Any big plans need solid financial support. Before submitting proposals to potential investors, you must create your own cash reserve, which will contribute to economic growth. This is very important for a country that plans to implement a project worth half a trillion US dollars.
The Saudi Arabian Sovereign Fund, or PIF, is one of the largest foundations on the world stage. Its assets are estimated at $ 400 billion, but that number will increase exponentially in the near future. This organization was specially created to invest on behalf of the Saudis. For the VIZE 2030 program, PIF is a “safety net” that helps to anticipate the successful implementation of projects.
History of the Saudi Sovereign Wealth Fund
Despite the fact that a new round of development of the Kingdom is planned for the next decade, its economic potential is accumulating in the long run. The rich oil fields discovered in the desert and in the waters of the Red Sea have largely determined the prosperity of the Arab countries.
As early as 1971, the government began considering the creation of a fund whose main task would be to support strategically important projects. Thus was born the public investment initiative of Saudi Arabia, commonly referred to as the PIF.
At the beginning of the 21st century, when the Kingdom embarked on a path of integration with the world community, great hopes were placed in this fund to achieve ambitious goals. Throughout its half-century history, PIF has played an important role in many strategically important projects. Among them are oil refineries, developments in petrochemicals, energy, and fertilizer production.
Since 2014, the authority of the Saudi Sovereign Wealth Fund has expanded significantly. This allowed the fund to increase his financial potential. The investment process takes place through capital investments, loans, or guarantees.
PIF also provides loans with different maturities to public and private industrial projects. Popular areas for investment are energy, the aerospace industry, telecommunications, development and implementation of green technologies.
Five years ago, the Fund began investing heavily not only in local companies but also in companies from other countries. A notable example is the acquisition of 38% of the shares of one of the South Korean companies. The following year, PIF bought about 5% of Uber’s stock.
The deal is estimated at $ 3.5 billion. In 2017, plans were announced to invest $ 40 billion to support US infrastructure projects. The fund even owns 5% of Tesla shares. Elon Musk personally said he was considering closer cooperation.
The present Saudi Sovereign Wealth Fund
PIF increases its investment activity every year. The organization owns stakes in many well-known companies, such as Bank of America ($ 487.6 million), Boeing ($ 713.7 million), Citigroup and Facebook ($ 522 million each), Disney ($ 495.8 million), BP ($ 827.7 million).
But these are all “trifles” compared to the volume of investments expected in the development of local projects. First of all, we are talking about the promising megacity NEOM and related facilities.
Due to the strategic importance of the PIF, it is personally chaired by Crown Prince Mohammed bin Salman Al Saud. In addition, the board contains:
• Ibrahim Abdel Aziz al-Assaf – Minister of State, Member of the Saudi Council of Ministers;
• Majid Abdullah al-Kasabi – Minister of Commerce;
• Mohammad Abdul Malek al-Sheikh – Minister of State, Member of the Saudi Council of Ministers;
• Ahmed Aqil al-Khatib – Minister of Tourism;
• Khalid Abdel Aziz al-Falih – Minister of Investment;
• Mohammad Abdullah Al-Jadaan – Minister of Finance;
• Mohammed Mazid Altvayjri – Adviser to the Royal Court;
• Yasir Osman al-Rumayyan – State Investment Fund Manager.
On top of the people close to the Saudis, foreigners are also accepted into the PIF leadership. The main composition of the TOP managers is as follows:
• Yasser A. al-Salman – Chief Financial Officer;
• Bander Mogren – CEO;
• Turki Ayu Al-Novayzer – Head of International Investment;
• Yazid A. Al-Humied – Head of Local Holding Investments;
• Ayman M. Al-Mudayfer – Head of Local Real Estate Investment;
• Fahad al-Saif – Head of Corporate Finance;
• Shinakha S. Al-Azzaz – General Counsel and Secretary General of the Board;
• Saad Alcroud – Acting Chief of Staff;
• Feta Zabeli – Head of Risk;
• Kevin Foster – Head of Corporate Communications;
• Jerry Todd – Head of National Development;
• Mike Cheng – Head of Internal Audit;
• Richard A. Collins – Chief Compliance Officer.
They are entrusted with the great responsibility of transforming Saudi Arabia into the world’s largest economy and an attractive tourist destination.
The future of the Saudi Sovereign Wealth Fund
As the Kingdom expects the start of the post-industrial era, with the growth of the market for tourism services and scientific and technical projects, for which $ 500 billion is already planned, the volume of PIF will increase many times over.
According to bold forecasts, we are talking about a figure of about $ 2 trillion, which will be used to invest in non-resource sectors of the economy. For this goal, the PIF will radically change its strategy and increase foreign investment to 50%, which is fully in line with the new policy of openness and dialogue with the world community.
Development program for 2021-2025
Saudi Arabia’s Sovereign Wealth Fund is launching a five-year strategy, including a vision program for 2021-2025. Crown Prince Mohammed ibn Salmán told reporters at one of his press conferences.
Following previous successes in 2018-2020, this strategy will ensure the continued growth of PIF as a global investment center and partner for innovative businesses around the world.
