CEO of Saudi Arabia’s newest technology investment fund STV shoots for the moon

CEO of Saudi Arabia’s newest technology investment fund STV shoots for the moon
Updated 10 January 2019

CEO of Saudi Arabia’s newest technology investment fund STV shoots for the moon

CEO of Saudi Arabia’s newest technology investment fund STV shoots for the moon
  • Abdulrahman Tarabzouni typifies the new style investor who is transforming the economy of the Kingdom
  • Over the past eight months, STV has scanned around 500 investment opportunities across the tech spectrum

"We pursue the moonshots,” said Abdulrahman Tarabzouni, but he was not taking about the space industry.

Tarabzouni is the chief executive and managing director of Saudi Arabia’s newest technology investment fund, STV. It began operations just over a year ago, independently managed but backed by the Kingdom’s communications giant Saudi Telecom, aiming to exploit opportunities in the technology sector, which has been identified as core to the Vision 2030 economic development strategy.

STV is looking for world-changing investment opportunities. “As venture capitalists, we are seeking ideas that improve things by a factor of 100, not by a factor of 10. I think that’s the same spirit that we see nowadays in Saudi Arabia from the top down,” he explained.

Tarabzouni typifies the new generation of Saudi business leaders who are leading the top-down transformation of the country and its economy, and the journey away from oil dependency.

An early career stint at Saudi Aramco and education at the Massachusetts Institute of Technology led to specialization in that part of the global economy where finance meets technology. After seven years with Google in California, Tarabzouni returned to Saudi Arabia to lead the venture with Saudi Telecom.

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Bio
Education

Massachusetts institute of technology, bachelors and masters in electrical engineering and computer science

Career

Member, Innovation leadership advisory board, Saudi Aramco

Financial trading technology analyst, Morgan Stanley

Strategy consultant, Oracle

Board member, Microsoft Board of the Future

Co-founder, Syphir tech company

Regional head of emerging Arabia and other roles, Google

Member of investment committee, Middle East Venture Partners

Various advisory roles at public and technology institutions in KSA

Board of directors, careem

Ceo and MD, STV

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The Kingdom is the perfect environment for the next phase of the digital revolution, he believes. “Saudi Arabia’s incredible resources, demographics and untapped potential to leapfrog its peers in terms of digital share of GDP, and the strong top-down will in the country to see this happen are strong enablers for a thriving venture ecosystem.

“We need to capitalize on the economic and strategic weight Saudi Arabia carries regionally and its ability to influence technology and consumer trends across the region, due to its market size and growing tech-user base,” he said.

Tarabzouni thinks the venture capital industry has a vital role to play in this transformation. “It is a balanced way of multiplying the number of players, companies, and ‘shots’ the ecosystem is taking to create new economic opportunities. Startups are new bets to create new forms of value, and venture capital firms are engines that can do this at scale with portfolios. If a country does it right, it ends up with a portfolio of transformative bets that will surely have some positive spill-over effect.

“Entrepreneurs are the best agents for such a task. They not only do this at scale, they are also the best positioned to go down the long tail of opportunities and diversify against the bulk of a country’s economic curve,” he said.

Saudi Telecom was the perfect partner for the venture. The largest telecoms company in the Middle East, it has moved quickly away from being an old-fashioned phone company to becoming an engine for digitization and innovation across the Middle East. “Their capabilities, assets, and aspirations are, without doubt, a powerful enabler for our joint objectives. This a partnership we are very proud of,” he said.

Over the past eight months, STV — with a $500 million war chest in which Saudi Telecom is the lead investor — has scanned around 500 investment opportunities across the tech spectrum including medical, media and ride-sharing sectors, and has led or co-led investments worth close to $250 million. Tarabzouni describes it as “a step change in the regional scale of deployed venture capital investments in such a short space of time.”

One of the most high-profile investments has been in the UAE based ride-hailing business Careem, in which Saudi Telecom was an early investor and where Tarabzouni sits on the board. 

Everywhere we look we see new opportunities to create market leaders that didn’t exist before and that will take a lot of investment.

Abdulrahman Tarabzouni

STV’s arrival on the Kingdom’s investment scene comes as interest in the technology sector reaches unprecedented levels. The Public Investment Fund — from its own resources and via its involvement in the $100 billion Vision Fund set up by SoftBank of Japan — is also pursuing tech opportunities, in Saudi Arabia as well as globally.

