Saudi Arabian wealth fund's new investment plan will help diversify local economy, NCB Capital says

The fund's five-year plan will create opportunities for listed companies within transport and logistics sectors

Saudi Arabia’s Public Investment Fund (PIF)'s new strategy plans to create 1.8m jobs by 2025 by focusing on innovation along with the development and diversification of the local economy. Bloomberg

Plans by Saudi Arabia's Public Investment Fund to invest in new sectors from aerospace to food will diversify the economy, unlock new sectors, build long-term partnerships and boost private sector investments, NCB Capital said in a report.

PIF's five-year strategy to double its assets to $1.07 trillion will be driven by strong performance of the current assets, higher returns on new investments and the restructuring of some investments through privatisation or listing, the Saudi Arabian bank said in a  report this week.

The fund is aiming to create 1.8 million direct and indirect jobs over the next five years.

"We believe the fund’s new investments will be a major tool to reduce unemployment rates among Saudis and increase Saudis’ labour force participation in the economy," the report said.

The sovereign wealth fund has been a cornerstone in Crown Prince Mohammed bin Salman's Vision 2030 plan to wean the economy off its dependence on oil. On Sunday, the Crown Prince laid out the fund's strategy through to 2025.

PIF will invest a minimum of $40 billion a year into the domestic economy until 2025, helping to contribute $320bn to the kingdom's non-oil economy.

Under the strategy, PIF will focus on 13 new sectors including healthcare, renewables, telecoms, media and technology, food and agriculture, automotive, transportation and logistics, real estate, aerospace and defence, construction and building components and services.

The industrial sector will be a key beneficiary from the strategic investment in aerospace and defence, NCB Capital said. For automotive, the fund is in talks with Lucid Motors to build a facility in Saudi Arabia that will support growth in several sectors such as petrochemicals and mining, it said. Mining company Ma’aden will play a key role in expanding the mining and fertilisers sectors locally, regionally and globally, it added.

PIF's plans to increase its investments in the transport and logistics sectors will create opportunities for listed companies within these sectors, the report added.

Online shopping platform Noon "will synergise the ecosystems of e-commerce and logistics to become the 'Home screen of the Arab world'" while investment in food and agriculture will “cement Saudi’s position as a hub of Halal industry and distribution centre to the world," it said.

PIF is also negotiating with top global healthcare players to invest in Saudi Arabia, which is expected to create new opportunities in the sector, the report noted.

The travel and tourism sectors will be key beneficiaries from the increasing investments in entertainment and leisure.

"The ongoing progress in giga projects will drive demand in the construction sector in the medium term and further enhance the long-term outlook of the tourism sector," it said.

The fund has established entities including the futuristic city known as Neom, the Red Sea Development Company, Qiddiya and Saudi Entertainment Venture, among others, to develop the kingdom's nascent tourism and entertainment sector.