The Weekly Circuit
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Saudi Arabia’s bid to broaden international ties and diversify its exports beyond oil may advance this week at a meeting of the so-called BRICS nations, which comprise Brazil, Russia, India, China and South Africa. The Gulf kingdom is among some 40 countries that have expressed interest in joining the group and will attend the three-day Johannesburg summit starting Tuesday. The BRICS group has positioned itself as a counterweight against the dominance of the U.S. and Europe in world trade.
Even if it remains outside BRICS for now, the Saudi government is bolstering links with individual member-countries and signed a series of deals worth $1.3 billion with China last week to develop housing and real estate businesses. China, the world’s second-largest economy, has been courting Saudi Arabia and brokered its rapprochement in March with Iran.
Among other Saudi-China developments last week was the opening of an office by a Shanghai municipal investment agency in Riyadh’s King Abdullah Financial District. Hong Kong officials, meanwhile, said they hope to develop stronger connections with Saudi Arabia and the UAE at the Belt and Road Summit the city will host starting Sept. 13, which will focus on China’s infrastructure investments around the world.
Israel, which has been discussing a proposed normalization agreement with Saudi Arabia through U.S. mediators, got a reprieve last week from criticism over the economic impact of government efforts to overhaul the judicial system. Fitch Ratings affirmed Israel’s sovereign credit score at A+, its fifth-highest investment-grade level and the same as Saudi Arabia’s.
Dubai’s efforts to become a destination for digital nomads is paying off, according to a new ranking from real estate firm Savills. The city beat out Lisbon, Portugal – last year’s leader – as the top place for hybrid work, propelled by its fast-growing financial and fintech sectors.
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Plunge in VC funding threatens prospects for Gulf startups
Philip Bahoshy has spent more time than usual in the last few weeks trying to calm Gulf investors, startup founders and government ministers who are alarmed by the slowdown in venture capital funding. As investment plunged globally in the first half of 2023, the chief executive of Magnitt, a Dubai-based tracker of VC data, finds himself now in a classic situation of “Don’t shoot the messenger,” The Circuit’s Kelsey Warner reports.
First road show: Venture activity in the Middle East and North Africa faced a significant decline year-on-year, posting a total of $1.1 billion in funds raised across 193 deals: a 41% drop in funding and a 64% decline in the number of transactions. “This is the first time I actually did a road show to meet ministers and our key clients because I wanted to make sure that people understood the data, which is not reflecting positively,” Bahoshy told The Circuit.
Sequoia, Softbank: Several years ago, big names like Sequoia Capital, SoftBank, Naspers and Tiger Global were making plays in the region. “We [now] see an alarming gap in capital,” Luca Barbi, chief operating officer of STV, an active growth stage VC fund with Saudi founders, told The Circuit. “Those [international] players are not active anymore in the Middle East because the context now is more challenging.”
Sovereign wealth: For much of 2023, a prevailing narrative has been that the greatest investment opportunities are in the Gulf. Entrepreneurs and investors from the West, including Adam Neumann, Marc Andreessen and Nelson Peltz, have been vocal in their support for the economic transformations underway in Saudi Arabia and the UAE in particular, underpinned by the countries’ sovereign wealth funds.
Local payback: But to raise funds in the Gulf now means a certain percentage needs to be reinvested back into those local markets, Bahoshy said, a reality that may be slowing activity. “I think that the sovereigns are right at the beginning to say, if you want to come and take our dry powder, the requirements will be that a certain percentage of that needs to be deployed back into our local markets,” Bahoshy said.
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Wizz Air expands cheap flights in Mideast, pledges better service
At $157 for a round-trip ticket, Wizz Air’s three-hour flights between Abu Dhabi and Tel Aviv last April were less than half the cost of FlyDubai, El Al and other competitors, Rebecca Anne Proctor reports for The Circuit.
Poor reviews: Passengers, however, were routinely crammed into some of the narrowest seats in the industry, flights were habitually late and extra charges piled up for luggage, food and legroom. In February, Wizz Air was rated the U.K.’s worst airline by a consumer organization in terms of boarding, cabin environment and seat comfort.
Booming business: The Budapest-based carrier’s executives acknowledge the shortcomings and say they’re trying to improve on-time schedules and customer service. At the same time, they suggest that passengers know what they’re getting with the airline’s “ultra low-cost” model – similar to RyanAir, easyJet and Spirit Airlines – and business has never been better.
Facing skepticism: “I’m actually not too worried about how we are performing,” Johan Eidhagen, managing director of Wizz Air’s Abu Dhabi-based Mideast division, told The Circuit. “But I do understand that, of course, a lot of skepticism comes around being low-cost, of how you can achieve [better service]. And that’s the challenge.”
