RIYADH – In the middle of a long and very interesting trip to Saudi Arabia, I occasionally get the feeling of déjà vu. When I meet many foreign entrepreneurs – Americans, Europeans, including several Italians – I find in their enthusiasm an atmosphere that I experienced twenty years ago in China. At the beginning of the millennium, as I increasingly moved from San Francisco to the opposite shore of the Pacific, I met industrialists in Beijing and Shanghai (then more Americans, Japanese and Taiwanese than Europeans) who were convinced of the future. In 2004, I moved to Beijing to tell you about this future from the front lines. Which has partly kept its promises, partly exceeded the most optimistic expectations and partly disappointed (the disappointments particularly concern political change and human rights). Now I sense a similar excitement in Saudi Arabia and also among some of its Gulf neighbors who have led the way (Emirates, Qatar).
The Chinese comparison
As I share these impressions with you, I must immediately make an important correction. The comparison between China and Arabia is untenable for many reasons. First of all, there is the size, the geographical location and, above all, the demographics. China is a colossus of 1.4 billion people. Its population was only slightly smaller when it entered the global economy – an event that had been underway since the early 1980s and was then sanctioned and dramatically accelerated with the People's Republic's admission to the World Trade Organization (WTO) in late 2001. Thanks to the immense size of its workforce, it was able to become the planet's factory. There are other ingredients to add to this enormous size, some of which I remember. A very old capitalist history (South China experienced forms of proto-capitalism in the late Middle Ages) unnaturally interrupted by Maoist communism. Confucian culture with its work ethic. The role of the diaspora, particularly Taiwanese capitalists, who pioneered investment in factories as Beijing abandoned Maoism and began the transition to a market economy.
None of this exists in Arabia. It has only 32 million inhabitants, a third of whom are foreign immigrants. China therefore has more than 40 times the population of the Kingdom of Saudi Arabia (Ksa, an abbreviation I will use), which well reflects the mismatch in both labor force and end market. Furthermore, the Chinese population is predominantly Han Chinese, belonging to the same ethnic group; the Saudi one has a high foreign share.
Work ethic and the harm of welfare
This last aspect is even more relevant when it comes to examining work ethics. For historical reasons, many Saudis had become accustomed to living off oil revenues: lavish incomes for the privileged, low social incomes for the majority, who were accustomed to modest but ubiquitous welfare. A lot has changed and will change on this front, but in certain professions the immigrant population is indispensable because the Saudis reject them: especially in blue-collar jobs. The revolution under the 38-year-old Prince Mohammed bin Salman (abbreviated MbS: photo) wants to force young people to change their attitude to work, and there are some positive signs in this sense, but habits entrenched for decades cannot be done in the blink of an eye deleted.
Revolution from above, signed by MbS
I return to the atmosphere I breathe among our entrepreneurs and explain in more detail how it reminds me of the excitement I felt in China at the turn of the millennium. Many Western entrepreneurs operating in this market are convinced that “anything is possible here”. They are fascinated by MbS's fantastic projects. For example, the urban planning and architectural revolution that is underway in Riyadh. Or the even more futuristic project of Neom that I will tell you about soon: suffice it to say that Neom goes beyond the pharaonic construction sites to build the city of the future, in addition to the most advanced technological industries and the challenge of sustainability should be one sort of autonomous state within the KSA, with rules and lifestyles that are significantly more Western than Arab. In addition, the development of customs and certain rights is also noticeable in the rest of the country, such as the freedom for women to dress as they want, drive a car, go to public places alone and travel abroad alone. In this sense, MbS has studied the laboratories of Dubai and Qatar and wants to recreate this type of secularization in a much larger and, above all, much more central country for Islam: the Saudi Kingdom is the guardian of the two holy places for Muslims throughout the world, Mecca and Medina.
“The future is here, the West is the past”
I conclude this overview of the “atmosphere”: Western entrepreneurs are impressed by the long-term and even very long-term vision, another point of commonality with China and a clear difference from the West, which lives in a frenetic cycle of electoral convulsions. Those investing in KSA are beginning to share an opinion that shares Riyadh with Beijing and many other emerging market capitals: the idea that the West is the past, a civilization in decline, while the future is theirs” (even if “they “are a very diverse aggregate full of differences). I said that Arabia was objectively small compared to China. It is small – in terms of population, not in terms of GDP or financial wealth – even compared to three neighboring geopolitical players: Iran with almost 90 million people, Turkey with almost 85 million people and Egypt with 113 million people. We can put Egypt in brackets: it has always been a giant with great influence, but today its ruined economy depends on Saudi capital, so Cairo can be considered an economic colony and a “friend of violence”. But compared to the hegemonic goals of Tehran and Ankara, the Saudi monarchy has disadvantages that cannot always be compensated for with money.