How does STV’s approach differ from these bigger organizations? “We are probably similar in our long-term ambitions but operating largely on different orders of magnitwude and levels of capital deployment. I think we all believe that technology will shift economic centers of gravity and disrupt long standing industries, and I think all of us are pursuing this fundamental idea that value creation is shifting.

“We are embracing, each in his own way, new paradigms, experiments, and ventures in areas where we see upsides that can be amplified by our own assets and differentiated capital. STV is merely one player in a long global and interconnected funding chain that includes all these players,” Tarabzouni said.

The venture capital industry in the Middle East is a long way behind its counterparts in many parts of the world. By way of example, Tarabzouni cites figures showing that the MENA region has only 10 percent of the venture capital funding of the US, relative to GDP.

“The industry is only now starting to gain a critical mass and momentum. Everywhere we look we see new opportunities to create market leaders that didn’t exist before and that will take a lot of investment, as well as venture capital backing, experience and support,” he said.

But the international investing community, from Asia to the US, is waking up to the opportunities that exist in the Middle East. “They are looking to put a lot of capital to work here. It’s a really positive outlook and exciting time for the regional industry right now,” he said.

Some analysts point to two difficulties in the STV strategy: The high valuations of the global technology sector, and the comparatively high levels of geopolitical risk associated with the region, and the Kingdom, in the minds of some foreign investors.

On the first fear, Tarabzouni is sanguine. “That (overvaluation) may be true in other parts of the world, but we still see a lot of value and fundamental growth opportunity for technology investment in the MENA region. In our view, we still need multiple times more VC money in MENA to rival other advanced economies and meet this region’s capacity.

“The potential is especially clear when you consider the Middle East has, for example, some of the highest smartphone penetration and digital media adoption rates in the world, as well as compelling tech-centric demographics. So, we are looking to partner with entrepreneurs who are sharp, who are tenacious, and who want to take on the world and solve big problems,” he said.

On the second point, he recognizes that the Middle East has its own issues. “The region, like any natural system, has strong forces of gravity — either legacies in the system or forces that add friction to change or progress. You need strong counter forces to achieve lift off; to reach escape velocity for new ideas.

“That is exactly what is happening now with Vision 2030 in Saudi Arabia and why we are bullish about the future. We want to work with stakeholders to enable that kind of escape velocity to happen in every sector where technology and venture capital can have a positive impact,” he said.

The economic backdrop is benign, he believes. “The long-term fundamentals of the Saudi economy remain robust. In Vision 2030 we also have a blueprint to create a better, more prosperous and sustainable Saudi Arabia,” he said.

Tarabzouni declined to talk about the other big issue facing the technology communications sector — the increasing concerns by governments and regulators over the powers of “Big Data” companies such as Facebook and Twitter and their role in “fake news.”

But, returning to the space theme, he said: “Indeed the times have changed. We are living in a world when the global space race for example is not between two powerful nations anymore but between 2-3 private companies backed by strong founders.

“The economic power of a nation is now measured by how it empowers its non-public sector to create value, and that’s the core of Saudi’s new approach, and why it is worth pursuing.”


Saudi Arabia starts trial of the first wind turbine in Al-Jouf

Saudi Arabia starts trial of the first wind turbine in Al-Jouf
Updated 05 August 2021

Saudi Arabia starts trial of the first wind turbine in Al-Jouf

Saudi Arabia starts trial of the first wind turbine in Al-Jouf
  • Dumat Al-Jandal is poised to become the largest wind farm in the Middle East

RIYADH: Saudi Arabia has started the operational trial of the first wind turbine at Dumat Al-Jandal wind farm, which once fully operational will reduce CO2 emissions by nearly 1 million tons annually and supply 72,000 homes with clean energy.

The turbines comprise towers, blades, and nacelles, which will be assembled at the project site, 900 kilometers north of Riyadh in the Al-Jouf region. The project will include 99 Vestas wind turbines, each with a hub height of 130 meters and a rotor diameter of 150 meters.

