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MENA Watch: Saudi Arabia’s startup ecosystem gains momentum amid Sudan conflict

UAE startups attracted 22 investments totalling USD 65.6 million, with Flare Network earning USD 35 million. Only two Egyptian businesses raised USD 4.6 million

Saudi Arabia raised USD 16.3 million in startup funding in February 2024, up 48.18% from January 2023, making it the second-highest fundraising country in the MENA (Middle East and North Africa) region. This accomplishment shows the Saudi startup ecosystem’s vibrancy and development potential, as well as international investors’ awareness of the Kingdom’s high-tech innovation capabilities.

In February, MENA businesses received USD 88.7 million in financing. UAE startups attracted 22 investments totalling USD 65.6 million, with Flare Network earning USD 35 million. Only two Egyptian businesses raised USD 4.6 million.

Web3 raised nearly $40 million this month, food tech raised USD 21 million in two rounds, and financial and logistics businesses raised USD 6.9 million and USD 5.4 million, respectively. Most funding came from seed rounds, with 11 firms raising USD 25.5 million.

The Saudi government has supported the diversification of the country’s economy and the development of science, technology, and innovation by providing financial support, policy incentives, innovation infrastructure, and high-tech conferences and summits, which have helped the innovation ecosystem thrive. Since 2023. Saudi companies earned a record USD 1.383 billion in venture capital investments, up 33% from 2022. Saudi Arabia’s portion of Middle Eastern financing rises from 30% in 2022 to 52% in 2023.

More than a month into Sudan’s conflict, almost 600 people have died. The humanitarian crisis is increasing as unrest in Khartoum and elsewhere persists since 2023.

Lieutenant General Abdel Fattah al-Burhan’s Sudanese Armed Forces (SAF) and Mohamed Hamdan “Hemedti” Dagalo’s Rapid Support Forces (RSF) are fighting for control of the country in an existential confrontation.

Few observers expect Sudan to return to peace soon. In Jeddah, Saudi Arabia, on May 6, all sides began their first negotiations since Sudan’s crisis began on April 15.

Five days later, the SAF and RSF signed a “declaration of principles” committing to ending their occupation of private homes, removing their forces from public and private properties, protecting civilians and medics, and providing humanitarian aid.

Conflict resumed in Khartoum immediately after the statement was made, despite Saudi Arabia and the United States mediating the discussions.

United Nations officials said Jeddah discussions will continue and hopefully lead to a truce. Despite the results, these conversations show that Saudi Arabia is striving to prove its diplomatic leadership in the Arab world after years of a tarnished worldwide image from the Yemen conflict.

Saudi Arabia startled diplomatic observers by restoring ties with longtime regional adversary Iran earlier in 2024. Many hailed the action as a positive step toward resolving regional issues in which the two countries were involved.

Saudi Arabia’s diplomatic efforts to de-escalate the Sudanese conflict must be considered in light of its interests. Analysts say the monarchy has nothing to gain from Sudan’s turmoil, which can cause a refugee crisis and provide armed groups with new possibilities.

Sudan’s unrest might hurt Saudi Arabia’s “Vision 2030” economic diversification agenda, especially its plans for NEOM, a zero-carbon smart metropolis, and Red Sea tourism attractions. Sudan is another major investment target for Saudi Arabia, particularly for food security.

But Riyadh will have to help stabilise Sudan. With al-Burhan and Hemedti regarding the struggle as existential and the two sides seemingly devoted to eliminating each other, a short-term end may be unlikely.

Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington (AGSIW), told Al Jazeera, “Just because it’s an important test for Saudi Arabia doesn’t imply it’s going to be an easy one. The same applies to the US’ role in seeking to restore its brokering abilities in the Middle East region after many years of all too often rejecting to play that role or freezing itself out of diplomatic procedures by refusing to speak to one or more significant countries.”

Saudi aims aside, Sudanese events will decide. “If one party is gaining a military edge over the other, then we’re more likely to see concessions from the losing side,” said RANE Middle East and North African expert Ryan Bohl.

Since no outside powers are pouring into Sudan to significantly alter the balance of power, the RSF and Sudanese military will keep on with the fight.

Soft Power

Saudi Arabia has helped evacuate foreigners from Sudan, in addition to initiating negotiations. The Kingdom also has brought a lot of goodwill by deploying ships to Port Sudan to transport 8,000 individuals to Jeddah.

“Riyadh’s facilitation of foreign evacuation demonstrates Saudi Arabia’s importance as a vital actor in the region,” said AGSIW fellow Aziz Alghashian.

“This shows that Saudi Arabia is a geopolitical, geostrategic, and economic power. Their attempts may be a loud but tacit response to Western capitals who say that Saudi Arabia is less strategically significant and that their relations with Riyadh should shift,” the expert commented further.

Bohl said Saudi Arabia’s evacuating foreigners from Sudan in recent weeks has been a “net positive” for Riyadh’s diplomatic approach.

A Unique Role

Saudi Arabia’s unique Arab position provides it a unique diplomatic role in Sudan’s crisis.

“The SAF and RSF chiefs consider Saudi Arabia neutral,” stated Sudanese journalist Youseif Basher, while adding, “The [Sudanese] army perceives Ethiopia and Kenya as RSF partners, whereas the RSF sees Egypt as a significant army ally.”

Saudi Arabia is balancing between Abu Dhabi and Cairo’s Sudan viewpoints because the RSF, which has received Emirati support for years, mistrusts Egypt.

Al-Burhan and Hemedti desire Riyadh’s assistance as they seek legitimacy. Alghashian added, “Both Sudanese generals consider Saudi Arabia as a vital actor to have on their side.”

In other words, they both realise they cannot afford Saudi Arabia against them. Although it is unknown if either side will concede to peace, al-Burhan, and Hemedti’s sides decided to visit Jeddah.

“It wouldn’t help either to boycott or provoke Saudi Arabia, the US, and the international community by refusing to meet,” Ibish told Al Jazeera.

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