:17But the Saudis are interested in bringing the world to Saudi Arabia.
04:23They look at its location.
04:25They see it as an important center for culture, sports, tourism, technology, and logistics.
04:35I think the Saudis are kind of opening the door to all of these companies who have expressed a tremendous amount of interest in coming to Saudi Arabia.
04:43But there is issues related to kind of, from what I understand, related to what the Treasury Department
04:52and what the Commerce Department will allow a company like Google or Apple to do in a place like Saudi Arabia.
04:57What about countries other than the United States as possible investors?
05:01You're seeing, for example, from Europe.
05:02Yeah, you're seeing general interest in the, quote-unquote, new Saudi Arabia.
05:08Crown Prince Mohammed bin Salman, his mantra has been to make Saudi Arabia a normal country.
05:15Now, he is not a Democrat.
05:17He's not a liberal.
05:18This is all top-down reform.
05:20But I think what he sees is most Saudis are 18 to 50 years old.
05:26And if you're going to make your country prosperous and you're going to want to have that cohort staying there and making their lives there.
05:36And so he's been inviting investment from all over the world into the kingdom so that people can work and live and enjoy their lives like they would if they were in the United States or Europe.
05:48One of the areas of potential investment is real estate, commercial and residential.
05:53What is the level of investment in real estate right now going on in Riyadh, in Jeddah?
05:58Well, I mean, the only way to really answer this, David, is to say that the most oft-sighted bird in Saudi Arabia, especially in those two cities, is the construction crane.
06:07I mean, I don't think there are enough construction cranes in Saudi Arabia to satisfy all the building that is going on.
06:14They've had to bring them in from other places.
06:17In terms of real estate, who's doing the investing in all this construction with all these cranes you talk about?
06:23Where's that money coming from?
06:24Well, a lot of this is driven by the government.
06:27But they've encouraged private firms to engage in the development of cities and so on and so forth.
06:36So there are authorities that the government has established that have partnered with private firms in terms of the development in Jeddah, of the old city, and the development of hotels there and tourist attractions there.
06:51But a lot of this is top-down driven by the government.
06:55But there is private money coming in.
06:56We've heard about Trump developments in both Jeddah and Riyadh.
07:00Adam Neumann has a flow project in Riyadh as well.
07:03That's private money going in?
07:05And do they partner with Saudi entities?
07:07How does that work?
07:08Well, yeah.
07:09So there has been a recent change in how foreigners can invest in real estate.
07:14It's in certain areas.
07:15And it has to be in partnership with a Saudi entity.
07:19But it is less restrictive than it was, where previously it was much, much harder for foreigners to invest in real estate in Saudi Arabia.
07:31Right now, AI is all the rage, right?
07:34In the United States and elsewhere.
07:36There's a lot of concern about maybe a bubble, over-investing in AI.
07:39Is there a danger of over-investing in, for example, real estate in Saudi Arabia?
07:45Absolutely.
07:46I mean, I think that that's certainly the case.
07:48Again, there is a build-it-and-they-will-come aspect to what they're doing.
07:55The Saudis, when you press them on this, will say that they've done the hard work and know that there's demand for all of this.
08:01But if you just look at the scale of the projects that they're doing, they're not even called mega-projects, they're giga-projects.
08:09They're enormous, a trillion-dollar bet on a country.
08:12You have to wonder whether the demand and supply will come together on this.
08:18And, again, we've seen this before, where the Saudis have had this grand vision for new cities and so on and so forth, and they've never come to fruition.
08:30Look, Neom, which is something that the Crown Prince has talked a lot about, in many ways is his baby, they've had to scale that back over and over and over again.
08:40Part of it is engineering and the idea that what he envisions is extremely difficult to do.
08:47But at the other end of it is just putting a city down in a place where one didn't exist before not only has engineering challenges,
08:55but you have to wonder, if there wasn't a city there before, why would there need to be a city there now?
09:00So it's those kinds of flights of fancy that I think people need to be worried about when it comes to Saudi Arabia.
Be the first to comment