Saudi Arabian Monetary Authority taps Deloitte to build fintech hub

28 May 2018 Consultancy-me.com

The Saudi Arabian Monetary Authority is set to build a fintech ecosystem in the Gulf Coast country in collaboration with Deloitte Middle East. The Big Four firm will attempt to position capital city Riyadh as a fintech hub rivalling those in Bahrain, Abu Dhabi, and Dubai.

In 2016, Saudi Arabia announced its ambitious Vision 2030 program with an aim to move the country away from its economic dependency on oil – which accounts for 40% of real GDP, not including the portion of the economy dependent on oil distribution. The programme also seeks to improve health, education, infrastructure, and tourism.

The bold plan hopes to transform Saudi Arabia into a geographically well-positioned hub connecting Asia, Europe, and Africa. There are three ‘pillars’ to the Vision 2030 program: the first is the fostering of a ‘vibrant society’, with more funding and improvements to cities, culture, sports, and heritage sites. The second is ‘a thriving economy,’ which aims to boost employment, women in the workforce, foreign investments, and non-oil exports. And the third pillar is ‘an ambitious nation,’ which, pivotally, seeks to create non-oil revenues, and advancements in e-government and government effectiveness.

As part of its bid to diversify the economy and attract investments to non-oil projects, the Saudi Arabian Monetary Authority (SAMA – Saudi Arabia’s central bank) has brought in Big Four consultancy Deloitte to help build a fintech ecosystem. The collaboration hopes to position capital Riyadh as a fintech rival to the local hubs already established in Bahrain, Abu Dhabi, and Dubai.Saudi Arabia hires Deloitte to help build fintech hub in RiyadhFintech is a hot market – like most ‘disruptive’ digital services – attracting $31 billion in funding in 2017. By building a fintech ecosystem, Saudi Arabia hopes to create jobs and attract investment not entirely dependent on its oil industry. With fintech expected to keep booming in the future, displacing traditional financial service providers, the industry seems like a good choice to build a base for. The new ecosystem will also support Saudi Arabia’s desire to be a world-leading cashless, digital economy.

“We are very excited for the launch of Fintech Saudi, which will be an important catalyst in the development of a thriving FinTech industry in the Kingdom and the region,” commented Ziad Al-Yousef, Director General of Payment Systems at SAMA. “Saudi Arabia truly has the right ingredients to host a FinTech hub, not least of all because of its burgeoning and tech-savvy youth.”

“The work of FinTech Saudi fits within the Kingdom’s Vision 2030 objectives, particularly in increasing financial inclusion and the prominence of small and medium enterprises. In the coming weeks and months, I am confident that we will see a positive uptick in innovation and the growth of an active FinTech ecosystem,” added Al-Yousef.

Deloitte will support SAMA in the creation of the ‘Fintech Saudi’ ecosystem, creating infrastructure to aid the growth of fintech and attract talent. The firm will oversee the overall strategy of the fintech ecosystem, while also also building a ‘fintech incubator/accelerator space’ to help launch capable new enterprises. The consultancy will also develop a regulatory sandbox to help test new fintech ideas and concepts.

“Deloitte has an excellent track record building FinTech ecosystems, and in producing cutting-edge thought leadership on the state of digital financial services around the world,” remarked Punit Renjen, Deloitte Global CEO. “Our global reach provides us with strong relationships with key stakeholders in the broader FinTech ecosystem and enables us to draw FinTech-related insights and expertise from our extensive network of SMEs. This agreement will foster growth, innovation, and collaboration across the financial services industry in KSA.”

Established in the region in 1926, Deloitte now has 25 offices across 14 countries in the Middle East. The accounting and consulting firm has been a Tier 1 tax advisor in the GCC region since 2010. In related news, Deloitte recently announced the establishment of a Digital Delivery Centre in Saudi Arabia with the support of the Saudi Ministry of Communication and Information Technology, which is keen to leverage the firm's digital expertise to boost economic diversification efforts in the Kingdom.

Do consultants have a legitimising effect in the Middle East?

19 April 2019 Consultancy-me.com

Do the often kowtowing international consultants operating in the Gulf simply grant legitimacy to local rulers? The answer’s not so simple says regional expert Calvert Jones, who has conducted a fascinating research study on the local consulting industry.

