Saudi crown prince Mohammed Bin Salman greets French diplomatic advisor Emmanuel Bonne & Nbsp
Author: Martyn Cornell, writer
When the public investment fund (PIF) sneezes, a very large number of companies catch cold. And the petroleum prices dive gave the massive sovereign fund of Saudi Arabia a final case of sniffs, with serious implications for a large band of concerns.
The PIF was worth $ 941 billion in 2024, according to its latest annual report, making it the sixth largest sovereign fund on the planet. Its assets have increased by almost five years in the eight years since 2016, an annual growth rate made up of 22%. Its declared objective is to see its assets under management spend $ 1.1 at the end of 2025 and reaching 2T of $ 2 by 2030 (See Fig 1). PIF has four world offices and more than 2,500 employees.
Currently, however, the PIF slows down and reduces, with serious implications for more than 13 million foreign workers in Saudi Arabia and the hundreds of companies that count on the Saudi economy to continue.
The fund, which was founded in 1971, has approximately 170 subsidiaries and was credited with participations of hundreds of millions of dollars both in household name companies, including the owner of Facebook Meta ($ 522 million), Disney ($ 500 million), BP (830 million dollars), Boeing ($ 700 million), Uber (2.7 billions of dollars) and Citigroup ($ 520 million).
The largest tranche of its investments lies in the energy sector, at 23%, followed by ownership, 17%, nine percent and financial and communications services are about seven%each.
He has invested more than $ 100 billion in the United States only between 2017 and 2023, generating, according to his own estimate, 103,000 American jobs and $ 33 billion in GDP. By 2030, IT, IT and its portfolio companies will have invested $ 230 billion in the United States and supported the creation of more than 440,000 American jobs.
Budget control
In the first half of 2024, the PIF was the most spilled state investor in the world, according to the overall consulting firm SWF, and it was to increase its annual expenses to $ 70 billion in 2025, a year earlier than planned previously, according to the International Monetary Fund.
Another way to collect funds in the face of the drop in oil income is to type the bond markets
But this spring, the PIF, which is chaired by Crown Prince Mohammed Bin Salman, the de facto sovereign of Saudi Arabia since 2015, commissioned discounts of spending at least 20% in the regions of its portfolio where it can exercise control over budgets, which covers investments in a hundred different companies, ranging from the Saudi football club. The result was the layoffs, the hiring of gels and the project delays.
Certain budgets have been reduced to 60%, according to the Information Service on Business Based on the Arabian Gulf Business Insight (AGBI). The five so-called “Giga projects”, massive real estate regimes such as Neom, a new planned city of $ 500 billion meant, possibly, cover more than 10,000 square miles in northeast Saudi Arabia and the Global Red Sea, a huge effort intended to considerably stimulate tourism in the country thanks to plans such as a new square destination of 1,500 tourists, including 25 new hotels, Particularly been carried out in reducing the reduction of the reduction in the reduction of the new key, including 25 new hotels, was in particular in reducing the reduction of the reduction in the reduction of the new key, including 25 new hants, was in particular in the reduction of the reduction of the new tourist destination, including 25 new hotels, was in particular in the reduction of the reduction in the reduction of the reduction of the new key.
A $ 5 billion contract at Neom was canceled the day before the signature ceremony. A central part of the Neom project is a linear city called “The Line”, which is 170 km long. After a multitude of delays, and in the midst of complaints reported in the Wall Street Journal of Huge Salaries for imported management and a toxic work culture, the initial phase of the project was reduced to only five kilometers to finish by 2030.
There have also been cash reports leading to payment delays for entrepreneurs, especially in the construction sector, a leading international entrepreneur saying that it should be due to $ 800 million by Saudi customers. The company blamed prolonged payment delays as an important factor in its decision to reduce operations in the kingdom. A large European construction company would have completely withdrew from the Saudi market, accusing payment risks and financial uncertainties.
