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Saudi Arabia Bullies China into Trade/Tech Deal – Wise Move?

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As Saudi Arabia ambitiously ventures to diversify its economy beyond oil, the kingdom is setting its sights on the burgeoning field of technology, particularly in partnerships with Chinese tech giants. This strategy marks a significant pivot towards harnessing the potential of the digital era, leveraging the kingdom’s petrodollar wealth to seed the development of its domestic tech industry. In a series of high-profile deals with Chinese companies such as Alibaba and SenseTime, Saudi Arabia is not just opening its doors to foreign investment but is also insisting on a quid pro quo arrangement that promises to reshape the technological landscape of the Gulf region.

These agreements, worth hundreds of millions of dollars, are not just financial transactions but strategic moves designed to transfer knowledge and expertise to the kingdom. Alibaba and SenseTime, among others, have been drawn into the Saudi vision of technological advancement, agreeing to establish joint ventures within the kingdom. This strategic partnership requires the Chinese firms to not only invest financially but also share their coveted technological know-how with their Saudi counterparts. “They want your company and engineers to train their own talent,” reveals a consultant familiar with the negotiations. This demand underscores Saudi Arabia’s intent to build a tech-savvy workforce capable of driving the nation’s digital transformation.

Saudi Arabia is in a unique position to take advantage of China and indeed any country that it negotiates with, being one of the top oil producers in the world. Any other country would be at a severe disadvantage given that China’s markets and cashflows are overwhelming, but China is energy hungry and wants to secure its future in this respect. However note that Saudi Arabia’s educational system and pseudo-socialist economy may not be able to absorb the technology they negotiate for. Anecdotally, Saudi citizens have not been the most adept at technology, in fact it was once the case that a Saudi jet fighter pilot was paid $1 million per year, because they were so rare. The longer term Chinese strategy may be to flood Saudi Arabia with technologists and consultants, much like the U.S. and Great Britain have historically done.

The kingdom’s approach mirrors the tactics once employed by local governments in China, where market access was granted in exchange for investment and the transfer of technical skills. This model of development is now being employed by Saudi Arabia as it seeks to cultivate a thriving tech ecosystem. The partnership with SenseTime, for instance, extends to the ambitious Neom project, a futuristic megacity emblematic of the kingdom’s push towards innovation. Similarly, the collaboration with autonomous driving company Pony.ai and Alibaba Cloud’s joint venture with the Saudi Telecom Group further illustrate the depth of Saudi Arabia’s commitment to embracing advanced technologies.

These partnerships, however, come with a set of stringent conditions designed to ensure that the kingdom’s investments yield tangible benefits. For example, SenseTime’s agreement to develop AI solutions in the Middle East includes a clause that mandates the buyout of the Saudi Company for Artificial Intelligence’s stake should the venture not go public within seven years. Additionally, Saudi investors now require that a significant portion of funds raised be allocated to projects within the kingdom, marking a shift from the previous era of less conditional investments.

This rigorous approach reflects Saudi Arabia’s broader strategy to not just participate in the global tech landscape but to become a pivotal player in it. By courting leading tech companies from both the East and West, the kingdom is positioning itself as a crucial hub for technological innovation. However, these ventures are not without their challenges, especially in sensitive areas like AI, where collaboration with Chinese entities could potentially trigger US export restrictions on advanced technology.

Moreover, Saudi Arabia’s foray into space industry agreements with China underscores the kingdom’s ambition to extend its technological reach beyond terrestrial bounds. Negotiations with Chinese space contractors aim to secure technology transfer for satellite software among other aspects of space cooperation, signaling the kingdom’s intention to become a significant actor in the global space industry.

As Saudi Arabia continues to forge these strategic partnerships, it is evident that the kingdom is not merely seeking to diversify its economy but is aiming to leapfrog into the forefront of the technological revolution. The marriage between Saudi aspirations and Chinese technological prowess, while laden with potential is also laden with risks of that China will infiltrate and control. As these partnerships unfold, they will undoubtedly shape the trajectory of the kingdom’s economic, technological and perhaps political future.

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