The consultants are flocking to Saudi Arabia.
The kingdom has spent US$1.25 billion on fees for management consultants this year, according to a report from Source Global Research, as it gears up to announce its National Transformation Plan on Monday. The NTP is a raft of economic reforms designed to insulate the Saudi economy from the impact of low oil prices.
The fall in hydrocarbons revenues has hit Saudi Arabia’s financial buffers and widened its fiscal deficit, meaning that the Gulf monarchy has realised that it must embrace new policies – which is proving a boon to the economic advice industry.
Spending on consultants grew 14.8 per cent in Saudi Arabia year-on-year. That makes the kingdom the largest and fastest growing market for consultants in the region. The GCC as a whole spent $2.7bn on consultants in 2015, up from $2.46bn the previous year.
“For consultants, [Saudi Arabia] currently represents the mother of all transformation projects,” said Edward Haigh, SGR’s director.
Jason Tuvey, an emerging markets economist at Capital Economics, said: “Saudi ministries have relied on western consultants and experts for many years to help with running the economy. It’s a way for the Saudi government to get outside authority for their plans. For consultants, there is plenty of work available.”
The consultancy McKinsey argues that the kingdom needs to create 6 million new jobs by encouraging $4 trillion of new investment into its non-oil economy by 2030, in a report published shortly before the Gulf state announced it would embark on an economic reform programme.
The four largest consulting firms, PwC, Deloitte, EY and KPMG – which have recently expanded their consulting businesses – have benefited most, earning $913 million in fees in 2015, according to the report.
As oil prices rose steadily from 2003 to 2014, Gulf states embarked on an infrastructure spending spree. Mega-projects from the Kingdom Tower in Saudi Arabia, to the Qatari stadium projects ahead of the Fifa World Cup 2022, and the UAE’s major airport developments, have provided plenty of business for consultants.
But with oil prices now at $43 per barrel, down from a high of $110 in the summer of 2014, the Gulf states are turning to consultants to help them trim their budgets as they enter an era of austerity. Privatisations, cuts to subsidies, reductions in social welfare payments and overhauls to sovereign wealth funds have all been considered, and consultants are advising on each of these changes.
Last December Saudi Arabia announced an austerity budget in which it would cut spending by 13.8 per cent this year.
Some elements of the NTP have been mentioned in deputy crown prince Mohammed bin Salman’s public statements.
Ministries have been told to cut their individual spending plans by 5 per cent each, on top of additional policy changes, Reuters reported in March. Prince Mohammed said this month that the kingdom would hope to generate more than $100bn per year by 2020 in new revenue from subsidy cuts, new labour market rules and the introduction of VAT. He also outlined a complex plan to transfer ownership of Saudi Aramco to the Public Investment Fund, a new sovereign wealth fund.
abouyamourn@thenational.ae
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ADCC AFC Women’s Champions League Group A fixtures
October 3: v Wuhan Jiangda Women’s FC
October 6: v Hyundai Steel Red Angels Women’s FC
October 9: v Sabah FA
The years Ramadan fell in May
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Company%20Profile
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Pieces of Her
Stars: Toni Collette, Bella Heathcote, David Wenham, Omari Hardwick
Director: Minkie Spiro
Rating:2/5
How Tesla’s price correction has hit fund managers
Investing in disruptive technology can be a bumpy ride, as investors in Tesla were reminded on Friday, when its stock dropped 7.5 per cent in early trading to $575.
It recovered slightly but still ended the week 15 per cent lower and is down a third from its all-time high of $883 on January 26. The electric car maker’s market cap fell from $834 billion to about $567bn in that time, a drop of an astonishing $267bn, and a blow for those who bought Tesla stock late.
The collapse also hit fund managers that have gone big on Tesla, notably the UK-based Scottish Mortgage Investment Trust and Cathie Wood’s ARK Innovation ETF.
Tesla is the top holding in both funds, making up a hefty 10 per cent of total assets under management. Both funds have fallen by a quarter in the past month.
Matt Weller, global head of market research at GAIN Capital, recently warned that Tesla founder Elon Musk had “flown a bit too close to the sun”, after getting carried away by investing $1.5bn of the company’s money in Bitcoin.
