Saudi investment fund to be worth more than $2 trillion after Aramco IPO

Published April 3rd, 2016 - 03:48 GMT
Deputy Crown Prince Mohammed bin Salman.  (File photo)
Deputy Crown Prince Mohammed bin Salman. (File photo)

Regarding the new phase that Saudi Arabia is opening-up towards, Deputy Crown Prince Mohammed bin Salman, stated his vision for the Public Investment Fund in an interview that lasted for more than 5 hours. It was stated that the Public Fund will control more than $2 trillion where the Prince will be selling shares in Aramco’s parent company.

The prince said that IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue replacing oil. Saying; “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.”

Buying Buffett and Gates

According to the prince the fund will be playing a chief role in regard of the Saudi economy where investments will take place at home and abroad, after the sale of Aramco, which is planned between 2017 and 2018. Worth noting that the fund might be big enough to buy the world’s four largest publicly traded companies; Microsoft Corp, Google, Apple Inc. and Berkshire Hathaway Inc..
The Prince stated that they are working on increasing the effectiveness of spending, where, the government previously spent up to 40 percent more than billed in its budget.

Is it too late?

The query focuses on whether the reaction has come too late to the more than halving in the price of a barrel of crude, taking into consideration the Saudi influence over the oil market. Stating that the freeze output will only take place if Iran and other major producers do the same, said the prince.

Taking Control

Prince Mohammed has shown to have power more than anyone else in his position, with his vibrant attempts to make a change in the economy against the backdrop of increasing domestic security threats with the Sunni-ruled kingdom fighting a war in Yemen against Shiite rebels it says are backed by Iran.

Prince Mohammed leads the military effort, as the Defense Minister. Also, he oversees ministries including finance, oil and the economy through the Council for Economic and Development Affairs, the council which also controls the Public Investment Fund.

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,said the Prince.

The fund is looking at “two opportunities outside Saudi Arabia” in the financial industry, the prince said, declining to name the possible acquisition targets. “I believe that we will conclude at least one of them.”

Over a multiple-course dinner with the prince and several top Saudi officials, he described the overseas investment plan as “very aggressive,” though said PIF would initially be skewed toward domestic assets by the addition of Aramco.

“Undoubtedly, it will be the largest fund on Earth,” the prince said. “This will happen as soon as Aramco goes public”.

 

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