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Friday November 24th, 2017 4:00AM

A look at how Saudi Arabia is transforming its wealth fund

By The Associated Press
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DUBAI, United Arab Emirates (AP) — When global oil prices plunged three years ago, alarms went off in Saudi Arabia, one of the world's top producers. With the kingdom nearly entirely reliant on oil for income, a looming economic crisis threatened its future stability.

This jolted Saudis into action and a blueprint for reform called Vision 2030 was rolled out with the goal to overhaul the country.

On Tuesday, the kingdom opened a three-day investment conference with top business figures from around the world, to showcase the centerpiece of these reform efforts: The Public Investment Fund.

Here's a look at how Saudi Arabia plans to build the PIF into the world's largest sovereign wealth fund:

OWNERSHIP OF BIGGEST OIL COMPANY

Saudi Arabia plans to transfer ownership of its crown jewel, state-owned oil firm Aramco, to the wealth fund and list less than 5 percent of the state-owned oil giant, using that revenue to fuel PIF investments.

The kingdom says this could make PIF the world's most valuable sovereign wealth fund and put some $2 trillion under its control— double that of Norway's sovereign wealth fund, which is currently the world's largest. Analysts, however, have suggested Aramco's market value could be half of the government's projection.

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INTERNATIONAL INVESTMENTS

PIF grabbed headlines when it invested $3.5 billion in ride-sharing firm Uber last year, though that investment could be in trouble due to the company's internal restructuring woes and the abrupt departure of its founder and CEO in June.

The fund has also partnered with Japan's Softbank, other investors and technology firms to form a deep-pocketed private equity fund to invest in technologies like artificial intelligence and robotics, with PIF investing up to $45 billion over five years.

It is also contributing $20 billion to a $50 billion health care and real estate fund with U.S. private equity firm Blackstone. The Saudi fund already has $20 billion invested in a U.S.-focused infrastructure fund with Blackstone.

___

DOMESTIC VENTURES

The fund, alongside other investors and the Saudi government, will help build a $500 billion city called "Neom" in the country's northwestern region. The city will be an innovation hub for scientists, engineers and technology firms — and it will be run entirely on alternative sources of energy.

PIF is also creating a beachfront destination and developing a string of islands in the Red Sea where the kingdom's ultraconservative rules on gender segregation and women's dress will likely not apply.

In addition to a newly-created fund to support small and medium-sized businesses and establishing a real estate refinance company, PIF is creating companies to build new hotels around Muslim holy sites in Mecca and Medina to host even more pilgrims.

PIF has also launched an entertainment investment company to cater to the needs of Saudi youth and oversee the development of a Six Flags theme park outside the capital, Riyadh.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Industries, AP Business - Financial Services, AP Business - Utilities
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