PIF aims to boost investment capacity, eyes sustainable returns: official

Saad Alkroud, Chief of Staff at the PIF

The Public Investment Fund (PIF) is planning to increase its investment capacity to provide attractive opportunities for the private sector and benefit from its global relationships in bringing technology and knowledge to the local market, Saad Alkroud, acting Chief of Staff at the fund told Argaam in an exclusive.

The fund, through its projects and newly-established affiliates, aims to achieve sustainable returns and promote the sectors, where the private sector could face difficulties if it attempts to enter solely.

The PIF’s investments, activities and projects are determined by its strategy, in light of its other obligations, interim priorities and market changes, Alkroud explained.

Based on its strategy, several companies could be set up directly or indirectly by the fund. Some target sectors require more empowerment through the establishment of a new entity that acts as a driver for promoting the sector.

Here’s the full interview with Saad Alkroud:

What are the most prominent features of the fund’s five-year strategy? How is it different from the previous strategies?

The five-year strategy complements the PIF’s previous efforts. It aims to achieve its objectives. The PIF increased its assets under management (AUMs) from SAR 570 billion in 2015 to nearly SAR 1.5 trillion in 2020. The fund set up 30 new firms in promising and new sectors. It also boosted its foreign investments and partnerships and supported the Kingdom’s economic transformation and income diversification efforts.

The PIF aims to increase AUMs to SAR 4 trillion by the end of 2025 through its local and foreign investments. The fund is planning to invest at least SAR 150 billion annually in 13 strategic sectors, such as entertainment, tourism, sports, transportation and logistics.

The PIF aims to introduce 1.8 million direct and indirect jobs and raise its contribution to the non-oil GDP to cumulative SAR 1.2 trillion by the end of 2025.

The fund’s five-year strategy was based on eight pillars, which focuses on several initiatives to help the PIF achieve its objectives.

The PIF is planning is planning to increase its investment capacity to provide attractive opportunities for the private sector and benefit from its global relationships in bringing technology and knowledge to the local market. It will continue to cooperate with global and local economic enablers, to as to ensure sustainable contribution and provide value-added services to its units and partners.

How can the fund play its role as a contributor to the national development despite the presence of other government programs?

The PIF is an investment arm and its role in the national development is evidenced by its plans, strategies and activities.

To deliver Vision 2030, the fund invests in high-return projects on the medium and long-term to diversify the Kingdom’s income sources and reduce oil dependence.

The fund is studying potential cooperation with all programs under Vision 2030, and determines the aspects it can support in line with its strategy. This includes stimulating a number of the fund’s global partners to cooperate with those programs or studying investment opportunities for its local portfolio.

The fund’s strategy targets various sectors of top national priority, such as foods, agriculture, entertainment, tourism, sports, renewable energy, healthcare, telecommunications, media and technology. The fund took into account the global and local perspectives, in terms of the market analysis, size, expected growth, available opportunities and the evaluation of sectors, in which the Kingdom has a competitive advantage across the region and the entire world.

In light of the Crown Prince’s statement that the PIF will invest SAR 150 billion annually at least in 13 strategic local sectors, how investment decisions are taken at the fund?

The fund’s investments and activities are determined by its strategy and the internal decision-making dynamics, in light of its other obligations, interim priorities and market changes. Based on the Crown Prince’s statement, the PIF will focus on local investments, economic development, and diversification and empowerment of the private sector through providing investment and partnership opportunities in 13 sectors.

To implement these plans, a sound and fast decision-making mechanism should be adopted. To this extent, the PIF comprises five committees with various authorities and adopts an effective, flexible and solid governance model.

In addition to the board of directors’ committees, the PIF has other executive committees, such as the administrative, administrative investment, administrative risks and administrative liquidity committees. All committees along with the board of directors either propose or take the majority of investment or institutional decisions.

Overall, all investment proposals, which are submitted to those committees, are linked to the fund’s objectives, sectors, and strategy.

For investment projects, the term “fund’s projects” is widely used. What about the mechanism of implementing investments under these projects?

The fund’s projects are generally investments. After selecting projects, special administrative and financial entities are set up for each type of projects, such as sector development or real estate development. For example, Saudi Arabian Military Industries (SAMI) was launched as a project.

The PIF has other giga projects, such as NEOM, The Red Sea and Qiddiya, which are integrated economic systems that aim to develop several sectors. These projects have different sizes and outputs, when compared to other projects.

The fund, through its projects and newly-established affiliates, aims to achieve sustainable returns and promote the sectors, where the private sector could face difficulties if it attempts to enter solely. This in turn leads the PIF to take various initiatives and encourage investors.

The PIF adopts the “active investor” strategy, effective governance practices and strategic partnerships. How can this enhance the value-addition of its portfolio?

Based on its vision, the fund aims to be an engine for investment through six pools, of which one is related to effective participation in supervising the activities of its affiliates and adopting the active investor concept. A governance framework was set to regulate the fund’s relationship with its units, in line with the best international and local practices.

The PIF exercises its duties through the optimum channels for each company. It developed its voting mechanism on agenda items, which focuses on analyzing the recommendations of each company’s board of directors, and the expected outcomes on the company and the fund.

The fund has over 400 representatives in these boards of directors. These members are able to create value-addition for their companies.

Moreover, a specialized governance center was established to enhance the skills of board members, or the fund’s representatives, to improve the corporate governance practices.

The fund also encourages the adoption of positive governance practices, keeping an eye on the global developments in this field.