Now valued at $3 billion annually in the GCC alone, the Middle East management consulting industry has exploded since the global financial crisis, growing at a heady 20 percent clip up until 2014 when the dive in global oil prices and attendant austerity measures briefly applied the brakes; ‘brakes’, in this context, meaning growth which at its lowest point in 2015 dropped to around 6 percent.

The slow-down was brief. With the plummet in oil prices spurring regional governments to act on economic diversification – captured in a range of ambitious national transformation agendas – together with the emergence of a range of digital advances now sweeping the public and private sectors, fresh impetus was given to the local consulting market; this year forecast to return to double-digit growth.

Of that $3 billion consultancy price tag – with close to half of it handed over in Saudi Arabia – the public sector accounts for approximately a third of the take, the vast majority of that paid to foreign consultancies and in particular the advisory wings of the Big Four and global strategy giants such as McKinsey and BCG. Scrutiny of these practices – especially in the wake of the Khashoggi killing – has also increased.

Copping much of the media flak, McKinsey for its part has backed itself as a force for good in the region, contributing greatly toward local economic, education and healthcare development. But the question remains, even if making a positive difference, do international consultancies confer legitimacy on authoritarian governments – “helping to prop up and even strengthen repressive, illiberal regimes?”Does the Middle East consulting industry have a legitimising effect?One person well-placed to address that question is Calvert W. Jones, an Assistant Professor in the Department of Government & Politics at the University of Maryland and author of ‘Bedouins into Bourgeois: Remaking Citizens for Globalization’. Jones spent 19 months between 2009 and 2017 conducting field research in the region, including into the consulting industry and the notion of conferred legitimacy.

According to Jones, some of the consultants she interviewed themselves expressed this concern, particularly when due a range of market factors they may have grown less inclined over time to voice too strong of an opinion. Yet, whether this is indeed the case is not so clear. Among other findings and areas of research, Jones conducted several experiments on the subject of legitimacy at universities in Kuwait, involving some 650 students.

“Conventional thinking about experts in politics suggests not only that experts rationalise governmental decision-making, but also that they confer legitimacy – meaning that the public may be more likely to support government initiatives when experts with the relevant knowledge, training, and experience are involved. In the Gulf, both experts and ruling elites tend to think along these technocratic lines,” she states in an article for the Harvard Business Review.

Experiments

While not addressing potential international legitimacy or other geopolitical or business and trade issues, Jones sought to test the idea of conferred legitimacy as to public opinion in the local polity. For the experiments, she asked participants to imagine that their country’s leaders were launching a major reform to improve either education or infrastructure, exposing them to a variety of mock news articles outlining the likely benefits from the government initiative.

In the first experiment, half of the reports featured reference to a team of top international experts assisting with the hypothetical reform, including their credentials and extensive experience elsewhere, with this detail absent from the remaining half. She found that subjects who read that experts were involved were far less likely to support the reform – indicating the ‘involvement of experts’ may have led to a significant drop in legitimacy. The results, however, are somewhat murky.

In the second experiment, Jones explored the impact of nationality on opinion, with otherwise identical reports on expert-advised infrastructure reform referring to either American, Chinese, or Kuwaiti advisers. She found two surprising results. Support for the reform did not differ significantly whether led by Chinese or Kuwaiti experts, but did however for the American-led reports, with subjects expressing significantly lower support.

The Chinese were also considered far more capable than their American counterparts, which may in itself provide a clue. “It’s not necessarily evidence of profound anti-Americanism, let alone a new love for Chinese experts,” Jones cautions; “Most likely, it reflects Kuwaitis’ longer experience with American experts, which includes their frustration with the lack of progress on various reforms.” The Kuwaitis, she suspects, are just far less familiar with Chinese consultants.

“This experimental evidence raises doubts about the ability of experts to rationalise and legitimise authoritarian rule,” Jones concludes. “Indeed, my research suggests that international experts can actually undermine legitimacy, potentially reducing domestic support for autocrats and weakening their regimes… In my experience, residents of these countries are increasingly critical of their governments paying hefty fees to foreign experts and consultants for little in return.”