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Saudi Arabian wealth fund eyes $24bn investment in Arab states
The Public Investment Fund chaired by Crown Prince Mohammed bin Salman plans to open five offices across the region in bid for influence and investment
Saudi Crown Prince Mohammed bin Salman speaks during the Future Investment Initiative (FII) conference in a virtual session in the capital Riyadh, 28 January 2021 (AFP)
By
MEE staff
Published date: 26 October 2022 18:36 UTC | Last update: 2 days 22 hours ago
Saudi Arabia's Public Investment Fund (PIF) plans to invest $24bn across the Arab world, as the kingdom looks to boost its influence in the region.
The PIF said in a statement it would set up companies in Iraq, Jordan, Bahrain, Oman and Sudan to invest in industries ranging from infrastructure and manufacturing to healthcare and food.
The decision follows the PIF's establishment of a company in Egypt earlier this summer to facilitate new investments. The PIF acquired $1.3bn-worth of minority stakes in some of Egypt's most prominent sectors, including fertiliser and technology companies.
Egypt has emerged as a prime example of energy-rich Gulf states stepping in with investments in neighbours whose economies have been battered by the global economic downturn and the war in Ukraine.
Emirati investments in Egypt more than doubled during the first half of the 2021-2022 fiscal year. Meanwhile, Qatar has pledged to inject $5bn dollars in the struggling North African country.
While the investments have been welcomed by the indebted government of President Abdel Fattah el-Sisi, they have drawn the ire of some who believe Cairo is selling out national assets after spending big on arms purchases and the construction of a lavish new capital city.
'Not charity'
Besides shoring up their neighbours, analysts say Gulf states are looking to profit from the acquisitions.
"Investments from the Gulf have been a lifesaver to the Egyptian economy, but Egypt is also a good place to do business," Mirette Mabrouk, founding director of the Middle East Institute's Egypt programme, told MEE.
"This money isn’t charity - it's investments, and the Gulf expects to make their money back."
The countries where Saudi Arabia plans to open new investment offices have been hit by geopolitical instability and global economic headwinds.
Unemployment in energy-poor Jordan is at 24 percent, and double that for the kingdom's youth. Sudan has seen international aid dry up after the military's ousting of a democratic transition government. Iraq has been beset with political tensions.
"[The new subsidiaries] will contribute to an increase in regional investment opportunities for PIF's portfolio companies and Saudi Arabia's private sector, bolstering attractive financial returns over the long term, and creating more avenues for strategic economic collaboration with the private sector in the target countries as well as enabling the Saudi private sector," the PIF said in a statement.
The wealth fund is chaired by Crown Prince Mohammed bin Salman and has emerged as the main vehicle for his attempts to overhaul the kingdom's oil-dependent economy. This summer it purchased $7bn of shares in US companies including Starbucks, Zoom and Microsoft.
The fund was the world's second-most active state investor between January and October, according to the wealth fund tracker Global SWF. The PIF plans to grow its $620 billion in assets to more than $1tn by 2025.
Saudi Arabian wealth fund eyes $24bn investment in Arab states
The Public Investment Fund chaired by Crown Prince Mohammed bin Salman plans to open five offices across the region in bid for influence and investment
www.middleeasteye.net
Saudi wealth fund targets $24bn investment in Arab states
Kingdom’s sovereign fund to set up companies in Middle East and north Africa in attempt to shore up soft power
Samer Al-Atrush in Riyadh
October 26 2022
Saudi Arabia’s sovereign wealth fund plans to invest $24bn in six Arab countries as the kingdom enjoys an oil boom and seeks to bolster its soft power in the region.
The Public Investment Fund said in a statement it would set up companies in Iraq, Jordan, Bahrain, Oman and Sudan that would seek investments across sectors ranging from infrastructure and healthcare to finance and food.
In August, the PIF began this process by establishing a similar investment company for Egypt, where the fund has already spent $1.3bn acquiring minority stakes in four firms, including fertiliser and tech companies.
While Saudi Arabia and the Gulf’s other large oil exporters have enjoyed a huge petrodollar windfall as energy and food prices have soared since Russia invaded Ukraine, poorer states in the Middle East are struggling with deepening economic and social pressures.
Saudi Arabia, the United Arab Emirates and Qatar have deposited $13bn in Egypt’s central bank this year as it struggles with a foreign currency shortage.
The wealthier Gulf states have traditionally aided their allies with loans and central bank deposits, but in recent years they have made their assistance more conditional. And under day-to-day ruler Crown Prince Mohammed bin Salman, Saudi Arabia’s support has been shifting to investments that could profit the PIF.
“This is a continuation of a shift in the way Saudi Arabia supports its regional partners from grants and soft loans to strategic long-term investment,” said Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East.
The PIF said that the planned investment fitted with its strategy of “seeking new investment opportunities in the Middle East and north Africa to build lasting strategic economic partnerships and achieve sustainable returns”. It provided no timeframe for the $24bn target.
Monica Malik, chief economist at the Abu Dhabi Commercial Bank, said Saudi Arabia’s focus on providing regional support through economic programmes and investment “provides a greater ability to guide changes, alongside potentially benefiting from investment returns”. “
Greater Saudi economic support remains vital for the wider region, which is suffering from higher energy prices and various structural imbalances,” she added.
The PIF is chaired by Prince Mohammed and the heir apparent has been put it in charge of driving the government’s ambitious plans to diversify the kingdom’s economy beyond oil revenues.
The fund has been tasked with overseeing a massive domestic spending programme, including developing megaprojects and establishing companies to kick-start new sectors, as well expanding its foreign exposure.
It has been one most active sovereign wealth funds in recent years as it targets increasing it assets under management to $1.07tn by 2025, with 24 per cent to be held internationally.
Saudi wealth fund targets $24bn investment in Arab states
Kingdom’s sovereign fund to set up companies in Middle East and north Africa in attempt to shore up soft power