The Sovereign Fund will create new industries and opportunities that will shape the future of the global economy while leading the transformation in Saudi Arabia. By the end of 2025, PIF plans to increase its assets to $1.07 trillion and contribute $320 billion to non-oil-related GDP.
Over the last four years, the fund has created 10 new sectors of the economy, enabled the launch of more than 30 new companies, and created 331,000 jobs in the kingdom.
It is safe to say that PIF contributes to Saudi Arabia’s economic diversification and strengthens it as a global investment hub. The Foundation expects to focus on financing the new future of humanity on a planetary scale through:
• improving the quality of life at home and abroad;
• Ensuring environmental and economic sustainability;
• Development of new sectors and creation of new jobs.
This strategy will serve as a roadmap for the fund over the next five years. It will help realize VISION 2030. One of the most important PIF initiatives is investing more than $ 40 billion a year in the domestic non-oil mining and refining industries, creating nearly two million jobs in tourism, services, and R&D by the end of 2025.
Main activities of PIF
As part of its internal strategy, the Saudi Arabian Sovereign Wealth Fund will focus on 13 sectors:
2. Utilities, renewable energy sources;
3. Telecommunications, media, information technology;
4. Food and agriculture;
5. Automotive industry;
6. Transport and logistics;
7. Real estate;
8. Aviation and defense;
9. Construction and related services;
10. Entertainment, recreation, and sports;
11. Financial services;
12. Metal and mining industry;
13. Consumer goods and retail.
A key element of the Saudi Arabian Sovereign Fund’s success is the strategic economic partnership that has been established with many of the world’s leading investors and companies. Over the next five years, these partnerships will be strengthened by giving foreign traders access to untapped investment opportunities and creating synergies and value for the global community.
PIF will also continue to use knowledge-sharing partnerships with direct benefits for the global community.
The PIF strategy focuses on economic transformation in Saudi Arabia and contributes to the development and strengthening of the private sector. The Foundation also works with innovative companies around the world to constantly monitor scientific, technical, and managerial achievements.
At the heart of the strategy is a focus on financing the new future of humanity through improved quality of life, environmental and economic sustainability, and the development of new industries and jobs.
Recent investment acquisitions include a stake in Carnival Corp. and the Marriott International Inc. hotel chain, as well as stakes in Canadian Natural Resources and Suncor Energy. Sailing looks most attractive because the development of the Red Sea project involves the development of new tourist areas, including recreation at sea and travel.
The shipping industry in the kingdom
The State Investment Fund has launched the Saudi Cruise Program, which aims to create and develop a cruise ship industry in Saudi Arabia, intensifying the kingdom’s efforts to become a tourist destination on the international travel map and the development of the tourism industry in line with VISION 2030.
The company is headquartered in Jeddah on the Red Sea coast. The Cruise Saudi project will create a strategic partnership between maritime and inland tourism through the development of cruise ports and terminals in several cities in Saudi Arabia, which will provide visitors with a comprehensive experience.
The launch of Cruise Saudi is in line with the State Investment Fund’s strategy for 2021-2025, which aims to unlock the potential of promising sectors outside oil refining.
Cruise Saudi also works closely with local authorities to develop tourist destinations. This is done in order to introduce the itineraries, provide guests with an unforgettable experience and create opportunities to explore the heritage and culture of Saudi Arabia. The main thing is to ensure the preservation of the environment and the protection of natural resources.
PIF and its subsidiaries are targeting a cumulative contribution of SARs 1 200 billion in non-oil GDP by the end of 2025 and are taking advantage of growth opportunities for strategic and vital sectors of the economy.
The Saudi Sovereign Wealth Fund is committed to exploiting the kingdom’s tourist attractions as well as the kingdom’s historical and cultural heritage, including UNESCO sites and unique natural sites such as mountains and the sea.
Investments in tourism projects are part of a strategy to develop promising industries and achieve high returns in the medium and long term. In addition to developing sea activities, the Saudis intend to achieve high results in air transport.
The first commercial helicopter company in Saudi Arabia
Helicopter Company (THC) was established with an initial capital of SAR 565 million. Its main mission is to satisfy the growing demand in the field of luxury tourism and also to develop the urban air transport segment. This will contribute to the development of logistics and transport in the major cities of Saudi Arabia and will also support the development of the innovation sector as a whole.
In addition, THC will provide access to remote destinations and a high level of service at the level of other global tasks.
The launch of THC is in line with the Saudi Sovereign Wealth Fund’s strategy to generate sustainable profits, create and develop new sectors of the economy and support the VIZE 2030 program, which acts as a catalyst for the nascent tourism business in the kingdom.
Helicopter Company is the first national commercial helicopter operator in Saudi Arabia. Its aim is to unlock the potential of urban air transport and tourist opportunities. Already purchased 10 light helicopters Airbus Helicopters H125. The brand was not chosen by chance because Airbus is a world leader in aviation, aerospace, and related services.
The company offers the most complete range of passenger transport aircraft as well as the most efficient solutions for civilian and military helicopters.
The development of local aviation, thanks in part to THC, will help implement major projects, including the Red Sea project, which will include dozens of islands. It will be extremely difficult to organize logistics and passenger transport between them without an established air service.
Also, have a look at NEOM will create the world’s first personalized eVTOL system.