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Saudi summit loses its swagger as elites question kingdom

Withdrawal of business titans from Riyadh conference following Khashoggi killing is a blow to country's leadership

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Portraits of Saudi King Salman (at right) and his son Crown Prince Mohammed bin Salman are displayed in Riyadh ahead of the Future Investment Initiative conference to be held from Oct 23 to 25.

Washington

IT'S an investment summit in the shadow of a killing: stripped of the glitz and glamour of business titans who last year flew in to woo a young prince and be a part of his grand plans to transform his country's economy.

Hosted by the kingdom's sovereign wealth fund, the three-day conference that kicks off in Riyadh on Tuesday was meant to showcase the opportunities created by reform efforts to break the economy's dependence on oil and unveil billion-dollar contracts in front of the world's business elite. That was until the killing of government critic Jamal Khashoggi prompted dozens of finance and business leaders to pull out.

Saudi Arabia and Crown Prince Mohammed bin Salman - who posed for selfies with hundreds of delegates at last year's conference - will be keen to show that it's business as usual in the kingdom, even as European leaders and US President Donald Trump demand more information on how the Washington Post columnist was killed at its consulate in Istanbul.

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No-shows from the likes of Deutsche Bank's Christian Sewing, JPMorgan Chase's Jamie Dimon and BlackRock CEO Larry Fink will deal a blow to the 33-year-old leader and the kingdom, which has built close ties with Wall Street executives and relies largely on global banks to finance its ambitious plans.

But a delegation of Russian chief executives including at least one billionaire still plan to show up. Kirill Dmitriev, the chief executive of the state-run Russian Direct Investment Fund and a leading player in President Vladimir Putin's push to engage Saudi Arabia, has encouraged business leaders in fields ranging from petrochemicals to diamonds to banking to attend.

"There's more of a shift toward regional and Asian CEOs as the leadership was determined to hold the event at all costs," said Ayham Kamel, head of Middle East and North Africa at Eurasia Group. "The Saudi leadership can walk away with an event that neither fails or succeeds, but in a few months, the most important impact on the country will still be a dip in international confidence in the economic reform programme."

For two weeks, Saudi authorities had said Mr Khashoggi, who moved to the US last year for fear of being caught up in the wave of arrests sweeping the kingdom, had left the building. On Saturday, they acknowledged he was killed inside the building, saying it was an accident. That account is dramatically different from that given by Turkish officials, who said privately that a Saudi hit team flew in to kill and then dismember him. According to TheNew York Times, some members of the group had ties to the Saudi crown prince.

The crisis is already hurting Saudi Arabia's plans to attract and retain international stock-market investors. Foreigners were net sellers of a total of four billion riyals (S$1.5 billion) of stocks last week, more than any other since data was first made available in 2015, with the exception of a one-time outflow from a single transaction in September 2017. Most of the sales came from qualified foreign institutional investors.

Last year's so-called Future Investment Initiative - the first of its kind - gathered some of the finance world's most influential people in a coming-out party of sorts for the kingdom's Public Investment Fund (PIF). The prince announced plans for a US$500 billion sci-fi city called Neom that would have more robots than humans, and said the country was returning to "moderate" Islam and intended to "eradicate" extremism.

Finance titans such as Blackstone Group's Steve Schwarzman, former HSBC Holdings CEO Stuart Gulliver and BlackRock's Mr Fink mingled with Saudi ministers of finance, energy, and commerce, as well as the head of the PIF as it floated ambitions to become the world's largest sovereign fund.

During the event, Blackstone and PIF firmed up plans to invest in US infrastructure, with the fund providing a commitment of up to US$20 billion. In July, BlackRock received licences to conduct arranging and advising activities in the kingdom's securities business.

SoftBank Group founder Masayoshi Son said he planned to invest in the new city and potentially acquire a "substantial" equity stake in state-controlled Saudi Electricity Co. Mr Son remains one of the few business chiefs who hasn't pulled out of this year's event.

The PIF closed the 2017 gathering by unveiling plans to invest about US$1 billion in Virgin Group's space companies. Billionaire Richard Branson this month said he was suspending talks with the fund, calling Mr Khashoggi's disappearance a potential game-changer for companies doing business with Saudi Arabia.

While the final programme and attendee list for this year's meeting isn't clear - event organisers have taken down a list of attendees from the website - a spokesman said the event is "moving ahead with an updated programme built around the latest global business, investment and technology trends, featuring over 120 speakers and moderators, across more than 35 sessions over three days".

The gathering has been likened to the annual World Economic Forum in Davos, Switzerland, because of the high-profile attendees, but there is no connection between the events. Many banks are still sending delegations in the hopes of minimising the damage to ties to the House of Saud.

"Saudi is too big and too important an economy for the Middle East and rest of the world, and hence is unlikely to be ignored by investors for too long a period," said Aarthi Chandrasekaran, a financial analyst at Shuaa Capital PSC in Dubai. "While investors are possibly in a pause mode for now, they will eventually step in when the dust settles." BLOOMBERG