For almost a decade, the skyscrapers of King Abdullah Financial District defined Riyadh’s skyline. But the gleaming towers housed an uncomfortable truth — they were empty.
First announced in 2006, the $10bn project faced grinding delays. But the once-silent district is coming to life as Saudi Arabia pushes ahead with ambitious plans to become a regional financial hub.
The kingdom’s $940bn sovereign wealth fund, the Public Investment Fund, last year began moving its workforce to a 385-metre skyscraper — the tallest in Riyadh — in KAFD, while other buildings have also started to fill up as global groups such as HSBC and Accenture take up residence.
“A year ago, this felt like Canary Wharf in 1992,” said a western expat who works in the district as he sipped a latte at one of the trendy cafés lining the wadi, the pedestrian public space in the middle of KAFD.
That was the year London’s docklands financial centre officially opened, and went bust.
“Now it feels like Canary Wharf in 1998,” they added — the start of an era of construction that would make it the European home of the world’s biggest banks.
One recent morning, a foreign woman dressed in a bright red outfit walked alongside Saudi office workers in their white thobes and women in niqabs. Nearby, construction crews toiled on a skywalk that would allow people to cross from one tower to another without stepping out in the summer heat as temperatures rise to 42C.
The district is the main physical manifestation of a “financial sector development programme”. It has become part of a larger plan launched by Crown Prince Mohammed bin Salman to diversify the kingdom’s economy away from dependence on oil revenues, and make Riyadh a rival to cities like Dubai and Abu Dhabi in the neighbouring United Arab Emirates.
While many executives and bankers say Dubai is years ahead, Saudi officials are confident the kingdom can overtake the emirate thanks to the size of its economy — which is the region’s largest and makes it a G20 country — and the ambitious economic and social reforms that the government implemented in recent years.
“We want to be in both Riyadh and Dubai,” said a portfolio manager with one of the major international investment banks. “You may not see Saudi Arabia competing with Dubai now, but we didn’t see Abu Dhabi coming either.”
Authorities have sought to push global firms to establish a strong presence in the kingdom by giving them an ultimatum, which came into force last year: establish their regional headquarters in Saudi Arabia or face the risk of losing out on lucrative government contracts. The rules require firms to have a regional base in the kingdom with at least 15 employees, including executives overseeing other countries.
The investment ministry said more than 600 firms received licences to set up their regional headquarters in the kingdom since 2021. But experts said it would take more to dislodge Dubai as the Middle East’s financial capital, with Saudi Arabia still lagging on the regulatory clarity needed by banks.
“The Saudi government can’t just rely on the country’s economic heft and the global profile of its sovereign wealth fund to carve out a financial hub status,” said Robert Mogielnicki, a senior resident scholar the Arab Gulf States Institute in Washington.
“Competitive and consistent regulations are key. Other regional actors are playing the regulatory and incentive game effectively.”
The new capitals of capital
Banks such as Goldman Sachs and Morgan Stanley opened regional headquarters in Riyadh last year. But concerns over the kingdom’s regulatory environment mean that other banks and financial institutions are still reluctant to fully commit to move their regional headquarters to Riyadh.
While Dubai’s International Finance Centre acts an offshore banking hub with its custom-made regulatory framework based on English law, the financial sector in Saudi Arabia — including firms located at KAFD — is regulated by the kingdom’s central bank Sama and the country’s Capital Market Authority.
“There’s too much of a random walk in the kingdom. There are too many variables there: the politics, the personalities, sharia law,” said a veteran American investor who has worked in the Middle East for 20 years. “It’s just very difficult for people to feel comfortable with that kind of an environment.”
While the idea of turning KAFD into a “special zone” with its own regulatory framework has been discussed in the past, Saudi officials argue that recent judicial and regulatory reforms as well as access to the kingdom’s big-spending economic diversification projects should provide enough incentives and assurances for foreign firms to set up shop in Riyadh.
Saudi Arabia introduced a commercial courts law in 2020 and a civil transactions law in 2023 as part of reforms meant enhance the business environment. A foreign lawyer based in Riyadh said these changes had helped make rulings “more predictable” but added: “I’m not sure they will ever do offshore [regulation].”
Despite the vast sums Riyadh is spending on its development plans, it has struggled to attract its desired level of foreign direct investment, with a target of hitting $100bn annually by 2030. Inbound FDI was down 19 per cent year on year to $20.7bn last year, the lowest since 2020, according to the government’s statistics authority.
But the PIF’s financial muscle continues to draw in money managers, as it seeks to leverage its relationships with the international financiers to develop Saudi Arabia’s investment industry and get fund managers to invest in the kingdom.
One day after Donald Trump spoke at a Saudi-US investment forum in Riyadh in May, the fund announced agreements with five international asset managers — BlackRock, Franklin Templeton, Northern Trust, Neuberger Berman and I Squared Capital — to attract new capital and bring investment expertise to the kingdom.
The PIF and Neuberger Berman have agreed to work together to support up to $6bn in investments in Saudi Arabia, and to launch a Riyadh-based multi-asset investment management platform.
“The name of the game — and what underpins the relationship with PIF — is that this is not just about exporting capital from the region but finding ways to invest in the region,” said Matt Malloy, head of Europe, the Middle East and Africa at Neuberger Berman.
Authorities are also optimistic that the social liberalisation reforms introduced in recent years, including lifting the ban on women driving and easing restrictions on entertainment, would help convince foreign executives and bankers to trade Dubai for Riyadh.
But Riyadh, where the financial district boasts a futuristic new metro station designed by Zaha Hadid and high-end restaurants are opening to cater to the city’s growing professional class, still lags behind the UAE in terms of infrastructure.
Expats complain of a lack of schools in particular, and the challenge of finding suitable housing at affordable prices. Alcohol also remains banned, and many expats in the region prefer the lifestyle Dubai offers.
The fact that it was the tiny island of Bahrain that historically served as the Gulf’s financial hub before the emergence of Dubai has given Saudis confidence that they can play the long game and win.
“Bahrain has stagnated and Dubai moved fast,” the portfolio manger said. “Dubai might be 15-20 years ahead, but Saudi Arabia is catching up fast.”
Additional reporting by Harriet Agnew in London