PIF plans stake in big industrial zone

PIF plans stake in big industrial zone
Updated 05 September 2016

PIF plans stake in big industrial zone

PIF plans stake in big industrial zone

JEDDAH: The Public Investment Fund finds itself playing a new role under Vision 2030.
While launching Vision 2030, Deputy Crown Prince Mohammed bin Salman called for transforming the PIF into the world’s largest sovereign wealth fund, emphasizing diversification and encouraging the private sector’s commercial expansion. One of the PIF’s aims is to invest in King Abdullah Economic City in Rabigh, near Jeddah, Reuters reported.
That will certainly inject capital into the business zone, now being developed by Emaar the Economic City (EEC), a Saudi consortium affiliated with Dubai’s Emaar Properties Group.
The source told Reuters that the PIF could either buy a stake directly in KAEC and serve as a partner to develop the project along with EEC, or take a stake in EEC itself.
The fund was poised to begin focusing investment in three “fundamental” sectors — housing finance, renewable energy and information technology, John Sfakianakis, director of economic research at the Gulf Research Center, points out.
 “The fund will seek in the next stage to transfer technologies into the Kingdom and will be the most important industrial investment arm of the Saudi economy,” Sfakianakis said.
 James Reeve, deputy chief economist and assistant general manager at Samba Financial Group, commented: “The KAEC needs to change its focus. Developing tourism is the right approach because it will bring in foreign exchange. The additional capital from the PIF should help revitalize the city.”
The CEO of the city, Fahd Al-Rasheed, told Reuters in January its population was projected to hit 50,000 by 2020, with an ultimate target of 2 million around 2035.
Tenants now include French pharmaceutical maker Sanofi , a venture involving US battery maker Johnson Controls and producers of building materials.

EEC obtained an SR5 billion loan from the Saudi Ministry of Finance in 2011, which has been extended until 2026, and the source said the company had a similar amount of debt to commercial banks.
An investment by the PIF in the economic city would be a step in the fund’s development as one of the most important institutions in the Saudi economy, using its financial power to push projects which the government considers vital.
Under the economic reforms, the government has said it will expand the PIF from SR600 billion to over SR7 trillion, by giving it assets such as ownership of Saudi Aramco. That would make the PIF the world’s biggest sovereign fund by far, on paper though not necessarily in terms of the cash it had available for investment.
The PIF will invest abroad — in June, it bought a stake in US ride-hailing firm Uber for $3.5 billion — but it will focus much of its money and management attention on domestic projects designed to reduce Saudi Arabia’s reliance on oil exports.
For example, the PIF will take over Riyadh’s King Abdullah Financial District and restructure the project, sources have told Reuters. It is also expected to get involved in developing a Saudi shipbuilding industry and in restructuring state firms such as utility Saudi Electricity Co.
The PIF will “help unlock strategic sectors requiring intensive capital inputs. This will contribute toward developing entirely new economic sectors and establishing durable national corporations,” the national reform plan reads.