Saudi Arabia’s prominent state-owned Public Investment Fund (PIF) is set to emerge as an anchor investor in an $800 million Gulf Infrastructure fund, established by Bahrain-based Investcorp and Aberdeen Standard Investments. The fund has also obtained support from the Asian Infrastructure Investment Bank (AIIB) to dedicate $90 million.
It is believed that the fund will be joined by other global institutional investors, the likes of pension funds, insurance companies, endowments, family offices, and private clients.
The fund is expected to focus on social infrastructure projects across the Gulf region in line with the new generation of Gulf leaders that appear to be prioritizing social development projects within their respective countries.
The PIF, the sovereign wealth fund of Saudi Arabia, has been a key mechanism in facilitating the economic transformation of Saudi Arabia as part of its Vision 2030 objectives. This makes the fund institutionalised by the most dominant force for economic development in Saudi Arabia.
The PIF has become increasingly important as a source of capital for fund managers in the Middle East as it is working on a plan to support Saudi’s economic diversification, moving it away from its heavy dependence on oil revenues. Currently, the oil sector accounts for roughly 87% of Saudi budget revenues, 90% of export and 42% of GDP.
Investcorp, the Middle East’s largest alternative investment manager, is finishing up the fund’s first shutdown at around $250 million. Ever since its establishment forty years ago, Investcorp has acted as a bridge for wealthy Gulf families to invest newly discovered oil riches in Western markets.
The Bahrain-based entity has stated that it seeks to increase its assets under management from $35 billion to $50 billion in the next five years.
Aberdeen Standard Investments on the other hand has an established track-record dealing with sovereign wealth funds, managing a total of $635 billion of assets on behalf of governments, pension funds, insurers, companies, charities, foundations, and individuals across 80 countries.
The fund has captivated interest from Gulf financial institutions and family offices, both of which are eager to deploy excess funds in the wake of the COVID-19 pandemic. The pandemic has also put pressure on Gulf governments to further improve their health infrastructure despite their relative success in containing and managing it.
In response to the pandemic, the Saudis have established a stringent governance system comprising of authoritative committees to continuously track contraction rates, screen its population, and implement any necessary measures to contain the spread of the virus.
Yet, the Saudi government is determined not to bring this success to an end and is now committed to increasing healthcare funding with an emphasis on allowing the private sector to boost through investment and provide quality healthcare to consumers. The Gulf Infrastructure Fund is the bridge to such a goal.
Furthermore, progress in the development of digital services across the region has become more important as companies have had to adapt to the post-Covid world of restrictions.
Digitalisation has become recognized as one of the key aspects of economic sustainability as the pandemic has made digital technology evermore relevant and critical, with activities ranging from schooling, working to shopping shifting to online platforms.
The Saudi government understood the importance of digitalisation in regards to economic development and sustainability and have integrated digital technology into Vision 2030. Investments in digital technology have been emphasized within the Gulf Infrastructure Fund.
The development of education and social housing have also been prioritised, as both residential housing projects and the educational system are given such importance within the 2030 Vision. Investment in both sectors is of considerable importance to the Saudi government.
Indeed, it is clear that the Saudi government is taking important steps to encourage projects that both ensure social and environmental development. The PIF’s move to invest in the Gulf Infrastructure Fund, aims to improve infrastructure, healthcare, and education, as well as prioritising digitalisation.
The nation has long been known as a strong economic actor specialised in oil production, perhaps it is now time to place our bets on a new potential portrait of Saudi Arabia: an agent for socio-economic development and positive change.