Saudi Arabia investing billions in global technology fund

A man looks at mobile phones at the SoftBank Group Corp.’s headquarters in Tokyo. (Reuters)
Updated 15 February 2017
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Saudi Arabia investing billions in global technology fund

JEDDAH: Public Investment Fund (PIF) has taken another strong step in its mission to support Saudi Vision 2030 with its move to set up a strategic partnership with SoftBank Group Corp. (SBG), according to top businessmen and analysts. 
“This is a bold move by the PIF to explore global opportunities into tech ventures,” Basil Al-Ghalayini, CEO of BMG Financial Group, told Arab News.
His comments came as the PIF joined forces with Japanese telecom firm SoftBank to form a tech investment fund worth as much as $100 billion, making it one of the largest on the planet.
PIF — Saudi Arabia's sovereign wealth fund — is expected to put up as much as $45 billion of the money, with SoftBank throwing in at least $25 billion.
PIF, under the leadership of Deputy Crown Prince Mohammed bin Salman, has revised its long-term investment strategy to coincide with the country’s Vision 2030.
Saudi authorities have described SoftBank’s "strong investment performance" as a key reason for investing in the new tech fund.
Ihsan Bu-Hulaiga, head of the Joatha Consulting, told Arab News that the new fund reflects the implementation of PIF’s new strategy after restructuring and expanding its financial might from $160 billion to $2 trillion.
He said: “The engagement of PIF with SoftBank is more a meeting of mindsets than a mere financial collaboration.”
Bu-Hulaiga added: “In perspective, PIF compliments with SoftBank experience to provide benefits to highly selective global technology start-ups.” 
In a statement, SBG said it will use its deep operational expertise and network of portfolio companies in order to add value to the fund’s investments.
“Making such investments is critical for developing a stake in the most rapidly developing and transformative sector of the global economy,” a Gulf analyst, who declined to be named, told Arab News.
“The key is to build linkages that maximize the broader benefits for the Saudi economy. This is a positive beginning but what matters is all that is built around it: Partnerships, alliances, knowledge transfer, research, etc,” he added.
The SBG statement said the fund will be managed in the United Kingdom by a subsidiary of SoftBank Group Corp. and will deploy capital from SBG and investment partners.
SBG expects to invest at least $25 billion over the next 5 years. SBG has concluded a non-binding memorandum of understanding on Oct. 12, with the Public Investment Fund under which the PIF will consider investing in the Fund and becoming the lead investment partner, with the potential investment size of up to $45 billion over the next five years.
In addition, a few large global investors are in active dialogue to join SBG and PIF to participate in this fund. The overall potential size of the fund can go up to $100 billion, according to the SBG statement.
“The Public Investment Fund is focused on achieving attractive long-term financial returns from its investments at home and abroad, as well as supporting the Kingdom’s Vision 2030 strategy to develop a diversified economy. We are delighted to sign this MOU with SBG given the long history, established industry relationships and strong investment performance of SBG and Masayoshi Son,” the Saudi deputy crown prince was quoted as saying in the statement.
Masayoshi Son, chairman & CEO of SoftBank Group Corp., commented: “With the establishment of the SoftBank Vision Fund, we will be able to step up investments in technology companies globally. Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector. We will further accelerate the Information Revolution by contributing to its development.”
Rajeev Misra, head of strategic finance, SoftBank Group, is leading the fund project for SBG.
SBG has engaged former Deutsche banker Nizar Al-Bassam and ex-Goldman partner Dalinc Ariburnu for the project. PIF also had its own team of experts engaged.
Commenting on the tech investment fund, Sami A. Al-Nwaisir, chairman of Al-Sami Holding Group, told Arab News: “The PIF’s move is consistent with Saudi Vision 2030 in order to build the largest sovereign fund and, at the same time, increase the possibility of generating more revenues to the Saudi budget.”
The general role of the PIF is to function like a tool in framing fiscal policies in order to bring stability to the economy and provide liquidity, he pointed out.
Al-Ghalayini also said that the PIF’s partnership goes in line with the government's Vision 2030 program and plans to diversify revenue away from oil. 
“But with such a fund size of $100 billion, it will be worth watching where the fund plans to deploy this capital,” he said. 
“Furthermore, with such a supply into the Venture Capitals’ funding channels, valuations of target companies might go up,” he added. 
Economists say the PIF’s latest move strengthens Saudi Arabia’s ambitious plan to create a huge sovereign wealth fund that would be worth SR7 trillion ($1.9 trillion) by 2030, which would make it by far the biggest in the world.
PIF earlier invested $3.5 billion in US ride-hailing firm Uber.
At an annual rate of $20 billion, the new London-based fund could at current levels account for roughly a fifth of global venture capital investment, Reuters reported.
In the year to September, venture capital-backed companies globally raised $79 billion, according to data from KPMG and CB Insights, with tech start-ups attracting the lion's share of that cash.
“SoftBank Chairman Masayoshi Son is very good at looking for companies with big growth prospects, and that will create fierce competition," said Hiroyuki Kuroda, secretary general of the Venture Enterprise Center in Japan, was quoted as saying in the Reuters report.
SoftBank, a $68 billion telecommunications and tech investment behemoth, has also been stepping up investment in new areas. It agreed to buy UK chip design firm Arm Holdings in July in Japan's largest ever outbound deal.


