Saudi Arabia's PIF announces initiatives to boost local private-sector growth

Sovereign wealth fund aims to increase the share of local content spend in its domestic portfolio to 60% by the end of 2025

The Riyadh skyline. The PIF said its initiatives will support the private sector in increasing its contribution to GDP to up to 65 per cent by 2030. Reuters

Saudi Arabia's Public Investment Fund has announced three initiatives to boost the growth of the kingdom's private sector as part of its efforts to diversify the economy away from oil and support its move towards innovation and technology.

They include measures to increase the share of local content spending in PIF’s domestic portfolio to 60 per cent by the end of 2025 under its Musahama programme, the PIF said at its inaugural Private Sector Forum, on Tuesday.

As part of its suppliers development programme, the PIF will also seek to upskill local suppliers and vendors to meet the growing requirements of the fund's portfolio companies.

Meanwhile, the fund's private sector hub will provide companies with "greater visibility on supplier and investment opportunities" offered by the PIF and its portfolio entities.

The hub, which is now live and contains more than 100 opportunities, will be continuously enhanced and updated, the PIF said.

“The empowerment of the private sector is one of PIF’s foremost priorities considering the private sector’s crucial role in the growth and development of the Saudi economy," said Jerry Todd, head of the national development division at the PIF.

“The launch of our Musahama local content programme and supplier development programme is a major step forward in our efforts to drive the growth of local content in the kingdom.

"Both of these programmes will ensure that PIF and its portfolio companies embed local content considerations in our activities and operations which will contribute directly towards developing local industries and building long-term supplier and vendor partnerships."

This will strengthen local capabilities, enhance the competitiveness of local players, improve supply chain resilience and stimulate innovation in the Saudi economy, Mr Todd said.

One of the world’s largest sovereign wealth funds with about $620 billion in assets under management, the PIF is at the centre of the Saudi Vision 2030 initiative to diversify the country’s economy away from hydrocarbons.

Under a five-year strategy announced in 2021, the PIF aims to more than double the value of its assets under management to $1.07 trillion and commit $40 billion annually to develop Saudi Arabia's economy until 2025.

It has made a flurry of announcements in recent months to support the private sector in the country.

Last month, the fund invested $1.3 billion in four domestic contractors to improve local supply chains for projects in the country, drive the use of advanced technology and help increase private sector local content.

The PIF subscribed to new shares — as part of the companies' capital increases — amounting to “significant minority stakes” in Nesma & Partners Contracting Company, ElSeif Engineering Contracting Company, AlBawani Holding Company and Almabani General Contractors Company.

In February, the fund also signed a joint venture agreement with US sustainable agriculture company AeroFarms to build indoor vertical farms in the kingdom and the wider Middle East and North Africa region.

The first farm in Saudi Arabia is expected to be the largest one in the Mena region, with an annual production of up to 1.1 million kilograms of crops, using proprietary agricultural technology, the PIF and New Jersey-based AeroFarms said.

The PIF's two-day Private Sector Forum, which began on Tuesday, gathered the fund's executives, ministers, senior government officials and representatives from 50 PIF portfolio companies, as well as more than 4,000 private sector participants from across sectors.

At the event, the PIF signed a preliminary agreement with the Local Content and Government Procurement Authority to collaborate on the development of relevant programmes and strategies that aim to increase local content for PIF and its portfolio companies.

Another pact was signed with the Building Technology Stimulus initiative under the Ministry of Municipal and Rural Affairs and Housing, which aims to explore opportunities to develop modern construction methods and relevant technologies to support the housing and construction sectors in Saudi Arabia.

A third preliminary agreement was signed with the Saudi Contractors Authority to collaborate on initiatives to support the local contracting sector, while another was signed with the Federation of Saudi Chambers to enhance the co-operation between the private sector and PIF's projects and investments.

The forum and the new initiatives are in line with the PIF's plans to "support the private sector in increasing its contribution to gross domestic product [to] up to 65 per cent by 2030, create job opportunities, localise technology and drive the transfer of technology and knowledge to Saudi Arabia", the PIF said.