Complex Made Simple

Curtain on $100bn Saudi probe falling: Have the tables turned on the kingdom?

Saudi officials have been saying time and time again that in the kingdom, everyone is equal, and that no amount of wealth could help shelter corruption.

And that rooting out corruption is a necessary and ongoing step to provide investments in the country security and send a message that no one and nothing can tamper with Saudi Crown Prince Mohammed bin Salman’s Vision 2030.

It was King Salman who ordered the anti-corruption initiative saying it was part of an “active reform agenda aimed at tackling a persistent problem that has hindered development efforts in the Kingdom in recent decades.”

And so dozens of Saudi princes, businessmen and government officials became part of a November 4, 2017 probe involving at one point 350 defendants.

Though wrapping up, the investigation is only the first wave of more to come, as per  Sheikh Saud Al-Mujib, Saudi’s Attorney General’s words.

Over the weekend, Prince Alwaleed, retail billionaire Fawaz Al Hokair, Khalid al-Tuwaijri, head of the royal court under the late King Abdullah, and Prince Turki bin Nasser were freed, among 90  who settled.

$100bn or more in cash, assets, or real estate have been recovered, as stated officially.

Some 95 others are still detained, but is Saudi the side left searching for answers?

Click here: Are Saudi prince Alwaleed’s Kingdom Holding’s shares set to rise?

Doubts and aftershocks

“You’ve lit up the world, you are my world,” Reem bint Al-Waleed tweeted, posting a picture of her father Saudi Prince Alwaleed bin Talal sporting a beard.

Now the world is seeking to shed more light on what took place in the kingdom.

True or not, there is an idea floating out there that Saudi did this to fill a serious budget deficit.

“Saudi Arabia is using cash recovered from officials and princes arrested in the crackdown to ease the pain of austerity,” said CNN recently.

Regardless, Saudi finds itself on the defensive having to calm some investor nerves down.

“With the suspects’ names and evidence against them never officially announced, the detentions had raised concerns about transparency among foreign investors,” said Bloomberg.

Read: Does the Saudi Kuwait crisis have a sporting chance of being averted?

Reuters interviewed a Gulf banker who deals with Saudi Arabia who said the authorities appeared keen to conclude the probe partly because foreign investors were concerned their assets or local business partners could be targeted in the wide-ranging crackdown.

“The government is signaling that it wants to move to a new phase now, away from the crackdown and into other economic reforms,” the banker said.

Steffen Hertog, a leading Saudi Arabia scholar at the London School of Economics told Reuters: “This was completely unprecedented, not only in Saudi Arabia, but among all Arab monarchies.” said.

“The appetite for big-ticket corruption among Saudi elites will certainly be a lot lower now. But many also believe, at least for the time being, that life has become less predictable for the private sector, which could make it harder to commit to long-term investment.”

Reuters added that Saudi authorities are keen on preventing the probe from slowing inflows of foreign direct investment, keys to the government’s effort to diversify the economy beyond oil exports.

“The impact of the corruption investigation is being discussed as a concern by potential foreign direct investors in Saudi Arabia,” said another banker. “For them, it’s a source of risk.”

Are these sentiments shared across the board?

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 It’s all good

“Saudi Arabia is still a big market in terms of fundraising and investing,” Hazem Ben-Gacem, head of the Bahrain-based firm’s European private equity business, said at the World Economic Forum (WEF) in Davos.

Bloomberg said the firm, which aims to have $50bn in assets under management (AUM) in five years, is hoping investor fears to subside as the kingdom ends its corruption probe.

“Investcorp now has over $21.4 billion assets under management, has started marketing its Gulf health-care fund, set to raise $750 million, and hopes to close a Gulf technology fundraising $400 million by the summer,” Ben-Gacem said, “and considering investments in companies including Saudi Arabian eye-care specialists Magrabi Hospitals & Centers.”

Ali Taqi, head of equities at Rasmala Investment Bank Ltd. in Dubai told Bloomberg:“It is as if you were reading a book in a library and, suddenly, a false fire alarm goes off. Now it is the moment to get back to the book.”

Kunal Damle, senior institutional sales broker at Securities & Investment Company in Bahrain said: “The positives for the business are that from the face of it, it looks like it is business as usual for the companies.”

Read: MBC falls to Saudi anti-corruption committee?

That much is true

CNBC said shares in Riyadh-listed international investment company Kingdom Holding soared at the opening on Sunday after the company’s owner, Prince Alwaleed bin Talal, was released.

“The stock immediately jumped its 10% daily limit to 10.04 riyals in unusually active trade,” it said.

Reuters calculated this as adding about $850 million to Prince Alwaleed’s fortune as compared to a plunge of his Kingdom’s shares in the initial days after his detention which cost about $2.2bn on paper.

Shares in Saudi fashion retailer Fawaz Abdulaziz Alhokair, whose major shareholder Fawaz Alhokair was also detained and released Saturday, jumped 7.6%.