Saudi Arabia puts foot on the gas with accelerated strategy for sovereign wealth fund PIF

The next phase of Saudi Vision 2030, unveiled by Crown Prince Mohammed bin Salman during a speech on Sunday outlining the Public Investment Fund’s (PIF) strategy for the next five years, is a road map towards economic diversification. (AFP/File Photo)
The next phase of Saudi Vision 2030, unveiled by Crown Prince Mohammed bin Salman during a speech on Sunday outlining the Public Investment Fund’s (PIF) strategy for the next five years, is a road map towards economic diversification. (AFP/File Photo)
Short Url
Updated 27 January 2021

Saudi Arabia puts foot on the gas with accelerated strategy for sovereign wealth fund PIF

The next phase of Saudi Vision 2030, unveiled by Crown Prince Mohammed bin Salman during a speech on Sunday outlining the Public Investment Fund’s (PIF) strategy for the next five years, is a road map towards economic diversification. (AFP/File Photo)
  • Vision Realization Program to launch new sectors of economy and enhance ones already up and running
  • VRP2 expected to cement position of Public Investment Fund as an agency of economic development

DUBAI: The next phase of Saudi Vision 2030, unveiled by Crown Prince Mohammed bin Salman during a speech on Sunday outlining the Public Investment Fund’s (PIF) strategy for the next five years, is a road map towards economic diversification. But it is also much more than that.

“Our goal is to make our country a pioneer for the new human civilization,” said the crown prince, who is the chairman of the PIF, the Saudi sovereign wealth fund. In effect, Saudi Arabia is doubling down on the Vision strategy at a time when the world is reeling from the pandemic and economic strategists are still uncertain about global recovery prospects.

VRP2 — or the Vision Realization Program, as the plan is abbreviated — will launch new sectors of the economy, and enhance ones already up and running from the first VRP, dating to 2017, as part of the transformational strategy.

Yasir Al-Rumayyan, the governor of PIF, echoed the ambitious nature of the plan. “Core to our strategy is our focus on funding new human futures by improving quality of life, driving environmental and economic sustainability, and developing new sectors and jobs,” he said.




Yasir Al-Rumayyan, the governor of PIF, says human development is a core strategy of the plan. (AFP/File Photo)

Along the way in the next five years, VRP2 will also cement the position of the PIF as an agency of economic development, and go a long way to achieving the PIF’s aim of becoming the world’s leading sovereign wealth fund, rivaling the investment giants of Asia, Europe and the US.

Regional economics expert Nasser Saidi says the announcement was a quantum leap in the Kingdom’s plans. “Saudi Arabia has put its foot on the gas of the Vision 2030 strategy with the announcement of the economic plan for the next five years, under the auspices of the PIF,” he told Arab News.

“There can now be no doubting the seriousness of its intentions to push through the plan to deeply transform and diversify the economy, and society, of the Kingdom, in super-fast time.”

The PIF committed itself to $40 billion of investment every year for the next five — a huge amount, equivalent to around 5 percent per year of the Kingdom’s gross domestic product (GDP). It also pledged to contribute $320 billion to non-oil GDP through the companies in which it holds stakes, and create 1.8 million badly needed jobs in the Kingdom by the end of 2025.




The PIF’s role as a job creator will be augmented by the wave of new employment expected on the mega-projects like NEOM, the Red Sea Development and the Qiddiya (pictured), which have been marked for acceleration in 2021. (AFP/File Photo)

For the PIF to be such a pivotal role in the development of the Saudi economy shows how far the fund has come from the time when it was a sleepy backwater in the Kingdom’s financial scene, managing public-sector pensions and other investments.

Under VRP2, the PIF will take big strides towards its goal of having $1.07 trillion in assets under management in five years’ time, and closing in on its 2030 target of $2 trillion — overtaking the huge sovereign wealth funds of China and Norway. 

It is already a good way along the path to that goal. Al-Rumayyan said that over the past four years, the PIF had tripled assets to nearly $400 billion, created 10 new sectors in the economy, and generated 331,000 jobs either directly or indirectly through its investment policies.

FASTFACT

Public Investment Fund

* $2 trillion - Target for assets of PIF by 2030.

* 1.8m - Planned new jobs by 2025.

