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

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.


US firms awake to ‘sad day’ in Hong Kong as Trump cuts ties

Updated 7 min 33 sec ago

US firms awake to ‘sad day’ in Hong Kong as Trump cuts ties

  • President moves to strip finance hub of economic privileges in wake of tough new Chinese security laws

HONG KONG: The American Chamber of Commerce in Hong Kong said on Saturday it was a sad day for the global financial center, hours after US President Donald Trump moved toward stripping the city of its special treatment in a bid to punish China.

In some of his toughest rhetoric yet, Trump said Beijing had broken its word over Hong Kong’s high degree of autonomy by proposing new national security legislation and the territory no longer warranted US economic privileges.

“We will take action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China,” Trump said, adding that Washington would also impose sanctions on individuals seen as responsible for “smothering — absolutely smothering — Hong Kong’s freedom.”

Speaking at the White House, Trump said China’s move on Hong Kong was a tragedy for the world.

But Trump gave no timetable for the moves, leaving Hong Kong residents, businesses and officials to ponder just how far his administration will go. “This is an emotional moment for Americans in Hong Kong and it will take companies and families a while to digest the ramifications,” AmCham President Tara Joseph said in a statement.

“Many of us have deep ties to this city and with Hong Kong people. We love Hong Kong and it’s a sad day,” she said, adding the chamber would continue to work with its members to maintain Hong Kong’s status as a vital business center.

China’s parliament this week approved a decision to create laws for Hong Kong to curb sedition, secession, terrorism and foreign interference. Mainland security and intelligence agents may be stationed in the city for the first time — moves critics say puts the city’s extensive freedoms at risk.

Trump did not name any sanctions targets but said the announcement would “affect the full range of agreements we have with Hong Kong,” including the US-Hong Kong extradition treaty to export controls on dual-use technologies and more “with few exceptions.”

China’s Global Times, which is published by the People’s Daily, the official newspaper of China’s ruling Communist Party, said Trump’s decision was a “recklessly arbitrary” step.

The Hong Kong government, which has a long history of working ties with US counterparts distinct from Beijing, has yet to respond, although it warned on Thursday the move could be a double edged sword.

More than 1,300 US firms have offices in Hong Kong and provide about 100,000 jobs. In the past decade, the US trade surplus with Hong Kong has been the biggest among all its trading partners, totaling $297 billion from 2009 to 2018.

Britain, meanwhile, is prepared to offer extended visa rights and a pathway to citizenship for almost 3 million Hong Kong residents in response to China’s push to impose national security legislation in the former British colony.