He also predicted Tesla’s sales could struggle as traditional auto manufacturers ramp up electric car production, destroying its first mover advantage.
AJ Bell’s Russ Mould warns that many investors buy tech stocks when earnings forecasts are rising, almost regardless of valuation. “When it works, it really works. But when it goes wrong, elevated valuations leave little or no downside protection.”
A Tesla correction was probably baked in after last year’s astonishing share price surge, and many investors will see this as an opportunity to load up at a reduced price.
Dramatic swings are to be expected when investing in disruptive technology, as Ms Wood at ARK makes clear.
Every week, she sends subscribers a commentary listing “stocks in our strategies that have appreciated or dropped more than 15 per cent in a day” during the week.
Her latest commentary, issued on Friday, showed seven stocks displaying extreme volatility, led by ExOne, a leader in binder jetting 3D printing technology. It jumped 24 per cent, boosted by news that fellow 3D printing specialist Stratasys had beaten fourth-quarter revenues and earnings expectations, seen as good news for the sector.
By contrast, computational drug and material discovery company Schrödinger fell 27 per cent after quarterly and full-year results showed its core software sales and drug development pipeline slowing.
Despite that setback, Ms Wood remains positive, arguing that its “medicinal chemistry platform offers a powerful and unique view into chemical space”.
In her weekly video view, she remains bullish, stating that: “We are on the right side of change, and disruptive innovation is going to deliver exponential growth trajectories for many of our companies, in fact, most of them.”
Ms Wood remains committed to Tesla as she expects global electric car sales to compound at an average annual rate of 82 per cent for the next five years.
She said these are so “enormous that some people find them unbelievable”, and argues that this scepticism, especially among institutional investors, “festers” and creates a great opportunity for ARK.
Only you can decide whether you are a believer or a festering sceptic. If it’s the former, then buckle up.
PRO BASH
Thursday’s fixtures
6pm: Hyderabad Nawabs v Pakhtoon Warriors
10pm: Lahore Sikandars v Pakhtoon Blasters
Teams
Chennai Knights, Lahore Sikandars, Pakhtoon Blasters, Abu Dhabi Stars, Abu Dhabi Dragons, Pakhtoon Warriors and Hyderabad Nawabs.
Squad rules
All teams consist of 15-player squads that include those contracted in the diamond (3), platinum (2) and gold (2) categories, plus eight free to sign team members.
Tournament rules
The matches are of 25 over-a-side with an 8-over power play in which only two fielders allowed outside the 30-yard circle. Teams play in a single round robin league followed by the semi-finals and final. The league toppers will feature in the semi-final eliminator.
Series information
Pakistan v Dubai
First Test, Dubai International Stadium
Sun Oct 6 to Thu Oct 11
Second Test, Zayed Stadium, Abu Dhabi
Tue Oct 16 to Sat Oct 20
Play starts at 10am each day
Teams
Pakistan
1 Mohammed Hafeez, 2 Imam-ul-Haq, 3 Azhar Ali, 4 Asad Shafiq, 5 Haris Sohail, 6 Babar Azam, 7 Sarfraz Ahmed, 8 Bilal Asif, 9 Yasir Shah, 10, Mohammed Abbas, 11 Wahab Riaz or Mir Hamza
Australia
1 Usman Khawaja, 2 Aaron Finch, 3 Shaun Marsh, 4 Mitchell Marsh, 5 Travis Head, 6 Marnus Labuschagne, 7 Tim Paine, 8 Mitchell Starc, 9 Peter Siddle, 10 Nathan Lyon, 11 Jon Holland
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
BUNDESLIGA FIXTURES
(All games 4-3pm kick UAE time) Bayern Munich v Augsburg, Borussia Dortmund v Bayer Leverkusen, Hoffenheim v Hertha Berlin, Wolfsburg v Mainz , Eintracht Frankfurt v Freiburg, Union Berlin v RB Leipzig, Cologne v Schalke , Werder Bremen v Borussia Monchengladbach, Stuttgart v Arminia Bielefeld
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