Where the money is
At the Saudi Royal Palace, Mark Carney makes his pitch
Why do you rob banks, a reporter once asked Willie Sutton, a prominent bank robber. “Because that’s where the money is,” Sutton replied. And so to Jeddah, on the banks of the Red Sea, where Mark Carney spent Thursday holding meetings with the people in Saudi Arabia who know where the money is.
The PM’s first meeting was with Bandar al-Khorayef, the Saudi Minister of Industry and Mineral Resources; and Bob Wilt, CEO of Ma’aden, the Saudi-owned mining company with a market capitalization of a quarter of a trillion dollars.
Next meeting: Prince Abdulaziz bin Salman, Minister of Energy; and Amin H. Nasser, President and CEO of Saudi Aramco. Aramco is the country’s national oil company. Its market cap is $6.5 trillion, or about 26 times as big as Ma’aden. Prince Abdulaziz is the first member of the House of Saud to be his country’s energy minister.
Carney’s third meeting was with Fahad bin Abduljalil Al-Saif, who became the country’s Minister of Investment after a long career making decisions about titanic amounts of money; Yasir Al-Rumayyan, who runs the Public Investment Fund (PIF), which is like what Quebec’s Caisse de dépôt would be if the Caisse was fuelled by the wealth of Saudi Arabia; and Tariq Amin, CEO of HUMAIN, the “full-stack AI ecosystem” launched by PIF with $100 billion two weeks after the Carney Liberals won re-election last year.
Then Carney had a late lunch with the Crown Prince, Mohammed bin Salman. The Crown Prince, essentially the head of the Saudi government, thinks big. His Vision 2030 project is a trillion-dollar plan to diversify the Kingdom from an oil monoculture to a do-everything society of the future. It started big and ran straight into some speed bumps — cost overruns, a decline in oil revenues, expropriation hassles. All the same, that’s a trillion dollars on the table, and any government looking for money has to come through today’s Saudi Arabia.
There are downsides. One needs no civil-rights monitor more sophisticated than the government’s own standing travel advisory for Saudi Arabia, which warns of lengthy jail terms for simply “liking” tweets that are seen to mock the Saudi regime.
Why come? Carney’s answer was a little longer than Willie Sutton’s. “Engagement is not endorsement,” he said. “So engaging with a country doesn’t mean that we agree with everything that the country is doing. In fact, I can’t think of a country on the planet that we agree with everything that they do… We don’t even agree with everything that’s happening in Canada.”
Second, Carney mentioned the need to diversify Canada’s investments and partnerships, having become “over-reliant” on the US. Third, the need to improve relationships with influential regional players on files important to Canada. In the Middle East, those include Turkey and Saudi Arabia.
“That doesn't mean that they have the key to unlock things. But not being engaged? Not talking to them? I’m the first prime minister to come here in 25 years. I was the first prime minister to speak to President Erdoğan in over a decade — speak to him.” (The last PM to visit Jeddah was Jean Chrétien, and he got lousy reviews, though mainly for gaffes he committed before he got to Saudi Arabia.)
I asked Carney about all the obstacles the Saudis’ Vision 2030 has run into. Should any of that be a warning to Canada? The PM wasn’t buying my memento mori. The IMF just forecast 5.5% growth for the Saudi economy, said Carney, who’s just spent a month arguing on which side of zero Canadian growth lies. Oil has gone from 75% of government revenues to below 50%. Tourism has gone from near zero to 150 million visitors a year in the last six years.
How to avoid trouble? “Track what you’re trying to accomplish. Have KPIs, key performance indicators. Make course directions when necessary. Cut your losses if something isn’t working. That’s always good advice.” I mean, it was practically his Liberal leadership philosophy.
Carney had just announced that the Saudi PIF will attend his Canada Investment Summit in Toronto in September, an event that will be central to the government’s attempt to pitch Canada as a global investment destination. I pointed out that Justin Trudeau hosted an investment summit in Toronto 10 years ago, without notable result, and that Carney himself had advised the current UK government on attracting investment two years ago. How to get better results now than they did?
The PM rummaged around a bit, looking for an answer. Eventually he said part of the strategy should be to obviously have a strategy. “This isn’t just flavor of the month. It’s something you’re going to build out over over time. You’ve got a big market. You’ve got the rule of law. You’ve got smart people, you’ve got an ambitious country, and you’re connected to the world.”
What’s bracing, if not unnerving, about asking the world to take a bet on Canada is that ultimately it will be the world’s decision. Sooner or later everyone visits Jeddah, even a Canadian prime minister. They all make a pitch. Carney’s visit generated a lot of interest this week in Jeddah. Soon we will see how many zeros come at the end of that.
In my lefty-ish online neighbourhoods, Carney is getting roasted for the Saudi visit -- Jamal Khashoggi's name comes up frequently, as well it should. But I think the criticism misses a larger issue.
One of the things we hire leaders to do for us is carry out necessary but extremely unpleasant jobs. I wouldn't want to be the person who greets the family of a fallen soldier on the tarmac, or meet with the survivors of a mass shooting. But somebody has to, and it ought to be the person whose job includes speaking for the rest of us in those situations.
Similarly, someone has to approach the truly terrible people out there who have the money we need to help us build ourselves a little more breathing room and a touch more security than we currently have. And not just approach them, but give off positive vibes authentic enough to please them and get them to fly across an ocean to visit us. That's ugly work, and I hate that we have to do it; but it's got to get done.
Among the upgrades Carney gives us over Trudeau is that Trudeau couldn't make his contempt for those people (among others) any clearer. He didn't want to go anywhere near these autocrats and authoritarians, and so he didn't. (Harper too, to some extent.) I imagine Carney internally recoils from bin Salman or Erdrogan or Xi or Trump as much as any of us would. But his job is to get what Canada needs, and so he does what he was hired to do.
The reality is Canada's economic performance is in great part driven by a lack of investment. (The OECD's recent analysis of our productivity - June 29 - also throws shade on our education and training (thanks provinces) and our preponderance of non compete clauses (thanks business sector). There are few sources of "virgin" money in the world. As a 24 year veteran managing a portfolio of bonds comprised of 65 emerging market countries, the less than surprising rule is that one diversifies risk in order not to be too reliant on one country, particularly when your major trading partner (and investor) is itself on the path to become an emerging market (ok, submerging) market itself. Diversification is a nice way to avoid coercion. You may disdain Mark Carney's emphasis on our rule of law but international investors know this is nothing to sneeze at. And given the degree to which Saudi Arabia has diversified its economy, perhaps there is a thing or two we can learn. Saudi Arabia has plans to have 30 per cent of its electricity costs coming from renewables by 2030. This is the country with full cycle lifting costs for oil of about $10-15 full per barrel. to Canada's $35 to $50. Hmmm - what do they know that we don't? Frankly I would be delighted to see Saudi Arabia which has plans underway for 40 gigawatts of wind power investing funds in Nova Scotia's offshore wind capacity which the province's premier recently noted could provide 25% of Canada's electricity.