* $40bn - Annual PIF injection into Saudi economy.

Investment experts welcomed the accelerated strategy of VRP2. Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East, said: The proactive stand — where they use money to incentivize and direct investment into key sectors — is to be welcomed and applauded.”

“The Fund’s role as a separate channel to support the economy at the time of volatile oil prices is of major importance. It will help build savings, secure financing and attract investments,” said Mazen Al-Sudairi, head of research at Al Rajhi Capital.

Other financiers wanted to know further details of the ambitious plan. “It’s an impressive target and a reassurance in these tough times that some people are still thinking big, and thinking strategically. But I would like to know how they will pay for all this,” asked one banker who declined to be identified.

It is a valid question, and one which the PIF will no doubt be explaining in detail and in confidence to investment partners and banking professionals in the coming months. But some of the revenue streams by which PIF could use to bring about such a transformation are already known. It has four principal sources of finance.




For the PIF to be such a pivotal role in the development of the Saudi economy shows how far the fund has come from the time when it was a sleepy backwater in the Kingdom’s financial scene. (AFP/File Photo)

It receives capital injections from the government of Saudi Arabia, as it did with a $40 billion injection from the Saudi Central Bank (SAMA) last year to take advantage of investment opportunities around the world as asset values plunged under the pandemic, and it also has government assets transferred to it.

It receives revenue as dividends from its investment portfolio, which includes some of the biggest names in the Saudi Arabian listed sector, and from the disposal of investments.

The PIF can also raise loans from banks in the normal way, and can raise money through the International and domestic debt markets, in the form of bonds.

Al-Rumayyan has recently given indications of other ways the PIF could provide resources for its big plans. He recently told the Financial Times that the PIF would reduce its International investment exposure to focus more on Saudi Arabia, cutting the proportion of assets invested abroad from 30 to 20 per cent — though the absolute amount would remain little changed as the PIF assets grow.




“Our goal is to make our country a pioneer for the new human civilization,” PIF chairman Saudi Crown Prince Mohammed bin Salman said.

There is also big potential to raise money via the sale of portfolio companies in which PIF owns shares and which are listed on the Tadawul stock market, as well as privately held companies.

Many analysts expect a wave of IPOs and stake sales to come in Saudi Arabia this year as buoyant market conditions encourage investors, including the PIF, to realize paper gains.

The PIF received the $29 billion proceeds of the biggest initial public offering (IPO) in history when Saudi Aramco listed shares on the Tadawul in December, and there have been suggestions that further funds could be raised either through the sale of more Aramco shares, or through the disposal of some of the businesses that make up the Aramco energy grouping.

Al-Rumayyan told the FT that Aramco, of which he is chairman, could sell more shares “if the valuation is right”, and that he was considering sales of other Aramco assets. “If it makes sense for us to divest some of these assets, we’re definitely going to do it. It could include anything except the main operations,” he said.

The PIF’s role as a job creator will be augmented by the wave of new employment expected on the mega-projects like NEOM, the Red Sea Development and the Qiddiya, which have been marked for acceleration in 2021. It can also start new companies in the Kingdom, to add to the 30 or so it has set up in the past three years.




The PIF committed itself to $40 billion of investment every year for the next five — a huge amount, equivalent to around 5 percent per year of the Kingdom’s gross domestic product. (AFP/File Photo)

Electric-car maker Lucent — in which the PIF is majority shareholder — is believed to be in talks to set up a manufacturing plant near Jeddah, its first outside the US. Corporate start-ups are also likely through the opening up of Saudi operations for some of the companies that the PIF has jointly invested inside alongside the Vision Fund, the investment management business in which SoftBank is the leading investor.

The PIF will also look to vital foreign direct investment (FDI). “A key element of PIF’s success has been the strategic economic partnerships the Fund has developed with many of the world’s leading investors and businesses. VRP2 will enhance these partnerships, providing investors with access to untapped investment opportunities, creating synergies and value for the global community,” the Fund said this week.

FDI flows into Saudi Arabia actually picked up in the first part of last year, despite the pandemics’ drag on economies everywhere. “External funding will remain critical given the size of its (PIF’s) objective,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

The chance to showcase the opportunities of VRP2 to the outside world begins at the Future Investment Initiative gathering in Riyadh later this week.

