Saudi Arabia is looking to boost foreign direct investment into the kingdom as a mining law approved by the cabinet last year came into effect from January 1.
The mining investment law will “enhance governance of the sector, improve transparency and increase investor confidence,” Bandar Al Khorayef, the kingdom’s minister of industry and mineral resources said in a statement carried by the Saudi Press Agency.
The law not only “clarifies the roles and responsibilities of new investors in Saudi mining projects, it also greatly improves the ease of doing business by digitising the process for issuing new mining licences, streamlining licence approvals, and transparently publishing records related to all mining licensing activity,” Mr Alkhorayef, said.
Saudi Arabia’s mineral resources are estimated to be worth about 5 trillion riyals ($1.3tn), with 20 million ounces of gold reserves below ground, according to Invest Saudi. The kingdom currently accounts for 37.9 per cent of the Middle East and Africa’s 60 billion riyals metals and mining industry market.
The new law will “ensure that mining activities create new job opportunities and support the growth of local businesses”, the minister added.
The government is also undertaking multiple projects to support the mining and metals processing industry, including a 2,750 kilometre north-south railway connecting Al-Jalamid phosphate mine with processing facilities in Ras Al Khair Industrial City. The kingdom is also investing more than 90bn riyals in new mining ventures and plants to process industrial ores.
“Simplifying and streamlining licensing processes will facilitate an easier participation in the mining space in Saudi Arabia by new investors,” Bart Cornelissen, energy, resources and industrials leader at Deloitte told The National. “On top of that, investment governance related regulation will de-risk investments for foreign as well as local investors while export rights for licencees will ensure no additional hurdles for value creation are put in place."
Saudi Arabia has a diverse range of over 48 minerals and metal resources, with at least 15 minerals that are commercially viable. The kingdom’s Maaden company, listed on the Tadawul stock exchange, is playing an important role in developing the mining sector with a focus on production and exploration of gold, zinc, phosphate, aluminium and industrial minerals.
A study by the US-Saudi Business Council in 2019 said the kingdom needs about $13bn in private sector investment to fully exploit the potential of its $1.3tn worth of mineral endowments.
Saudi Arabia’s economy is expected to grow 3.1 to 3.2 per cent in 2021 as its sovereign wealth fund, the Public Investment Fund, injects billions of dollars into the Arab world's largest economy to spur growth, according to its finance minister Mohammed Al Jadaan.
Saudi Arabia’s PIF will inject $40bn on an annual basis in 2021 and 2022 to promote growth in its economy.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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1 Man City 26 20 3 3 63 17 63
2 Liverpool 25 17 6 2 64 20 57
3 Chelsea 25 14 8 3 49 18 50
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5 West Ham 26 12 6 8 45 34 42
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8 Tottenham 23 12 4 8 31 31 39