Imperial memory and geostrategic fragility
Let me give you a very recent example. Despite its sophisticated weaponry, the KSA failed to suppress the Iranian-instigated Houthi insurgency in Yemen, something that America and the United Kingdom have to deal with today. Although Saudi Arabia is “small” compared to others, it is huge compared to the Emirates and Qatar, those laboratories of modernization and secularization that Prince MbS has always carefully studied. The KSA wants to repeat these successful experiments on a much larger scale and with a glorious history. As such, the guardian of the holy sites of Mecca and Medina is highly respected throughout the Islamic world, which stretches from Morocco to Indonesia and covers much of Africa: at least 1.6 billion believers. MbS's vision is a futuristic new beginning of an “Arab Empire”, which in history was also able to colonize Andalusia and Sicily in northern India. and for several centuries it had the most advanced civilization in the world. This historical memory is important and represents another point of contact with China, which is also the proud heir to a civilization with limitless self-esteem.
Gold fever, hyperinflation: “bubble”?
From big issues to small everyday life, my current influence on the “new Arabia” (the previous version I visited in 2017 when I traveled here in the wake of Donald Trump, a memorable visit for many reasons, but one that lasted more than seven years seems to be distant) advises me to be careful. Coming from neighboring Qatar, everything in KSA seems a little less efficient and more expensive. I'll let you in on a little secret of local cuisine: as honored as I am to be a Corriere employee, my professional status is that of an external employee, so all travel expenses are borne by me. And the torture of hotel rooms since I've been in Riyadh has already forced me to change one. It is one of the many signs of “gold fever”: everyone wants to be here, those who sell hospitality and services use it, I see more exorbitant value for money than in Manhattan. And the “gold fever” phenomenon does not only affect hotels of a certain quality and level. Large Italian companies that employ essential workers – thousands of workers on construction sites – reveal to me that the Saudi kingdom is speculating in dormitories for employees, renting small rooms for a hundred euros a night. These are signs of a boom that could later turn out to be symptoms of a speculative bubble. MbS is in a race against time to realize all the futuristic projects of his Vision 2030 before something goes wrong and stands in his way.
October 7, 2023, a terrible date for MbS too
Since October 7, 2023, strong headwinds have already arisen with the massacre of Jewish civilians by Hamas and the subsequent response by the Israeli forces in Gaza. Prince MbS had relied on a normalization of relations with Israel, which is now much more problematic. It is an example of the many accidents that can thwart his plans. Iran certainly does not want Arabia to move towards a better future, because the success of MbS (and its secularism) would further highlight the criminal incompetence of the Ayatollahs.
Italian entrepreneurs
The opinions of the Italian industrialists I meet here in Riyadh are very different. Among the optimists there are two outstanding personalities: the managing director of the WeBuild group (formerly Salini-Impregilo) in Ksa, Massimo Marras; and the managing director of the Saudi company AcwaPower, Marco Arcelli, a protagonist in the field of renewable energy and water desalination. Based on her experience on the ground, I consider her to be one of the most authoritative examples of a positive vision of Arab potential. Other Italian entrepreneurs, particularly from slightly smaller companies, are concerned about the various obstacles they are encountering, not least the late payments of some Saudi customers. However, everyone feels like we “have to be here” in such a hectic moment of activity. I already felt this feverish interest when, last September, the European House Ambrosetti received the Saudi Minister of Investment at the Forum Villa d'Este-Cernobbio and, immediately afterwards, together with Minister Urso, organized an Italian-Saudi Forum at the Hotel Gaul of Milan. The crowd of Italian industrialists who flocked to the event seemed worthy of a rock concert.
World minerals and their role at the crossroads
Another event that attracted me here in Riyadh is the World Conference on Mineral Resources: Future Minerals Forum. Where in the last four days we have not been talking about oil, but about all other minerals, especially those necessary for the progressive decarbonization of our economies. On this occasion I saw Riyadh full of government and industrial delegations from Asia, Africa, Latin America and the industrialized nations of the West. It is another sign of what the new Saudi Arabia wants to be: a strategic crossroads through which all must pass, the north and the south, the east and the west of the planet. At the moment it's about winning. Everyone wants to sit at this big table with the Saudi leadership.
Human rights (women and workers)
I end this first episode of my travel diary with a topic that is rightly close to the hearts of Italians: human rights. In addition to the positive development of the situation of women, I was also struck by the extent of accident prevention measures and other protective measures that have been introduced at major construction sites in Riyadh and many other Saudi cities. A year ago, at this time, we were in the middle of the Qatar Gate, a corruption scandal centered on the issue of the situation of workers (particularly immigrants) on World Cup construction sites. It seems that MbS has also investigated this and wants to avoid similar incidents. At the same time, I learned about the withdrawal of some American pension funds from important investment projects in KSA. Behind this decision, I was told, was the way in which land is being expropriated and houses demolished to make way for the futuristic projects of Vision 2030. Those who resist and defend their homes will be treated with extreme severity by the Saudi justice system. We must acknowledge this ambivalent reality. Prince MbS is a real modernizer. He has the great merit of ousting the most fundamentalist Islamic clergy and shutting down the petrodollar taps that financed jihadist terrorism. He also has a progressive vision on the role of women in society. But nowhere is there any reference from MbS to the kingdom's transition to democracy. And even in this there is ultimately a certain analogy to Xi Jinping.
(Excerpt from Global, Federico Rampini's weekly newsletter)