Riyadh(ANN)-Saudi businesses are feeling the “pain” of Crown Prince Mohamed Bin Salman’s reform plan, a report by the Financial Times has found. In a lengthy piece based on interviews with business executives and analysts, the London based daily said that the policies of the 33-year-old de facto ruler has unnerved the business community and stalled the kingdom’s modernisation programme known as Vision 2030.

Global outrage over the grisly killing of Saudi Journalist Jamal Khashoggi and the ostensible anti-corruption drive, which saw more than 300 princes, businessmen and former state employees incarcerated at the Ritz-Carlton hotel in Riyadh in late 2017, were cited as major stumbling blocks in Riyadh’s drive to diversify its economy and reduce its reliance on oil.

While some foreign investors, lured by the promise of more multibillion dollar deals, are said to have shown a willingness to move on from the death of Khashoggi – which the CIA has conclude was likely carried out under the order of the Crown Prince known as MBS – the diversification efforts have not gone as planned.

“Lots of people want to invest, but are shamed,” said one foreign executive interviewed for report. “Everybody was waiting for how and when and where, then Khashoggi happened.”

In the absence of foreign investors, experts say that Riyadh has become more dependent on local investors to support its plans than it initially anticipated. However Saudi business leaders remain distrustful of the Crown Prince following the 2017 crackdown where some of the country’s most wealthy individuals are alleged to have been tortured.

Mistrust between the royals and business heads is said to have grown also due to non-payment. Riyadh’s finance Minster admitted that the government had settled arrears of $43 billion to companies over the past two years and some still remains outstanding. He conceded that the reforms have brought “pain” but says “dynamic” companies are prospering.

READ: Saudi releases detainees as corruption purge raises $106bn

While gross domestic product is said to have expanded by 3.6 per cent year on year in the last quarter of 2018, according to figures released by the IMF, much of it is still driven by the oil sector. According to the FT  “Riyadh has made little headway on other reforms such as a promised privatisation programme”.

Saudi business heads remain sceptical of the private sector lead reform. “How many public-private partnership projects? You can count them on your hands. How many privatisations have taken place? Almost none,” one retired banker was reported saying.

The Ritz-Carlton crackdown is said to have left deep scars. “It’s not just the people in the Ritz, but also those who were providing their supply chains, they weren’t being paid,” says a Saudi executive in the city. While most of the detainees were released having transferred cash and assets to the state, the bigger problem according to executives is trust.

The lynchpin of MBS’ reform plan is the Public Investment Fund (PIF), a $300 billion sovereign wealth fund, which was accused of “squandering state money” and described as the “personal tool of Prince Mohammed that is crowding out the private sector”. An expert questioned the entire state centred reform programme which he believes is modelled on China and South Korea. He was also sceptical of MBS’ intention in going after Saudi business leaders. “You cannot expect them to be with you if you purge them,” he said.

One western executive cited in the report said: “You need 12 to 18 months of no more self-inflicted wounds and some good indicators before [the economy] really starts to move.”

“When I talk to the private sector, I still hear a lot of scepticism,” he added.

Source: Middaleeastmonitor.