Growth in Gulf: The airline, which was established as a Hungarian company in 2003, flies to 54 countries and operates 183 aircraft. Wizz Air announced plans in March to increase its fleet to 200 aircraft this year and 500 by 2030. The Mideast subsidiary, Wizz Air Abu Dhabi, is a joint venture between Wizz Air Holdings and ADQ, a government-owned investment company, which owns 51% of the airline. Eidhagen said his priorities are safety, low prices and on-time performance. “If we can deliver those three most important things,” he said, “then I think we have a strong and good airline.”
Chip Wars: Saudi Arabia and the UAE are buying up Nvidia chips in the global race to build AI software, squeezing world semiconductor supplies, the Financial Times reports.
Shooting Arrows: Israel obtained U.S. government approval for a $3.5 billion contract to sell its jointly developed Arrow-3 missile-defense system to Germany.
Heat’s On: Aging power networks in Egypt, Iran and Iraq have been overwhelmed by demand for electricity amid record-high summer heat, the Wall Street Journal reports.
Startup Kingdom: Saudi Crown Prince Mohammed bin Salman announced the launch of a new $200 million fund to invest in domestic and international tech companies.
Gas Search: An offshore drilling rig arrived at its destination in Lebanese waters near the Mediterranean sea border with Israel and will start soon to search for gas.
Stalled Out: Saudi Arabia’s investment in luxury EV maker Lucid “undermines” its otherwise strong U.S. holdings, sovereign wealth fund tracker Global SWF said.
Green on Green: The UAE is mulling a mega-fund to drive billions of dollars into clean energy globally, a plan it may unveil at COP28 in Dubai later this year, Politico reports.
Top of the Heap: Forbes Middle East ranked the top 100 Arab Family Businesses, offering a glimpse into the holdings of MENA’s largest and oldest dynasties.
Right Track: Tel Aviv’s $5 billion light-rail network, which will eventually link 14 cities and 139 stations, started service on the first of three lines after eight years of construction.
Ocean Oasis: The St. Regis and Ritz-Carlton hotel resorts in Saudi Arabia, two properties owned by Red Sea Global, are almost ready to welcome guests.
Solar Park: Bahrain signed a series of agreements to set up a 72-megawatt solar power park as part of its efforts to reduce carbon emissions.
Smokers in Distress: Egypt’s Eastern Tobacco Co. will produce an extra 50 million cigarettes a day to address a shortage that has sent black market prices surging.
New Identity: Saudi Arabia’s Savvy Games Studios rebranded itself as Steer Studios as the kingdom tries to become one of the world’s biggest gaming hubs.
London Calling: Harrods, the hallowed London retailer owned by the Qatar Investment Authority, reported 52% annual sales growth as the impact of COVID-19 has subsided.
Charged Up: China’s defaulted property developer Evergrande agreed to sell an 8% stake in its electric-vehicle unit to Dubai-based startup NWTN.
From the Ashes: An unidentified UAE investor bought a 2% stake in Israel’s Phoenix Holdings after the insurer’s acquisition by Abu Dhabi-based ADQ was canceled.
First Closing: Saudi Arabia’s Energy Capital Group closed its first $150 million fund, targeting the establishment of top-level developers for energy technologies.
Bread Basket: Egypt signed a $500 million deal to secure wheat shipments for five years through the Abu Dhabi Exports Office and Al Dahra agribusiness company.
Kingdom to Kingdom: Jordan’s Innovative Startups and SMEs Fund committed $1.5 million to Saudi Arabia’s early-stage VC fund Sadu Capital.
Expanding Fleet: Morocco’s Royal Air Maroc signed a $300 million contract to lease five Boeing 737 aircraft from Los Angeles-based Air Lease Corporation.
Tumbling Tower: Intel Corp. canceled its $5.4 billion acquisition of Israel’s Tower Semiconductor because of difficulties with Chinese regulatory authorities.
Islamic Debt: Saudi Arabia completed an early purchase of outstanding debt and will issue some $9.6 billion in Islamic sukuk bonds in an effort to bolster its domestic market. The kingdom also sold $3.2 billion of U.S. Treasury bonds in June, cutting its holdings to the lowest level in six years, while the UAE sold $4 billion of U.S. Treasuries.
Supplying Japan: Abu Dhabi’s ADNOC Gas signed a five-year deal worth as much as $550 million to supply liquefied natural gas to Japan Petroleum Exploration.
LEED the Way: Saudi Arabia’s $63 billion Diriyah project, which is being built around the mud-brick-walled At-Turaif District that is a UNESCO World Heritage site, nabbed a LEED platinum certification, the highest standard in sustainable building practices.
On the Circuit
Saudi Crown Prince Mohammed bin Salman may be invited to the U.K. in the near future to meet King Charles III and Prime Minister Rishi Sunak, The National reports.
