Public Investment Fund of Saudi Arabia

The Public Investment Fund (PIF) is a sovereign wealth fund owned by Saudi Arabia, founded for the purpose of investing funds on behalf of the Government of Saudi Arabia. The PIF has a portfolio made up of approximately 200 investments, of which around 20 are listed on Tadawul, the Saudi Stock Exchange.

Role

The Public Investment Fund invests in specific projects through equity, loans or guarantees, and allocations of public funds. The PIF also provides medium and long-term loans to the large-scale government and private industrial projects. The PIF invests in the fields of telecoms, aerospace, energy, green technologies, and security, seeking a focus on housing finance, renewable energy and information technology.[1]

History

The Saudi Arabian Public Investment Fund (PIF) was established in 1971 by Royal Decree M/24[2] to provide financing support for projects of strategic significance to the national economy.[3]

Since its inception, the PIF has been the Kingdom’s main investment arm, and has played an important role in the financing of vital projects in the Kingdom, including in the oil refining, fertilizer, petrochemical and electricity sectors. In July 2014, the Council of Ministers granted the PIF authority to fund new companies inside and outside the Kingdom, either independently or in cooperation with the public and private sectors, without the council's prior approval.[4]

PIF post-CEDA

In March 2015, oversight of PIF was moved from the Ministry of Finance to the Council of Economic and Development Affairs (CEDA). CEDA was created following the fluctuations in oil prices in 2014, in order to improve efficiency in the government’s decision-making apparatus. As part of this process, a new PIF was appointed, chaired by HRH the Crown Prince Mohammad bin Salman Al Saud.[5]

Following these changes, the Board is taking steps to refine its investment capabilities and enable the fund to manage a broader portfolio of current and new assets,[6] ensuring that it is aligned with the government’s Vision 2030.[7] The aim is to diversify government resources and the economy and to help unlock strategic sectors.[8]

Investment projects

Beginning in 2015 the PIF began making a number of high-profile investments, including acquiring a 38% stake in South Korea’s Posco Engineering & Construction Co. in July 2015[9] and establishing a sizable fund with French firms in October 2015. In June 2016, it was announced that the PIF was acquiring an approximate 5 percent stake in Uber for an investment of $3.5 billion, the largest ever single investment in the App-based ride sharing company. On 14 October 2016 Japan's SoftBank announced it had signed a memorandum of understanding with the PIF for the establishment of a London-based SoftBank Vision Fund which aims to invest up to $45 billion over five years in the tech sector.[10]

In March 2016, it was announced that ownership of Saudi Aramco would be transferred to the PIF and that the Kingdom will seek to list 5 percent of Aramco’s shares by 2017. The PIF expects to become the largest sovereign wealth fund in the world with assets of $2 trillion.[11]

On May 20, 2017, during the Saudi-US CEO Forum which was part of President Donald Trump's official trip to Saudi Arabia, the Public Investment Fund (PIF) announced plans to "invest $40 billion in infrastructure projects, mostly in the U.S." Saudi Arabia, which is "working to diversify its economy" entered into business deals with General Electric, Lockheed Martin and The Blackstone Group. Blackstone, whose CEO and founder — Stephen A. Schwarzman — is a top supporter of President Donald Trump, entered into a non-binding memorandum by which the PIF committed $20 billion to the project.[12] During the CEO Forum US-Saudi, arms deals were announced including a pledge to "assemble 150 Lockheed Martin Black Hawk helicopters" in Saudi Arabia, representing 450 jobs in Saudi Arabia" as part of the "$6 billion deal for Black Hawks."[13]

On 31 July 2017, the PIF announced it will spearhead the Red Sea project for luxury beach resorts built over 50 islands unlocking 125 miles of coastline.[14] PIF will inject initial capital in order to raise funds for investments by international actors in the tourism and hospitality sectors.[15]

On August 7, 2018, Elon Musk announced that he was considering taking automotive and energy company Tesla private and that funding was "secured."[16][17] In a follow-up blog post six days later, Musk said the Saudi Arabian sovereign wealth fund had met with him several times since early 2017 to express interest in such a move "because of the important need to diversify away from oil." As of that post, the fund held almost 5% of Tesla stock, purchased through public markets.[18]

See also

References

  1. ↑ Company Overview of Public Investment Fund, Bloomberg.com
  2. ↑ "موقع هيئة الخبراء بمجلس الوزراء". Retrieved 2 December 2016.
  3. ↑ Bloomberg - The Key Questions Asked About Saudi Arabia’s $2 Trillion Fund
  4. ↑ "Saudis refine blueprint for post-oil economy". 26 April 2016. Retrieved 2 December 2016.
  5. ↑ "Cabinet Session 23-3-2015 - kingdom of Saudi Arabia - Ministry of Foreign Affairs". Retrieved 2 December 2016.
  6. ↑ "Vision 2030 – How to achieve our vision". June 2016.
  7. ↑ "Financial Times - The Saudi Reshuffle: five key reforms in Riyadh, May 2016". June 2016.
  8. ↑ "Al Arabiya – full text of Vision 2030". June 2016.
  9. ↑ ""Let's establish a joint venture", following a 20-minute explanation of the miracle of Incheon Songdo". POSCO Engineering & Construction., Ltd. November 4, 2015. Retrieved October 22, 2016.
  10. ↑ "SoftBank Group Corp. to Establish SoftBank Vision Fund". SoftBank Group. October 14, 2016. Retrieved October 22, 2016.
  11. ↑ Dobson, Paul Warner (October 2, 2016). "Saudi Arabia's Vision 2030". Headline Hamster. Retrieved October 22, 2016.
  12. ↑ Manchester, Julia (May 20, 2017). "Blackstone, Saudis set to invest $40 billion in primarily U.S. infrastructure". The Hill. Retrieved May 20, 2017.
  13. ↑ "Saudi-US arms deal includes plans for 150 Lockheed Martin Black Hawk helicopters". Arab News. Riyadh, Saudi Arabia. May 20, 2017. Retrieved May 20, 2017.
  14. ↑ His Royal Highness the Crown Prince Announces the Launch of ‘The Red Sea’ project as an international tourist destination as part of the Kingdom’s 2030 Vision, Pif.gov.sa, 31 July 2017
  15. ↑ Rob Hodgetts, Saudi Arabia launches luxury Red Sea beach resorts plan, Cnn.com, 3 August 2017
  16. ↑ @elonmusk (August 7, 2018). "Am considering taking Tesla private at $420. Funding secured" (Tweet). Retrieved August 14, 2018 – via Twitter.
  17. ↑ "Taking Tesla Private". Tesla, Inc. August 7, 2018. Retrieved August 14, 2018.
  18. ↑ "Update on Taking Tesla Private". Tesla, Inc. August 13, 2018. Retrieved August 14, 2018.
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