SAUDI Crown Prince Mohammed bin Salman arrives in the United States next week to kick off a tour of the pillars of the US economy — including meetings with Silicon Valley technology leaders, Los Angeles entertainment executives, oil industry figures in Houston and captains of finance in New York.

Mohammed, who will see President Donald Trump on Tuesday, is striving to woo foreign investment and know-how to Saudi Arabia to create jobs and diversify an economy that relies almost entirely on exports of oil. Those initiatives are key parts of his reformist Vision 2030.

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Selling American investors on Saudi Arabia is a tough business. During a visit to Riyadh last May, Trump touted what he described as nearly $200 billion of commercial and military agreements with the kingdom. They included sales of equipment and investment going in both directions. Nine months later, only a tiny number of the vaunted deals have come to fruition.

Investors may be even more skittish because of a recent crackdown on Saudi Arabia’s business elite orchestrated by the crown prince. Though Mohammed has portrayed the crackdown as an attack on corruption, Western investors are concerned about whether it demonstrates weakness in the rule of law. The Saudi government extracted billions of dollars and in some cases entire enterprises in exchange for the business executives’ release from detention in Riyadh’s Ritz Carlton hotel.

The ambitious heir to the throne is arriving to meet with investors

“The crown prince needs to do some reassuring of the international business and financial communities in the wake of the Ritz Carlton detentions of last year,” Gregory Gause, a professor of international affairs at Texas A&M University, said in an email. “He needs international investment to achieve his Vision 2030 goals, and the opaque way he dealt with the businesspeople and others he detained raised questions about security of investment in the kingdom.”

Explore: Mohammed bin Salman — a profile

Other people familiar with Saudi Arabia expect that episode to fade away. “Countries go through defaults, and within six months, if things have gone back to the mean, foreign investors start to trickle back in,” said Ali Shihabi, founder of the Arabia Foundation, a think tank. “Sure it’s a shocking event. It will give people pause. But after that pause, they will start coming in.

Maybe. Even before the crackdown, the World Bank ranked Saudi Arabia 92nd in the world for the ease of doing business. Permits and paperwork are burdensome. Personal ties help. Cross-border trade is practically impossible. And the kingdom lacks a clear bankruptcy law, making it hard to recover money if a weak local partner goes out of business.

Seeking advice and influence in the United States, the kingdom over the years has signed up a raft of lobbyists, lawyers and consulting firms, including Akin Gump, the Podesta Group, BGR Group, the Hohlt Group, Squire Patton Boggs, Qorvis, Hogan Lovells and King & Spalding. But many of those lobbyists privately express frustration at the challenges of working with Saudi officials.

Restrictions on films could dampen Hollywood’s appetite for engagement. Hotel chains might be intimidated by the difficulty of doing business in the kingdom.

Trump’s list of US-Saudi transactions included $110 billion of military deals and $80 billion of commercial sales, according to a spreadsheet a White House official provided to The Washington Post at the time. But some of those were not solid deals to begin with; the list included memorandums of understanding and letters of intent. Some were first floated during the Obama administration.

“There seems to have been very little progress on implementing specific deals,” Gause said. “There was a formal announcement to Congress of a $500 million deal earlier this year, but that is a small percentage of the amount announced during the visit.”

The biggest deal was $28 billion for integrated air and missile defence, combat ship, tactical aircraft and rotary wing technologies and programs from Lockheed Martin. So far, nothing has been delivered, and the agreements “are currently working their way through the approval processes in both governments,” said Maureen Schumann, a spokeswoman at Lockheed Martin.

The State Department notified Congress on Oct 6 that it had approved a possible sale to the government of Saudi Arabia of an anti-ballistic missile system, the Terminal High Altitude Area Defence (THAAD), for an estimated $15 billion, but there still is no solid contract.

If the past is any indication, that could take a while. The THAAD sale was not a new idea at the time of Trump’s visit. The Saudis have expressed interest in the system for several years, and President Barack Obama approved the sale — in principle — at a summit at Camp David in 2015.

Other parts of the Lockheed Martin package are even further off. There was to be a joint venture to finish building 150 S-70 Black Hawk helicopters for Saudi Arabia, an arrangement that was forecast to generate 450 jobs in Saudi Arabia.

But the venture has not advanced past a letter of intent, Schumann said.

“What the Saudis and the administration did is put together a notional package of the Saudi wish list of possible deals and portray that as a deal,” Bruce Riedel, a senior fellow at the Brookings Institution, said in a blog post. “Even then the numbers don’t add up. It’s fake news.”

A State Department representative said the delay in military sales was linked to Sen. Bob Corker, R-S.C., who nine months ago issued a blanket hold on sales of military equipment to countries in the six-member Gulf Cooperation Council over a dispute between Qatar and other GCC members. Saudi Arabia is a GCC member. But on Feb. 8, Corker wrote to then-Secretary of State Rex Tillerson that he was lifting his objection to weapon sales to countries engaged in anti-terrorism activities.

An aide to Corker who spoke on the condition of anonymity to comment freely said Corker had made exceptions for a wide variety of commercial and defensive nonlethal military sales, such as training and missile defence systems. The aide said that just four proposed sales totalling $2.9 billion to Saudi Arabia were subject to the hold and have since been cleared. That amounts to less than 3 percent of the $110 billion in sales announced last May in Riyadh.

At the time of Trump’s visit to the kingdom, General Electric also announced $15 billion in “new agreements” with Saudi Arabia. The projects would span the kingdom’s power, health care, energy and mining sectors, as well as skills training and digital analytics running on Predix, GE’s software platform for the “industrial Internet.”

The package also was to include a partnership with Saudi Aramco, the national oil and gas company, to generate $4 billion in efficiency savings by digitizing its operations.

But few of GE’s agreements have gelled. One exception: In June 2017, the company signed a joint-venture agreement worth $270 million with the Saudi firm Dussur to move some turbine repair operations to the kingdom. Another: GE software to put medical records online is being introduced at three hospitals around the kingdom.

When asked about the status of the other accords, a GE representative said the company “has been engaged in constructive dialogue with the relevant Saudi government entities.” GE chief executive John Flannery — who has upended the company and has changed out two-thirds of the top executives in the past nine months — travelled to Saudi Arabia this week.

Companies focusing on the energy industry have been waiting for the construction of a King Salman “energy park.”

Schlumberger, one of the world’s leading oil-field services companies, said it would become a “key anchor tenant” in the development. The company said it would manufacture products for land drilling rigs. It said the first phase of the project was planned to be completed by the end of the month.

But the biggest items on the Trump administration’s list of “deals” were, in fact, investment funds looking at projects in the United States and other parts of the world. The funds had been in the works since before Trump took office.

In one, the Saudi Public Investment Fund pledged to invest $20 billion in a $40 billion private-equity fund run by the Blackstone Group and focusing on US infrastructure. The Trump administration inflated the deal list by counting this commitment as a $40 billion “deal.” But the Saudi share is only half of the $40 billion and will not be drawn down until the fund has a pipeline of projects. So far, Blackstone has recruited some investors, including senior executives to manage the fund, but it has yet to make the first investment.

The Saudi PIF has also pledged to invest up to $45 billion in SoftBank’s $100 billion technology-focused Vision Fund, which is expected to invest heavily in the United States. SoftBank is a Japanese company. The Trump administration included the entire amount of the $100 billion fund in listing the commercial deals signed during the president’s trip. Bloomberg/The Washington Post Service

Published in Dawn, The Business and Finance Weekly, March 19th, 2018