Banking & Finance

PIF wary of crowding out private sector

June 15, 2023

Saudi PIF private sector — Jerry Todd (left), managing director of the National Development Division of PIF, says Saudi’s sovereign wealth fund aims to support the private sector in increasing its contribution to GDP

Safeguard measures built into investment process
Saudi sovereign wealth fund trains local businesses
Private sector integral to Vision 2030

Saudi Arabia’s Public Investment Fund has put measures in place to ensure it does not starve the private sector of investment opportunities.

“It’s of concern to everyone and it’s something we talk about a lot,” Jerry Todd, head of the National Development Division at the $700 billion sovereign wealth fund, said, adding that the PIF always analyses the wider impact of any proposals.

“We look at how much job creation the investment represents in GDP growth, but also what role it’s playing in the ecosystem,” Todd said.

“How is it doing something additional? How is it doing something that is going to have an impact beyond what the private sector would do?”.

Yet there are times, Todd says, when PIF’s scale and financial muscle allow it to take an opportunity that private capital would be unable to manage on its own, such as when there is a concern about regulation or the mere size of an investment.

Growing the role of the private sector is integral to the success of Vision 2030 which aims to raise its GDP contribution to 65 percent from 40.

New orders for non-oil private sector companies in Saudi Arabia rose at their fastest rate for over eight years in April while job creation also continued, as signalled by employment growth for the 13th month in a row.

In March PIF announced three initiatives aimed at increasing involvement by local businesses in its portfolio activities.

They include the launch of PIF’s Local Content Growth programme which is targeting a 60 percent share of local spend in the fund’s domestic portfolio by 2025.

Todd was speaking at a recent event in London hosted by the Saudi British Joint Business Council.

He said there was a big opportunity for businesses to get involved in the supply chain of PIF’s various companies and so the fund provides training on how to pitch for projects in this area.

“We’re also setting up a common vendor qualification platform that will allow suppliers and contractors to qualify in one step across all of the projects,” Todd said.

Since 2017 PIF has created 79 portfolio companies across 13 strategic sectors.

“Success is having an ecosystem that doesn’t require capital anymore – it grows on its own,” Todd said.

“Getting to the point where in any sector you can just be a passive shareholder, I think, is the ultimate goal.”