The kingdom's Public Investment Fund has many more tricks up its sleeve
Saudi Arabia’s $500bn NEOM investment zone is just the beginning
Saudi Arabia always thinks big and yesterday it didn’t fail investors, with the unveiling of a visionary $500 billion investment zone called NEOM encompassing the kingdom, Jordan and Egypt.
The zone, which will include nine specialised sectors and span 26,500 square kilometres, will be funded by the sovereign wealth fund, the Public Investment Fund (PIF), in addition to local and international investors.
PIF’s ambitious project is just one of a host of initiatives that the fund has been undertaking to help transform the kingdom into a diversified economy. This is in line with Vision 2030, the brainchild of crown prince Mohammed bin Salman, who also serves as PIF's chairman.
With plans to turn the $230bn PIF into a $2 trillion fund by 2030, the kingdom is accelerating plans to create new revenue streams and lower the dependence of the world’s biggest oil exporter on hydrocarbons.
PIF is set to become the engine of growth for these transformation plans and has vowed to create more than 20,000 jobs by 2020 though its various projects. It also will get proceeds from the sale of a five per cent stake in Saudi Aramco, the world’s biggest oil producing company.
The fund is investing in a variety of sectors from a mortgage refinancing company to recycling.
It has earmarked funds to set up a company to save energy and has created a $1bn fund to support small and medium-sized enterprises. It also plans to develop mixed-use projects in the holy cities of Mecca and Medina that will contribute annually 15bn riyals to the country's GDP by 2030.
PIF is also employing its cash internationally as well as locally. It has committed to invest as much as $45bn in the $100bn Softbank Vision Fund, a tech venture led by Japan’s Softbank Group with investments from Apple and Qualcomm to name a few.
As its chief executive Yasir Al Rumayyan told a major investment conference titled Future Investment Initiative in Riyadh yesterday, the fund is a long-term investor that is looking beyond 2030.
Saudi Arabia is on the right track and with PIF’s help it will be able to achieve its diversification objectives sooner rather than later.