Jared Kushner, the son-in-law of Donald Trump and former White House adviser, tells the Wall Street Journal he’s untroubled that his Saudi-backed private equity firm, Affinity Partners, has had a slow start, and expects as much as $1 billion in deals this year. In a post on X, previously Twitter, Tel Aviv venture capitalist Michael Eisenberg called the article a “hit job” and said Kushner “has been disciplined on price and investing.”
Sultan al Neyadi, the UAE astronaut, is scheduled to return from the International Space Station on Sept. 1, splashing down with crew members off the coast of Florida.
Neymar, the Brazilian star from French soccer’s Paris St.-Germain club, signed a two-year contract with Saudi Arabia’s Al Hilal worth a reported $98 million.
Jassim Alseddiqi, once the largest shareholder of Dubai-listed investment bank Shuaa Capital, sold his nearly 30% stake and is stepping down as managing director.
Eli Cohen was named CEO of First International Bank of Israel, the country’s fifth-largest bank, succeeding Smadar Barber-Tsadik who held the post for 16 years.
Khalid Fayez was appointed CEO of JPMorgan Saudi Arabia Co., the securities arm of JPMorgan Chase in the kingdom. He was previously head of corporate banking.
Oualid Lahsini was appointed CEO of hedge fund Brevan Howard’s Middle East business, based in Abu Dhabi. He was previously Mideast chief for Ares Management.
Nayef al-Saudairi, Saudi Arabia’s ambassador to Jordan, took on an additional post as nonresident ambassador to Palestine, which the kingdom recognizes as a state.
Israel Katz, Israel’s energy minister, visited the UAE, where a trilateral water-for-energy deal with Jordan due to be signed at the COP28 climate conference was on the agenda.
Ahead on the Circuit
Sept. 5-6, Tel Aviv, Israel: Agro-Mashov Conference 2023. Growers, buyers, retailers, wholesalers, importers gather for annual Israeli agricultural conference. Expo Tel Aviv.
Sept. 11-13, Riyadh, Saudi Arabia: Saudi Water Expo. Investors and leaders from industry and government discuss prudent use of the region’s water resources. Riyadh International Convention and Exhibition Centre.
Sept. 13-14, Dubai, UAE: Global Vertical Farming Show. Vertical farming companies from around the world meet with technology firms, policymakers and investors. Movenpick Grand Al Bustan Hotel.
Sept. 13-14, Riyadh, Saudi Arabia: IDC Saudi Arabia CIO Summit. Chief information officers explore new digital trends in business. Fairmont Riyadh Hotel.
Sept. 14-15, Abu Dhabi, UAE: Super Angels Summit 2023. Angel investors meet with startup founders at annual conference. Abu Dhabi National Exhibition Centre.
Sept. 19, Dubai, UAE: Middle East Investment Conference. Asset owners, managers, investors discuss latest trends in regional market. Ritz Carlton, DIFC.
Sept. 20-24, Dubai, UAE: Gitex Shopper. Electronics fair with product launches, presentations by major world brands. Dubai World Trade Centre.
Oct. 2-5, Abu Dhabi, UAE: ADIPEC 2023: Abu Dhabi International Petroleum Exhibition & Conference brings oil industry together to discuss trends and strategy. Abu Dhabi National Exhibition Centre.
Oct. 11-12, Dubai, UAE: Dubai Assembly for Generative AI. UAE-sponsored conference drawing government officials, corporate executives, investors to debate opportunities and risks of artificial intelligence, Museum of the Future.
Ski Saudi: Construction work is underway to build world-class slopes, luxury hotels and designer shopping malls at Saudi Arabia’s Trojena project, the Gulf’s first outdoor ski resort, Al Arabiya reports. Developers say Trojena, part of the kingdom’s planned $500 billion Neom metropolis, will rely on snow-making equipment powered with renewable energy for 75% of its requirements to cover the trails. The rest will be natural snow that falls in the Tabuk mountain range, where winter temperatures fall below zero at the highest altitudes. The resort has been selected as the site for the 2029 Winter Asian Games.
Pretty in Pink: While Barbie and Ken may have gotten a rude reception in some Arab countries, including boycotts in Kuwait, Algeria and Lebanon, director Greta Gerwig’s blockbuster movie drew exuberant crowds in other parts of the Middle East. Fans at the premiere in Saudi Arabia’s western city of Jeddah wore pink abayas – the usually black gowns women wear over their clothes in many Muslim countries – and munched on pink éclairs to celebrate the film’s world of bright plastic dolls.
Designer Kaftans: Saudi Arabia’s 24-year-old fashion designer Nora al Hudaib has built a business around her colorful embroidered interpretations of the kaftan, a long flowing robe worn by women in the Middle East, Africa and Southwest Asia. Now she’s taking the Nakhlah brand and aiming to sell her designs in New York department stores, Forbes reports.