Decimated oil price
The big problem, on the financial side, is the plunging price of oil. The International Monetary Fund said that oil must be a barrel to balance the budget for Saudi Arabia. But petroleum has not exceeded $ 90 per barrel since August 2022. At Easter this year, the price of crude Brent was at the bottom of $ 67, and the ban on American crude, West Texas Intermediate, had fallen for less than $ 64, or about 30% of this Saudi price. Shortly after, in early May, Brent fell to $ 61.63, or 30% down over its higher 12 months and WTI at $ 58.56, also at 30%. The result is that the giant oil company of the country, Saudi Aramco, has already reduced its estimate for its total payment of dividends for 2025 by almost a third, to 84.5 billion dollars, and may not have reached this. The PIF holds 16% of Aramco and will thus see its own income from Aramco dividends drop by at least $ 6 billion.
The PIF wants, for example, spending money in the stations that is built along the Red Sea coast to finally bring 19 million tourists per year as part of the 2030 ” project of Saudi Arabia to reduce its dependence on oil revenues. The main objective is to increase the private sector’s contribution to the country’s GDP from 40% to 65% at the start of the next decade. But irony is that Saudi Arabia needs oil income to finance developments intended to eliminate the need for oil income.
Pat Thaker, editorial director of the Middle East and Africa to the unit of intelligence of the economy, told FDI Intelligence that it expected that “several large-scale initiatives could be reassessed, postponed or even suppressed due to financial limitations”.
World Cup commitment
An answer is to try to get more foreign investment in PIF projects. Money is necessary for several major prestigious projects during the next decade to which Saudi Arabia has signed up, including international events such as Asian winter games in 2029, the 2030 Expo and the World Cup in 2034. Say.
However, in March, the PIF signed a memorandum of understanding with Goldman Sachs to create funds to invest in Saudi Arabia and the wider Gulf region. The same month, he concluded an agreement worth $ 3 billion with the Italian export credit agency, Sace, saying that the agreement had “supported cooperation between Italian companies in the private sector and the PIF and its portfolio companies”. He also signed Mous with Japanese financial institutions, including Mizuho Bank, Mufg Bank and Sumitomo Mitsui Financial Group of a value of up to $ 51 billion to help support funding via its local capital markets.
Another way to collect funds in the face of the drop in oil income is to type the bond markets. In January of this year, the PIF discharged $ 4 billion in bonds in a sale four times a stay, after having attracted investors with credit differences 95 and 110 base points above the US Treasury bonds. At the end of April, the fund changed $ 1.25 billion in Sukuk to seven years old, or bonds in accordance with Sharia law, with the offer more than six times over-window. The eagerness with which investors aroused bond emissions relieved at least the fears that the news of the forced budgetary reductions could strike the confidence of investors in Giga projects and the broader Saudi economy.
Creation of phenomenal jobs
The importance of PIF as a job generator cannot be exaggerated. By 2024, it is estimated that it has contributed to the creation of more than a million jobs in three years and supported the establishment over the same period of nearly 50 companies in 13 strategic sectors. However, the effect of the drop in petroleum prices, a medium-line JLL council report predicts, will be that employment growth in Saudi Arabia will plunge after reaching a maximum of almost 10% in 2022, slowing down to 3% by 2026 while the kingdom considers expenses.
This will affect a multitude of countries in the Middle East and South Asia who have sent surplus employees to Saudi Arabia and taking advantage of the wages they refer to their homes. Nearly two million expatriates, qualified and unskilled, have joined Saudi workforce in Saudi Arabia in the past two years. The country’s construction industry has more than doubled in size. But the slowdown means that workers are now looking for jobs elsewhere in the region, even if it means taking a salary reduction to move or move to other companies supported by PIF, according to Shyam Visavadia, founder of Workpanda Recruitment, a specialist in construction hiring based in Dubai.
In addition to the diving of petroleum income, Visavadia told Agbi: “Giga’s projects are too quickly evolving without long -term planning or clear strategy.” From now on, the future phases are “either postponed, remastered or not receiving budgetary approvals,” he said.
Another problem is that the scale and complexity of the various Giga projects mean that costs can easily exceed initial estimates. It seems that the PIF can now seek to prioritize projects with more immediate economic yields and / or those that are more in development.