Kingdom plans $2 trillion megafund for post-oil era181 views
Saudi Arabia is planning to create a $2 trillion budget for a post-oil economy, Deputy Crown Prince Muhammad Bin Salman, second deputy premier and minister of defense, was quoted as saying on Friday by Bloomberg News.
In an interview with Bloomberg, which reportedly lasted five hours, Prince Muhammad said the fund, which would be the biggest in the world — easily eclipsing the funds of both Norway and Qatar — is designed to help the country’s economy rely less on oil.
The deputy crown prince aid out his vision for the Public Investment Fund, which will eventually control more than $2 trillion and help wean the Kingdom off oil.
As part of that strategy, Prince Muhammad said Saudi will sell shares in Aramco’s parent company and transform the oil giant into an industrial conglomerate. The initial public offering could happen as soon as next year, with the country currently planning to sell less than 5 percent. “IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil,” Prince Muhammad said in the interview in Riyadh that ended at 4 a.m. on Thursday.
“What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”
Almost eight decades since the first Saudi oil was discovered, King Salman’s 30-year-old son is aiming to transform the world’s biggest crude exporter into an economy fit for the next era. The sale of Aramco is planned for 2018 or even a year earlier, according to Prince Muhammad. The fund will then play a major role in the economy, investing at home and abroad.
PIF ultimately plans to increase the proportion of foreign investments to 50 percent of the fund by 2020 from 5 percent now, said Yasir Al-Rumayyan, secretary general of the fund’s board.
Prince Muhammad said the wealth fund already holds stakes in companies including Saudi Basic Industries Corp., the world’s second-biggest chemicals manufacturer, and National Commercial Bank, the Kingdom’s largest lender.
The fund is looking at “two opportunities outside Saudi Arabia” in the financial industry, he said. “I believe that we will conclude at least one of them.”
It has already started to become more active abroad. In July, PIF acquired a 38 percent stake in South Korea’s Posco Engineering & Construction Co. for $1.1 billion and the same month agreed to a $10 billion partnership to invest in Russia with the Russian Direct Investment Fund.
The fund has been hiring specialists for markets, private equity and risk management, said Al-Rumayyan, PIF’s secretary general and a former chief of Credit Agricole SA-backed Saudi Fransi Capital.
News Source SaudiGazette