Nahed Taher, the first female Saudi senior economist at National Commercial Bank and the founder of Gulf One Investment Bank, has set up a joint investment vehicle with the investment arm of one the largest pension funds in the United States that will deploy as much as US$100 billion in capital towards financing projects, leveraging the kingdom’s privatisation agenda.
"It's been hard to finance projects in the past because it has been short term debt and very expensive," Ms Taher, who now heads Seeds Consulting, told The National. "So the solution is to increase the long-term debt for profitable projects with a return on equity and investment that is much above the interest rate, and create serious amount of jobs to compensate for the loss of employment while restructuring, and new jobs for newcomers."
Ms Taher teamed up with the fund about four months ago with the goal of funnelling investments in infrastructure and public private partnership (PPPs) projects. The fund, which she requested not be named, has an investment portfolio that includes convention centres, tourism related projects, sporting venues and stadiums, hospitals and healthcare facilities, as well as airports and public transportation, public works and utilities in addition to universities and colleges.
Ms Taher is presently working with Saudi ministries with a view to investing in build-operate-transfer projects, PPPs, semi- privatisation projects and industries in the kingdom and across the Islamic world.
Her initiative comes at an important juncture as Saudi Arabia vies to diversify its economy for a post-oil 21st century.
Under king Salman and crown prince Mohammed bin Salman, the country’s realignment under Vision 2030 involves fiscal sustainability through energy reform, the reduction of subsidies and reducing the country's inflated public servant wage bill. The overhaul of the economy also includes widening the country’s manufacturing base, creating jobs, privatising state-controlled assets and boosting foreign direct investment.
The listing of entities in the transport sector and a 5 per cent planned sale of Aramco, the world’s largest energy company, in a public offering that is expected to reap US$100 billion are but a few examples of the kingdom’s changing strategic imperatives.
The joint venture between the fund and Ms Taher’s Seeds Consulting, which is set to start providing financing by year-end, will offer leverage financing to large-scale projects across various industries related to water, health care, power, renewable energy, oil and gas, petrochemicals and education. The financing comes with long-term maturity of up to 40 years with interest rate payments that are lower than commercial banks in the region, she said.
"The government ministries are working hard, I have no doubt, busy with restructuring, fighting corruption and so forth, but this takes years to happen,” Ms Taher said. “I personally think that what should be happening in parallel is launching mega projects to get income and have the PIF [Public Investment Fund] or government funds to be partners with the private sector and bring international intelligent money to the country to launch these projects."
To date, four contracts have been awarded on a PPP basis in the transportation sector, including for the new Taif airport. There are about $40bn worth of PPP projects in the pipeline related to power, desalination and other sectors, according to National Commercial Bank estimates.
Beyond Saudi Arabia, the Arab world’s largest economy, the venture will also look to work in the UAE, Egypt, Lebanon, and Jordan, Ms Taher said.
She wants to leverage government privatisation projects and is looking at smaller single investments of $100 million though preference would be for the larger ticket sized projects of $1bn.
“The paradigm shift happening in our economy is going to move the way of financing and requires long term financing in order to be bankable,” she said.