Complex Made Simple

Saudi’s Davos in the Desert part IV brings mighty PIF, Kingdom’s future, into spotlight

The Future Investment Initiative, in its 4th edition, is on January 27-28 in Riyadh. The FII Institute will hold a multi-hub conference under the theme of “The Neo-Renaissance”.

Saudi Arabia's PIF aims to have its assets exceed $1.1 trillion by 2025 Saudi Arabia replaced its central bank governor Ahmed Alkholifey with Fahad Al-Mubarak Bin Salman stated that 85% of its huge economic program will be funded by the PIF

The Future Investment Initiative, in its 4th edition, is on January 27-28 in Riyadh. The FII Institute will hold a multi-hub conference under the theme of “The Neo-Renaissance” that will engage leaders, investors, and policymakers as they reimagine the global economy amid the COVID-19 pandemic. The conference will have speakers joining physically and virtually from the FII satellites in New York, Paris, Beijing, and Mumbai.

FII has a global appeal because of the many opportunities it caters to global businesses, governments, entrepreneurs, and youths, but this year will see the Public Investment Fund (PIF), the event’s host, take center stage for its role in funding Saudi Projects and attracting capital inflows.

Saudi Arabia’s PIF aims to have its assets exceed $1.1 trillion by 2025, according to the Sovereign Wealth Fund Institute, and the Saudi Crown prince, Mohammed Bin Salman. 

It would catapult the PIF to the No. 3 or No. 2 position among the world’s sovereign wealth funds.

Read: Saudi Arabia’s THE LINE is a city with “zero cars, zero streets and zero carbon emissions”

Attraction grabber   

 Some of Wall Street’s biggest names are scheduled to attend, mostly virtually, according to the conference’s itinerary. 

David Rubenstein of Carlyle is moderating a keynote panel that also includes Ray Dalio of Bridgewater Associates, Larry Fink of BlackRock, David Solomon of Goldman Sachs, and Thomas Gottstein of Credit Suisse. 

James Gorman of Morgan Stanley will be interviewed by the CNN anchor Erin Burnett. Other executives set to appear are Steve Schwarzman of Blackstone, Masa Son of SoftBank, Adena Friedman of Nasdaq, Tom Barrack of Colony Capital, and Jeffrey Ubben of Inclusive Capital.

This is quite the contrast from 2019 when Morgan Stanley and Goldman sent lower-ranking execs to the conference, not their CEOs.

Saudi Central Bank changes and PIF

Saudi Arabia replaced its central bank governor Ahmed Alkholifey with Fahad Al-Mubarak, former central bank governor, former chairman of Morgan Stanley in the Kingdom, and the G20 Sherpa when Saudi Arabia held the presidency last year.

The central bank and the $400 billion Public Investment Fund are set to play an increasingly important role in powering the domestic recovery and as such the central bank’s mandate was recently expanded to include supporting economic growth, while the crown prince has said the wealth fund would invest $40 billion a year domestically.

Saudi Arabia’s central bank has already been one of the key vehicles for providing stimulus to the economy extending over 100 billion riyals ($27 billion) to local banks in liquidity injections and to cover the costs of loan deferrals for small businesses hit by the COVID-19 pandemic.

The central bank also controls the kingdom’s reserves, which are among the largest in the world at $459 billion. But its historic role as manager of the country’s savings is being eclipsed by the PIF, which is chaired by the Saudi crown prince.

The PIF received a $40 billion transfer from the central bank in March for new investments as it looked to capitalize on a slump in global markets caused by the onset of the coronavirus.  

Read: Online payments, digital wallet growth, set the stage for Saudi Open Banking 2022

Saudi plans as per Saudi’s Crown Prince

Saudi Crown Prince Mohammed bin Salman recently participated in a virtual strategic dialogue session of the World Economic Forum and discussed major investment opportunities in the Kingdom, which amount to $6 trn over the next 10 years, including $3 trillion in new projects, as part of Vision 2030.

Bin Salman stated that 85% of this huge economic program will be funded by the PIF and the Saudi private sector, while the remaining portion will be through stimulating foreign capital from the Gulf and the rest of the world, to enter into investments in promising sectors and traditional sectors with efficiency.

Bin Salman said the scheme was in light of the Kingdom’s plans to rise to the leadership position in renewable energy, the fourth industrial revolution, tourism, transportation, entertainment, and sports, based on the assets and the gains it possesses, appreciating the role of serious and active partners, who provide added value in transferring and localizing knowledge and technology and enhancing talent within the Kingdom.

According to Cornelia Meyer, an economist with 30 years of experience in investment banking and industry, the PIF will reduce its exposure to international markets from 30% to 20%, freeing up firepower to invest in the Kingdom in projects such as NEOM or Qiddiya, which will be hugely beneficial to the country and create highly skilled employment opportunities for the country’s youth.

Indeed, employment weaves itself through all the announcements. Forty percent of Saudi Arabia’s population is below the age of 25.  

The Saudi government released third-quarter jobless figures as unemployment for the period fell to 14.92% from 15.4% in the second quarter. The Kingdom’s ambition is to shrink unemployment to 7% by 2030.