Saudi Arabia's Public Investment Fund (PIF) boosts economic diversification
Saudi Arabia's Public Investment Fund (PIF) has managed to double the value of its investment portfolio aimed at developing and enhancing emerging sectors, reaching 943 billion Saudi Riyals (equivalent to EUR 231 billion) by the end of 2023.
This significant increase reflects a key strategy to strengthen its role in the Kingdom's economic transformation and diversification of its revenue sources, thereby reducing dependence on oil.
According to the PIF's 2023 annual report, emerging sectors accounted for more than a third of assets under management, amounting to 2.87 trillion Saudi Riyals (€704 billion). This is significantly higher than the 21% recorded the previous year, indicating a redirection of the fund's resources towards long-term strategic investments.
As Asharq Business points out, this approach underlines the consolidation of priorities in the development of new sectors considered essential for economic growth.
The sovereign wealth fund is targeting specific sectors, such as aviation, defence, automotive, entertainment, tourism and sports, to drive growth in the coming years. An example of this ambition is AviLease, an aircraft leasing company, which has made several acquisitions, including the purchase of 13 aircraft from Avolon for EUR 666 million. In the automotive sector, the fund has signed an agreement with Hyundai Motors to establish a car factory with a production capacity of up to 50,000 vehicles per year. In addition, Savvy Games, a subsidiary of PIF, acquired the video game company Scopely for EUR 4.5 billion.
Targets until 2025
The PIF has set its main goals for the end of 2025, centred on two strategic axes. The first is to increase assets under management to approximately 4 trillion riyals by that date, with new sectors accounting for 21% of total assets under management. The second is to raise new local investments to at least 150 billion riyals per year.
En cuanto a la distribución geográfica, las inversiones globales del fondo alcanzaron un valor aproximado de 538.000 millones de riyales, lo que equivale al 20% del total de activos gestionados a finales de 2023. Las inversiones locales, por su parte, sumaron alrededor de 2,194 billones de riyales, mientras que las inversiones en la cartera del tesoro alcanzaron los 67.000 millones.
Expected impact
The fund has estimated the impact its investment guidelines will have on the Kingdom's economy by the end of 2025. Its contribution and that of its portfolio companies to non-oil GDP is expected to amount to 1.2 trillion riyals cumulatively. In addition, the PIF aims to increase the contribution to local content to 60%. Another key aspect is the creation of approximately 1.8 million direct and indirect jobs.
Investment models
The Saudi fund has presented several business models in which it hopes to add value to the country's economy. ‘Aradara is one of these companies, specialising in tourism and urban development. Its activity is focused on transforming the ‘Ardara’ project, located in the Asir region in the southwest of the Kingdom, into a tourist centre, with the aim of injecting some 18 billion euros into the non-oil GDP by 2030. Livera, meanwhile, represents the PIF's aspirations in the pharmaceutical industry, including the manufacture of insulin, vaccines and other products. Finally, ‘Riyadh Aviation’ is one of the initiatives aimed at contributing to an increase of around €18.5 billion in non-oil GDP growth and the creation of more than 200,000 direct and indirect jobs.
This set of initiatives underlines the Public Investment Fund's commitment to economic diversification and the creation of employment opportunities in key sectors, paving the way for a future less dependent on oil revenues. Moreover, these actions are aligned with the goals of Saudi Arabia's Vision 2030, an ambitious national strategy that seeks to transform the Kingdom's economy, reduce its dependence on oil and boost the development of strategic sectors that will ensure sustainable growth and a higher quality of life for its citizens.