Saudi Arabia's Tourism Development Fund signed an agreement with two of the country’s major lenders, Riyad Bank and Banque Saudi Fransi, to finance tourism projects worth up to 160 billion Saudi riyals ($43bn) in the kingdom.
As part of the deal, the fund and the banks will set up a mechanism to support the financing of tourism projects across the kingdom, according to the official Saudi Press Agency.
The new initiative “is part of the fund’s efforts to encourage and stimulate investments in the tourism sector and support the private sector, including the small and medium enterprises”, the statement on SPA said.
Saudi Arabia set up the fund with an initial investment of $4bn in June this year to boost the tourism sector and fund development at 38 sites across seven destinations by 2022.
Tourism is a key pillar of Saudi Arabia's Crown Prince Mohammed bin Salman's ambitious reform strategy to reduce the economy's dependence on oil. The kingdom wants the sector to contribute 10 per cent of gross domestic product by 2030, up from about 3 per cent currently.
Saudi Arabia began issuing tourism visas in September 2019, but the coronavirus outbreak led to a temporary halt as the kingdom closed its borders to foreign visitors in March to contain the spread of the pandemic.
However, as new cases subside and movement restrictions ease worldwide, the kingdom is planning to re-open to leisure visitors and issue tourism visas by early 2021, the country’s tourism minister told Reuters earlier this week.
Hammad Al Balawi, general manager of tourism investment at the kingdom’s tourism ministry, said the tourism development fund is “one source of funding that could help and accelerate the growth” of projects in the country.
“We are truly committed that the sector would be developed by the private sector … 75 per cent of room keys from now until 2023 will be developed by the private sector,” he said at the Arabian Hotel Investment Conference on Tuesday.
“The kingdom opened its doors for travellers from all corners [of] the world ... 80 per cent of global travellers could be granted the visa in less than five minutes, both e-visa on the website or even visa on arrival and that sets the ambitious strategy for what we want to achieve.”
Saudi Arabia is aiming to attract 100 million visitors by 2030 and the tourism sector would provide jobs to 1.6 million people, Mr Al Balawi said.
“There is no better place to feel [the] Arabian experience than Saudi Arabia. It has wonderful sites and wonderful heritage. We welcome local and international investors to invest in the country and develop new projects.”
Meanwhile, the kingdom's travel services company Seera Group signed a memorandum of understanding (MoU) with the Tourism Development Fund to finance the development of more than 1,000 hotel rooms in cities including Riyadh, Jeddah, Al Baha, Abha, Taif, Al Ula and Hail.
"The massive investment stimulus will help build a robust tourism infrastructure that is crucial to driving the industry's long-term growth, and will also serve the cultural, entertainment and hospitality sectors – all important when it comes to promoting tourism, domestic and international," Abdullah Aldwood, chief executive of Seera Group told The National.
"The agreement will allow the kingdom to finance tourism projects across the country as part of the government's efforts and Vision 2030 to accelerate and drive international tourism," Basel Talal, Radisson Hotel group's regional director for Saudi Arabia, Kuwait and the Levant, said.
"We believe the fund will play a critical part in developing the visitors' experiences and unlocking the country's full potential as a destination."
Radisson is planning to open eight additional hotels in Saudi Arabia next year to grow its presence in the country, he added.
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Who is Mohammed Al Halbousi?
The new speaker of Iraq’s parliament Mohammed Al Halbousi is the youngest person ever to serve in the role.
The 37-year-old was born in Al Garmah in Anbar and studied civil engineering in Baghdad before going into business. His development company Al Hadeed undertook reconstruction contracts rebuilding parts of Fallujah’s infrastructure.
He entered parliament in 2014 and served as a member of the human rights and finance committees until 2017. In August last year he was appointed governor of Anbar, a role in which he has struggled to secure funding to provide services in the war-damaged province and to secure the withdrawal of Shia militias. He relinquished the post when he was sworn in as a member of parliament on September 3.
He is a member of the Al Hal Sunni-based political party and the Sunni-led Coalition of Iraqi Forces, which is Iraq’s largest Sunni alliance with 37 seats from the May 12 election.
He maintains good relations with former Prime Minister Nouri Al Maliki’s State of Law Coaliton, Hadi Al Amiri’s Badr Organisation and Iranian officials.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
