Advertisement

The dilemma facing 'Davos in the Desert' no-shows

It is quite a roll-call. The list of business people who have dropped out of Saudi Arabia's Future Investment Initiative conference, in protest at the disappearance and suspected murder of journalist Jamal Khashoggi, would make a fine line-up at any finance summit.

Those no longer now attending the so-called 'Davos in the Desert' include John Flint, chief executive of HSBC; Jamie Dimon, chief executive of JPMorgan Chase (Swiss: JPM-USD.SW - news) ; Bill Winters, chief executive of Standard Chartered (BSE: 580001.BO - news) ; Stephen Schwarzman, chairman of Blackstone; David Schwimmer, the new chief executive of the London Stock Exchange (Other OTC: LDNXF - news) ; Tidjane Thiam, chief executive of Credit Suisse (IOB: 0QP5.IL - news) ; Larry Fink, chief executive of BlackRock; Jean Lemierre, chairman of BNP Paribas (LSE: 0HB5.L - news) and Frédéric Oudéa, chief executive of Société Générale.

Christine Lagarde, managing director of the International Monetary Fund, said on Tuesday evening that she would not be attending.

A glittering line-up of finance superstars in other words, while those from outside the world of finance who have also decided no longer to participate include Bill Ford, chairman of Ford Motor Company (LSE: 0P4F.L - news) ; Dara Khosrowshahi, chief executive of Uber and Sir Richard Branson, founder of Virgin Group.

Media partners who have pulled out include the Financial Times, the New York Times and Bloomberg.

Yet it is by no means certain that the absence of these top financiers and business people will hamstring the event.

Steve Mnuchin, the US treasury secretary, is still scheduled to attend while so too are a number of leading European business personalities including Joe Kaeser, chief executive of Siemens; Patrice Caine, chief executive of Thales (LSE: 0IW5.L - news) and Jean-Bernard Levy, chief executive of EDF (Paris: FR0010242511 - news) .

The latter two are still scheduled to be joined at the event by their fellow countryman Bruno Le Maire, the French finance minister, while the programme on the event's official website still lists professional services firms including EY, PwC, Oliver Wyman, McKinsey and Boston Consulting Group as taking part in various seminars.

Moreover, while some Europeans and Americans will now be staying away, it is clear that business leaders and blue-chip companies from the rest of the Middle East and from Asia will still be in Riyadh in strength.

Pulling out of the event, organised by Saudi Arabia's sovereign wealth fund the Public Investment Fund (PIF), represents calculated risk.

:: Recording emerges of journalist's 'torture and murder'

As the Wall Street Journal has pointed out, the PIF's ambitious plans and Saudi Arabia's need to modernise its economy promises "a gusher of investment and deal-making too big to be ignored".

For that reason, it was notable that Mr Fink has said BlackRock (Sao Paolo: BLAK34.SA - news) , the world's biggest investment manager, won't "run away" from Saudi Arabia, even if the country's government does turn out to be culpable in Mr Khashoggi's death.

He told CNBC: "We do business in 80 different countries. There are many countries where we may disagree."

And that sums up the dilemma for many participants in the event.

Some companies, like HSBC, have long-standing businesses in the kingdom and it is far harder for them to disengage.

Uber is backed by the PIF. JP Morgan Chase was one of the advisers on the now-aborted IPO of Saudi Aramco, the state oil company, a flotation in which scores of banks, law firms and public relations companies from around the world were desperate to get involved.

Mr Fink, a regular visitor to the kingdom, felt he had no choice but to withdraw from the event because his participation was becoming a big issue for BlackRock's employees and clients.

But the truth is that it is far easier to stay away from a business conference than it is to disentangle long-standing, well-established and profitable business relationships.

Moreover, staying away risks jeopardising future business deals with Saudi Arabia, leaving the path clear for rivals to capitalise.

That is particularly the case for the big banks. Mitsubishi UFJ Financial (Other OTC: MBFJF - news) and Mizuho Financial (NYSE: MFG - news) , respectively Japan's first and third largest banks, will still be in Riyadh and will certainly hope to benefit from the absence of their US and European rivals.

That may be partly cultural - Japanese companies tend to come under less pressure from consumers and shareholders than their western counterparts - and it may also be pragmatic, as both banks are big investors in the $100bn Vision Fund set up by SoftBank (Swiss: SOFB.SW - news) , the Japanese investment group, in which the PIF is the biggest single backer.

Mitsubishi UFJ and Mizuho have also, among large foreign banks, been among the biggest fee earners in Saudi Arabia in recent years.

The Tokyo Stock Exchange, meanwhile, competed hard with the London Stock Exchange and the New York Stock Exchange to host the secondary listing of Saudi Aramco.

Pulling out of 'Davos in the Desert' does not only raise the risk of losing future business with Saudi Arabia. It also risks antagonising the kingdom's allies.

Bahrain's foreign minister has already started a 'boycott Uber' campaign in protest at Mr Khosrowshahi's decision not to attend the event. Similar campaigns have been mooted in the United Arab Emirates.

So there is a lot at play here. Big corporates in the western world usually back down in the face of social media campaigns fairly quickly these days.

But getting them to unwind an entire position in a country, particularly one as potentially lucrative as Saudi Arabia, is much more complex and difficult even in an age of social media.

But the biggest concern for western companies, longer-term, may be this. Once upon a time, countries used to express unease at the behaviour of other countries via governmental channels. Now (Frankfurt: 11N.F - news) , it seems, business leaders must also act as unpaid adjuncts to the diplomatic service in addition to their day jobs.