The Kingdom’s first utility-scale wind-power source is being developed by a consortium led by EDF Renewables of France in partnership with Abu Dhabi-based Masdar. The Renewable Energy Project Development Office of Saudi Arabia’s Ministry of Energy awarded the project to the EDF Renewables-Masdar consortium in January 2019 after a competitive tender.

Its tariff of $21.3 per megawatt-hour (MWh), the lowest bid submitted, was reduced to $19.9/MWh at financial close, making Dumat Al-Jandal the most cost-efficient wind-energy project in the world. According to the US-Saudi Arabian Business Council, the development of Saudi Arabia’s renewable energy sector could create up to 750,000 jobs over the next decade, as the Kingdom pushes to generate 7 percent of its total electricity output from renewables by 2030.

It will also benefit from a 20-year power purchase agreement with the Saudi Power Procurement Co., a subsidiary of the Saudi Electricity Co., the Kingdom’s power generation and distribution company. Saudi Arabia’s renewable energy program aims to contribute to a sustainable future, preserve nonrenewable fossil fuel resources, and safeguard the Kingdom’s international energy leadership, according to the King Abdullah City for Atomic and Renewable Energy. That way, the program aims to ensure greater long-term global energy market stability.

Renewable energy projects, including wind and solar, are planned across more than 35 parks in Saudi Arabia by 2030.


Saudi youth move away from cash, says report

Saudi youth move away from cash, says report
Updated 05 August 2021

Saudi youth move away from cash, says report

Saudi youth move away from cash, says report
  • Revenue in the Saudi e-commerce market is projected to reach $7.05 billion in 2021, according to data firm Statista

RIYADH, DUBAI: Saudi youth are increasingly drawn toward using digital payment channels rather than cash, a trend indicating that the Kingdom’s plan to create a cashless society is on course.

Only 18 percent of Saudis aged between 16 and 22 years use cash, while almost half of the people who are 60 and above still prefer using cash, a report by Fintech Saudi showed.

The report also showed that only 20 percent of the population in the central region of Saudi Arabia, which includes the capital Riyadh, use cash in their everyday transactions, while 37 percent of those living in the western region, use paper money in their daily dealings.

The use of paper currency is declining at a rapid pace.

Fintech Saudi survey results showed that around 60 percent of individuals Kingdom-wide still use paper money at least once a week and one out of four people in Saudi Arabia uses cash every day.

Under Saudi Vision 2030, the Kingdom aims to increase the number of non-cash transactions to 70 percent by 2025.

“The coronavirus disease (COVID-19) outbreak has led to an acceleration in cashless activity with digital payments increasing by 75 percent over the last year, while cash withdrawals from ATMs and other payment points have declined by 30 percent over the same period,” the report said.

Revenue in the Saudi e-commerce market is projected to reach $7.05 billion in 2021, according to data firm Statista. 

The numbers are expected to show an annual growth rate of 5.38 percent in the coming years, resulting in a projected market volume of $8.69 billion by 2025.


Gulf economies expected to grow 2.2 percent this year, says World Bank

Gulf economies expected to grow 2.2 percent this year, says World Bank
Updated 05 August 2021

Gulf economies expected to grow 2.2 percent this year, says World Bank

Gulf economies expected to grow 2.2 percent this year, says World Bank
  • Most GCC countries are expected to continue to post deficits over the coming years
  • The countries that posted the largest deficits in 2020 — Bahrain, Kuwait and Oman — are expected to remain in deficit until 2023

RIYADH: Economies of the Gulf Cooperation Council (GCC) will likely grow at an aggregate 2.2 percent this year after a 4.8 percent contraction last year caused by the pandemic and lower oil prices, the World Bank said on Wednesday.

“With recent progress made with the rollout of the COVID-19 vaccine globally and with the revival of production and trade worldwide, the prospects for an economic recovery are firmer now than at the end of last year,” it said in a research report.

“Although downside risks remain, the forecast stands for an aggregate GCC economic turnaround of 2.2 percent in 2021 and an annual average growth of 3.3 percent in 2022–23.”

It remains vital for GCC countries — which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the UAE — to diversify their economies, the World Bank said, as oil revenues account for over 70 percent of total government revenues in most GCC countries.

It said it expects Kuwait and Qatar to introduce a value-added tax (VAT) this year, following the example of other GCC states that have implemented the revenue-diversifying measure in different phases over the last few years.

