PIF & FII - Investment at the centre of Saudi vision

Updated: Feb 5

The flow of investment related news from Saudi at the start of 2021 has been almost overwhelming. From the Crown Prince's desert presentation to the World Economic Forum in early January, to last week's Public Investment Fund meeting and Future Investment Initiative Conference in Riyadh, the stream of notable announcements has been relentless.

Having covered the WEF presentation in a previous post , we have turned our attention to breaking down the key elements of the PIF and FII meetings.


On January 24th, the Crown Prince and PIF announced its Vision Realisation Program (VRP) for 2021-25 and recapped on its successes between 2018 and 2020. Speaking after their latest board meeting, HH Mohammed bin Salman highlighted that PIF had:

  • Established 30 companies within 10 new strategic sectors

  • Created 331,000 direct and in-direct jobs

  • Increased ROI from 3% to 8%

  • Grown Assets under Management (AUM) to $400billion

Moving focus on to the 2021-25 VRP, the Prince outlined the key objectives for the fund to support overall goals of the Vision2030 program:

  • $40billion per year investment in domestic economy

  • Create 1.8 million direct and in-direct jobs by 2025

  • AUM to reach $1.07 trillion by 2025

  • Accumulated contribution of $320 billion to non-oil GDP by 2025

  • Balance of 80/20% domestic to international assets

Recent statements and initiatives from various stakeholders, including the Ministry of Investment's 'Invest Saudi' unit, suggest that attracting multinationals to support and drive much of this growth will be a key feature of the next five years. Our previous post about Riyadh focused on how the government is working to convince blue chip firms to set up their regional headquarters in the city. The PIF has invested billions in the Soft Bank Vision Fund over the past 3 years, and will be expecting to see many of the fund's portfolio companies locate operations in the capital. Yassir Al Rumayan, Governor of PIF said last week that Health and Technology will be core sectors targeted in due course.


HE Fahd Al Rasheed, President of the Royal Commission for Riyadh City (RCRC) outlined plans to double the size of the capital's population and economy over the next decade. A detailed strategy will be released in the next few months focusing on key areas such as industry, logistics, technology, biotechnology, and digital transformation. Infrastructure development will also be at the forefront of RCRC's plans to support the growth of the population to 15 million people.


In terms of funding, this is expected to come from a combination of dividends from stakes it owns, loans, government cash injections and the privatisation of Saudi companies it owns, possibly beginning in 2021. There are also signs that Saudi Aramco may look to divest some of its non-core assets to release cash and could possibly list more shares if the valuation is attractive.


Key sectors within the VRP are: Aerospace and Defense, Automotive, Transport and Logistics, Food and Agriculture, Construction and Building Components and Services, Entertainment, Leisure, and Sports, Financial Services, Real Estate, Utilities and Renewables, Metals and Mining, Healthcare, Consumer Goods and Retail and Telecom, Media, and Technology


FII


"Neo-Renaissance" was the theme of the fourth edition of the FII last week. 170 speakers addressed an accumulative online audience of 4 million people on topics dominated by technology, AI, Health and post-pandemic rebuilding of the global economy . Putting Saudi's development plans at the heart of many of the sessions, the event highlighted how much of the underlying principles of the country's plans have been accelerated by the impact of Covid 19. Renewable energy, carbon capture, re-thinking cities and transportation, healthcare technology and artificial-intelligence will all play a major role in Saudi's future economy.


NEOM's 'The Line' , the new city being developed in the north-west of the country which we featured recently, was the subject of a discussion between Crown Prince Mohammed bin Salman and Matteo Renzi, the former Italian Prime Minister. Pointing out that over 90% of humanity will live in cities over the next decades, MBS used the opportunity to detail how NEOM will take a completely new approach to urban development and living that will require significant investment in emerging technologies. Brendan Bechtel, the CEO of Brendan Bechtel, referred to NEOM as one of the most exciting and transformative projects globally, because it is leading the way in three key areas: clean energy, digital infrastructure, and water infrastructure. Significant opportunities exist for businesses in these sectors as the project gathers pace.


Environmental, Social and Governance (ESG) topics also featured prominently across the conference. "Build back better" was a phrase used widely over the 2 days as panelists and delegates discussed ways in which ESG can be placed at the heart of investment philosophies and corporate activity. How this will sit with Saudi Arabia's central role as the worlds pre-eminent oil producer is as yet undetermined.


Finally, travel and tourism was discussed in depth by industry stakeholders. Saudi plans to invest $20B per year on tourism development over the next decade and announced the formation of "Cruise Saudi" (a PIF Company) during the conference. The new entity will be tasked with developing cruise terminals and other infrastructure for the industry over the coming years. All the mega-projects are on schedule currently with major destinations such as Qiddiya and Diriyah Gate expected to open their doors in 2023.












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