------------------

Twitter: @frankkanedubai


WATCH: Saudi Crown Prince attends Formula E Diriyah E-Prix second race

 Saudi Arabia's Crown Prince Mohammed bin Salman was in attendance for the second race of the Formula E Diriyah E-Prix weekend in Riyadh on Saturday. (Screenshot)
Saudi Arabia's Crown Prince Mohammed bin Salman was in attendance for the second race of the Formula E Diriyah E-Prix weekend in Riyadh on Saturday. (Screenshot)
Updated 2 min 46 sec ago

WATCH: Saudi Crown Prince attends Formula E Diriyah E-Prix second race

 Saudi Arabia's Crown Prince Mohammed bin Salman was in attendance for the second race of the Formula E Diriyah E-Prix weekend in Riyadh on Saturday. (Screenshot)
  • Crown prince received good wishes as he arrived following successful operation

LONDON: Saudi Arabia's Crown Prince Mohammed bin Salman was in attendance for the second race of the Formula E Diriyah E-Prix weekend in Riyadh on Saturday.

The crown prince received good wishes from those in attendance as he arrived, following his successful operation earlier this week.

UNESCO World Heritage site Diriyah is host of the opening round of the FIA Formula E world championship this weekend.

In an electric opening race on Friday night, Mercedes-EQ driver Nyck de Vries claimed a maiden Formula E victory.

Dutch driver Robin Frijns, in the Envision Virgin Racing car, started on pole for the second race.


Arab region voices support for Saudi Arabia over US Khashoggi report

Arab region voices support for Saudi Arabia over US Khashoggi report
Updated 12 min 15 sec ago

Arab region voices support for Saudi Arabia over US Khashoggi report

Arab region voices support for Saudi Arabia over US Khashoggi report
  • The Secretary-General of the OIC said it rejects “the incorrect conclusions contained” in the US report
  • Arab Parliament stresses pivotal role that the Kingdom plays in consolidating security in the Arab region

LONDON: Arab countries and organizations expressed their support on Saturday for a statement released by Saudi Arabia’s Foreign Ministry. The statement concerned the report provided to the US Congress on the murder of journalist Jamal Khashoggi.
In a statement, Bahrain’s Foreign Ministry rejected anything that affects the sovereignty of Saudi Arabia.
Bahrain’s Shoura Council affirmed “the prominent and pivotal role played by Saudi Arabia, under the leadership of King Salman and Crown Prince Mohammed bin Salman, to lay down the foundations of regional and global security and peace.”
The council also praised diplomatic efforts exerted by Saudi Arabia through its foreign diplomacy in the region and the world, Bahrain News Agency (BNA) reported.

The UAE’s Ministry of Foreign Affairs and International Cooperation expressed its confidence in and support for the Saudi judiciary, as well as the Kingdom’s commitment to enforcing the law with transparency and integrity and to holding those responsible for the murder to account.

The Ministry affirmed the UAE’s solidarity with Saudi Arabia in its efforts to maintain stability and security in the region and the key role it plays in maintaining moderation in the Arab world.

The UAE rejects any attempts to exploit the Jamal Khashoggi case or interfere in Saudi internal affairs, the ministry said.

Kuwait’s foreign ministry expressed its support for Saudi Arabia’s statement and stressed the important role played by the Kingdom in supporting moderation regionally and internationally and in denouncing extremism.

The ministry said that it categorically rejects any attempts to affect the Kingdom’s sovereignty.

Oman’s Ministry of Foreign Affairs also expressed the Sultanate's solidarity with the Kingdom, saying it appreciated the efforts and actions of the competent judicial authorities in the Kingdom regarding the case and its outcome.

Oman’s Ministry of Foreign Affairs also expressed the Sultanate's solidarity with the Kingdom, saying it appreciated the efforts and actions of the competent judicial authorities in the Kingdom regarding the case and its outcome.

The Secretary-General of the Organization of Islamic Cooperation (OIC) said it categorically rejects “the incorrect conclusions contained” in the US report which is “devoid of any conclusive evidence.”

The organization rejected attempts to infringe the Kingdom’s sovereignty, insult its leadership and compromise the independence of its judiciary.