On the fiscal side, most GCC countries are expected to continue to post deficits over the coming years, the World Bank said, after shortfalls intensified last year because of the coronavirus crisis.

The countries that posted the largest deficits in 2020 — Bahrain, Kuwait and Oman — are expected to remain in deficit until 2023, but with narrower ratios than in the 2020 downturn. While a rebound in oil prices may lift economic prospects in the short term, the World Bank said downside risks to its outlook are “extremely high” because of the region’s heavy exposure to global oil demand and the service industries.

“Mobility restrictions including for international travel may hurt attendance at future high-profile events in the GCC — the 2020 (rescheduled to 2021) World Expo in the UAE and the 2022 Federation Internationale de Football Association (FIFA) World Cup in Qatar,” it said.


SABB records net profit of $504 million

SABB records net profit of $504 million
Updated 05 August 2021

SABB records net profit of $504 million

SABB records net profit of $504 million

JEDDAH: The Saudi British Bank (SABB) recorded a net profit after zakat and income tax of SR1,889 million ($504 million) for the six months ended on June 30, 2021.

This is an increase of SR7,785 million or 132 percent compared to the loss of SR5,896 million for the same period in 2020.

Operating income of SR3,984 million for the six months ended June 30, 2021, a decrease of SR703 million, or 15 percent, compared to SR4,687 million for the same period in 2020.

Lubna Suliman Olayan, board chair of SABB said: The bank’s “performance in the second quarter of 2021 builds on the progress made in the first quarter of the year, as we continue the implementation of our five-year strategic plan.”

She said the bank is now focused on supporting the Kingdom’s economic transformation.


Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban
Updated 04 August 2021

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban
  • The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate

ALEXANDRIA: The Central Bank of Yemen in Aden has injected billions of riyals in old large-sized 1,000 banknotes into the market to address a chronic shortage of cash.

The bank also implemented several other economic measures to control the chaotic exchange market and put an end to the fall in the Yemeni riyal.

Since late 2019, the Iran-backed Houthis have banned the use of banknotes printed by the Yemeni government in Aden, creating a severe cash crunch in areas under their control which has led to local exchange firms and banks stopping paying salaries and raising remittance charges.

The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate and carrying Saudi riyals or US dollars.

In a challenge to the Houthis, the central bank has put billions of riyals in old banknotes into the market and started withdrawing the newly printed 1,000 banknote. Yemenis can get old banknotes from local banks and exchange firms.

However, the Houthis warned people against using the large banknotes and published copies and serial numbers of the newly circulated cash.

In a bid to regulate the exchange market and curb the plunging value of the riyal, the central bank has tightened regulations for opening new exchange shops or firms, demanding that applicants produce a three-year feasibility study prepared by a certified accountant showing estimated budgets.

Existing exchange companies must now send their annual financial statements to the bank, use an approved software for their financial activities, apply international financial reporting standards, and audit their accounts by accountants certified by the central bank.

Some Yemeni economists, however, have cast doubt over the central bank’s ability to enact the regulations after the Yemeni riyal on Wednesday broke another historic record low against the dollar.

Local money traders told Arab News on Wednesday that the Yemeni riyal was trading at 1020 to the dollar in government-controlled areas, compared to less than 980 a month ago. When the war broke out in late 2014, the Yemeni riyal was sold at 215 to the dollar.

The Yemeni government previously relocated the central bank’s headquarters from Sanaa to Aden, floated the Yemeni riyal to bridge the gap between the official rate and the black market, closed many exchange shops, and printed billions of riyals to pay public servants. But all the measures proved ineffective on the ground as the Yemeni riyal continued to drop.

Waled Al-Attas, an assistant professor of financial and banking sciences at Hadhramout University, told Arab News: “The central bank is required to control the market and close unlicensed exchange shops in parallel with tightening control and procedures on existing exchange entities.”

He noted that the latest injection of cash into the market had boosted foreign currency speculation activities and pushed up inflation.

“The large 1,000 banknote that the central bank pumped into the market represents an additional burden and additional liquidity that will cause more inflation, higher prices, and speculation on exchange rates,” he added.

The continuing devaluation of the Yemeni riyal has pushed up food and fuel prices in government-controlled areas and triggered protests.