The huge ambitions of PIF come at vast expense

Saudi Press Agency via Reuters

• Fund to raise spending to $70bn
• Employee costs almost $16bn
• Questions raised over asset values

The scale of the holdings is vast and the ambition is huge. Saudi Arabia’s Public Investment Fund was the world’s highest-spending state-owned investor in the first half of 2024, according to Global SWF, a consultancy.  

It is due to raise its annual spending to $70 billion in 2025, a year earlier than previously announced, according to an International Monetary Fund official. It also holds stakes in various domestic companies including Saudi Aramco, Saudi Telecom Co and Saudi National Bank.

Yet the path has not been without missteps.

PIF’s financial statements, published last month, having been audited by KPMG, an international accountancy firm, show employee costs – salaries and benefits – rose 40 percent in 2023 to SAR59.9 billion ($15.9 billion). 

Tim Callen, a former International Monetary Fund official and visiting fellow at the Arab Gulf States Institute in Washington, said the costs could refer to employees across PIF’s 168 subsidiaries. It was not clear if this would be separate from the 2,553 employees PIF says it has in its four global offices. PIF declined to clarify. 

“PIF incubates some of its new companies internally, and perhaps there are some subsidiaries that are core in some way such that their employee costs are included whereas others are not,” said an analyst at a regional bank. 

Callen also pointed to a gap between PIF’s book assets and assets under ownership of $212 billion, which could imply huge spending on fixed assets. 

The gap is “much bigger than a reasonable value for the HQ building,” Callen said. PIF also has offices in London, New York and Singapore. 

Nor did the financial report detail PIF’s troubled investment in SoftBank’s Vision Fund reported by Bloomberg, which has made sizeable losses after PIF ploughed in $45 billion in 2017 as lead investor.

PIF justified the exclusion in the report’s notes, saying it does not control SoftBank Vision Fund. 

• PIF spending to hit $70bn a year early, says IMF
• PIF to initiate $5bn investment in Egypt
• Saudi Vision 2030 projects ‘to pick up’ on growth optimism

The Vision Fund recovered in the fiscal year to March 2024, with a profit of 128.2 billion yen ($890 million) after a 4.3 trillion yen ($30 billion) loss the year before as some of its investments rose in value. 

The travails did not end there. This month the Wall Street Journal described a toxic work culture and bloated salaries for senior management at PIF’s headline Neom giga-project, which is slated to complete a 5km-long horizontal city called The Line by 2030. 

The Line was originally billed as 170km long but has been beset by construction delays.  

A Gulf-based diplomat said these setbacks are immaterial to the greater goal of rebranding Saudi Arabia as open for business after decades as a closed society. 

“The Vision Fund is a failure but it doesn’t matter. It’s not about a return on investments, it’s about a young ambitious guy being able to walk the corridors of power in Silicon Valley,” he said. 

“The Line was about reshaping the view of Saudi Arabia in the world, so building it doesn’t actually matter. It serves another purpose.”