It expressed support for all judicial measures that were taken against the perpetrators of the murder who were brought to justice, and the sentences that were issued.

The Arab Parliament affirmed its support for the Saudi statement and expressed its categorical rejection of any infringement of the sovereignty of the Kingdom and the independence of its judiciary.

The parliament stressed the pivotal role that the Kingdom plays in consolidating security and stability in the Arab region and the Middle East and its policy of supporting international peace.

The Secretary-General of the Gulf Cooperation Council (GCC), Dr. Nayef Falah Mubarak Al-Hajjraf, affirmed his appreciation for the pivotal role the Kingdom plays in enhancing regional and international security and peace, and its great role in combating terrorism and supporting the efforts of the international community in this regard.

Al-Hajjraf said the report is nothing more than an opinion that is devoid of any conclusive evidence. He expressed his support for any measures that the Kingdom takes in order to preserve its rights and support its role in promoting a culture of moderation.

Yemen also rejected everything that might affect the sovereignty of the Kingdom and the independence of its judiciary.

 


Saudi Arabia announces 5 more COVID-19 deaths

Saudi Arabia announces 5 more COVID-19 deaths
Updated 27 February 2021

Saudi Arabia announces 5 more COVID-19 deaths

Saudi Arabia announces 5 more COVID-19 deaths
  • The total number of recoveries in the Kingdom has increased to 368,011
  • A total of 6,488 people have succumbed to the virus in the Kingdom so far

LONDON: Saudi Arabia announced five deaths from COVID-19 and 338 new infections on Saturday.
Of the new cases, 179 were recorded in Riyadh, 70 in the Eastern Province, 42 in Makkah, 10 in Asir, seven in Madinah, three in Hail, three in Jazan and two in Najran.
The total number of recoveries in the Kingdom increased to 368,011 after 320 more patients recovered from the virus.
A total of 6,488 people have succumbed to the virus in the Kingdom so far.


Saudi-led Arab coalition intercepts Houthi drone targeting Saudi Arabia

Saudi-led Arab coalition intercepts Houthi drone targeting Saudi Arabia
Updated 27 February 2021

Saudi-led Arab coalition intercepts Houthi drone targeting Saudi Arabia

Saudi-led Arab coalition intercepts Houthi drone targeting Saudi Arabia

DUBAI: The Saudi-led Arab coalition intercepted and destroyed a Houthi drone targeting civilian areas in Khamis Mushait city, southwest of Saudi Arabia on Saturday.
The spokesman of the Saudi-led Arab coalition, Col. Turki Al-Maliki, said that the Houthi militia’s attempts to attack civilians and civilian areas constituted as a war crime.
He stressing that the coalition took necessary operational measures to protect civilians in accordance with international humanitarian law.

The attempted drone attack came a day after the Arab coalition intercepted and destroyed two Houthi drones targeting Saudi Arabia’s southern region on Friday and a ballistic missile fired by the militia toward the Kingdom later on in the day.


Blinken stresses US will continue to defend, do business with Saudi Arabia

Blinken stresses US will continue to defend, do business with Saudi Arabia
Updated 27 February 2021

Blinken stresses US will continue to defend, do business with Saudi Arabia

Blinken stresses US will continue to defend, do business with Saudi Arabia

DUBAI: The US Secretary of State, Anthony Blinken, said Washington’s relationship with Saudi Arabia was important and that the relationship reflected shared interests and values between the two countries.
“The relationship with Saudi Arabia is an important one. We have significant ongoing interests. We remain committed to the defense of the Kingdom,” Blinken said during a press conference at the US State Department, as reported by CNN on Saturday.
The secretary of state also reiterated the United States’ interests to continue doing business with the Kingdom, stating that the relationship was “bigger than any one individual.”
Blinken also affirmed that US officials, including himself and President Joe Biden, had spoken with their Saudi counterparts.
Meanwhile, Pentagon press secretary John Kirby said on Friday that Saudi Arabia remained “a strategic partner in the region.”
“From a military perspective, as I've said many times, we take seriously our security commitments to Saudi Arabia with respect to their ability to defend themselves, and they do need to defend themselves, particularly along that southern border.”