Undersea gas fires Egypt’s regional energy dreams

Updated 18 November 2018
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Undersea gas fires Egypt’s regional energy dreams

  • In the past year, gas has started flowing from four major fields off Egypt’s Mediterranean coast
  • Gas production has now hit 184 million cubic meters a day

CAIRO: Egypt is looking to use its vast, newly tapped undersea gas reserves to establish itself as a key energy exporter and revive its flagging economy.
Encouraged by the discovery of huge natural gas fields in the Mediterranean, Cairo has in recent months signed gas deals with neighboring Israel as well as Cyprus and Greece.
Former oil minister Osama Kamal said Egypt has a “plan to become a regional energy hub.”
In the past year, gas has started flowing from four major fields off Egypt’s Mediterranean coast, including the vast Zohr field, inaugurated with great ceremony by President Abdel Fattah El-Sisi.
Discovered in 2015 by Italian energy giant Eni, Zohr is the biggest gas field so far found in Egyptian waters.
The immediate upshot has been that since September, the Arab world’s most populous country has been able to halt imports of liquified natural gas, which last year cost it some $220 million (190 million euros) per month.
Coming after a financial crisis that pushed Cairo in 2016 to take a $12 billion loan from the International Monetary Fund, the gas has been a lifeline.
Egypt’s budget deficit, which hit 10.9 percent of GDP in the financial year 2016-17, has since fallen to 9.8 percent.
Gas production has now hit 184 million cubic meters a day.
Having met its own needs, Cairo is looking to kickstart exports and extend its regional influence.
It has signed deals to import gas from neighboring countries for liquefaction at installations on its Mediterranean coast, ready for re-export to Europe.
In September, Egypt signed a deal with Cyprus to build a pipeline to pump Cypriot gas hundreds of kilometers to Egypt for processing before being exported to Europe.
That came amid tensions between Egypt and Turkey — which has supported the Muslim Brotherhood, seen by Cairo as a terrorist organization, and has troops in breakaway northern Cyprus.
In February, Egypt, the only Arab state apart from Jordan to have a peace deal with Israel, inked an agreement to import gas from the Jewish state’s Tamar and Leviathan reservoirs.
A US-Israeli consortium leading the development of Israel’s offshore gas reserves in September announced it would buy part of a disused pipeline connecting the Israeli coastal city of Ashkelon with the northern Sinai peninsula.
That would bypass a land pipeline across the Sinai that was repeatedly targeted by jihadists in 2011 and 2012.
The $15-billion deal will see some 64 billion cubic meters of gas pumped in from the Israeli fields over 10 years.
Independent news website Mada Masr reported that Egypt’s General Intelligence Service is the majority shareholder in East Gas, which will earn the largest part of the profits from the import of Israeli gas and its resale to the Egyptian state.
Kamal said he sees “no problem” in that, adding that the agency has held a majority stake in the firm since 2003.
“That guarantees the protection of Egyptian interests,” he said.
Ezzat Abdel Aziz, former president of the Egyptian Atomic Energy Agency, said the projects were “of vital importance for Egypt” and would have direct returns for the Egyptian economy.
They “confirm the strategic importance of Egypt and allow it to take advantage of its location between producing countries in the east and consuming countries of the West,” he said.
The Egyptian state is also hoping to rake in billions of dollars in revenues from petro-chemicals.
Its regional energy ambitions are “not limited to the natural gas sector, but also involve major projects in the petroleum and petrochemical sectors,” said former oil minister Kamal.
Minister of Petroleum and Mineral Resources Tarek El Molla recently announced a deal to expand the Midor refinery in the Egyptian capital to boost its output by some 60 percent.
On top of that, the new Mostorod refinery in northern Cairo is set to produce 4.4 million tons of petroleum products a year after it comes online by next May, according to Ahmed Heikal, president of Egyptian investment firm Citadel Capital.
That alone will save the state $2 billion a year on petrochemical imports, which last year cost it some $5.2 billion.
Egypt is also investing in a processing plant on the Red Sea that could produce some four million tons of petro-products a year — as well as creating 3,000 jobs in a country where unemployment is rife.