In an interview with Bloomberg, the Deputy Crown Prince Mohammed bin Salman of Saudi Arabia outlined his vision for the Public Investment Fund (PIF), which will eventually control more than $2 trillion and help the kingdom steer away from its dependence on oil.
The strategy will involve selling shares in Aramco’s parent company, which may happen as soon as next year. The country is currently looking to sell less than 5 percent, which will contribute to the oil giant’s transformation into an industrial conglomerate. “IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil,” according to the prince. “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”
The sale of Aramco could take place as soon as 2017. The fund will play a vital role in the economy and in home and overseas investments. The fund will then be in a position to buy the four largest publicly traded companies in the world; among them Apple Inc., Alphabet Inc. (Google parent company), Microsoft Corp. and Berkshire Hathaway Inc. and still be left with over a billion remaining.
The International Monetary Fund carried out a study in 2014, deducing that there were more examples of the failure of countries attempting to reduce their reliance on energy production than there were successes. At a current price of about $40 a barrel, Gulf Arab monarchies may have missed their best chance at a time when prices exceeded $100.
Prince Mohammed, currently second-in-line to the throne, is attempting to shake up the economy at a time of mounting domestic threats and regional turmoil. As Minister of Defense, the prince also leads the military effort and oversees ministries across oil, finance, and the economy through the Council for Economic and Development Affairs. The council, which was established after his father became king, also controls the Public Investment Fund.
According to the prince, the wealth fund currently holds stakes in Saudi’s largest corporations; among them Saudi Basic Industries Corporation, the world’s second-largest chemicals manufacturer and the kingdom’s largest lender, the National Commercial Bank.
Not naming any possible acquisition targets, he revealed that the fund will conclude one of “two opportunities outside Saudi Arabia” in the financial industry. The fund is becoming more active abroad, with a PIF acquired stake of 38 percent of $1.1 billion in South Korea’s Posco Engineering & Construction Co., as well as an entry into a $10 billion partnership agreement with the Russian Direct Investment Fund.
Alrumayyan, PIF’s secretary-general described the overseas investment plan as very aggressive, however initially the focus would be on domestic assets by the addition of Aramco. “We’re working now on different fronts,” he said. “Now the government is transferring some of its assets, lands, some of the companies to us. We have different projects in tourism and in new industries that are untapped in Saudi.”
Prince Mohammed’s conclusion is, “Undoubtedly, it will be the largest fund on Earth. This will happen as soon as Aramco goes public.”