As curtain rises on ‘Saudi Davos,’ all eyes are on the PIF performance

The stage is set, the actors are waiting in the wings and the audience is expectant. The three-day performance by Saudi Arabia’s Public Investment Fund (PIF) has been billed as the “Saudi Davos,” and by the end of the week the world expects to know a lot more about the Kingdom and its strategy to diversify away from oil dependency.
Like the Swiss gathering of the World Economic Forum, the Future Investment Initiative will be crammed full of plenaries, bilaterals, workshops, breakout sessions and (hopefully) media interviews and briefings. It will be a difficult choice to decide which session to attend when there is so much going on in a concentrated time frame.
Here, in no particular order, are the questions I will be looking to have answered by the time the event closes on Thursday.
1. What will be the pace of future economic policy in the Kingdom? Growth has slowed, as we know from official statistics and from the recent country report of the International Monetary Fund. This is partly because of the continued low price of oil, but also because of belt-tightening by the government in the face of depressed energy revenue. But the IMF made the point that the fiscal position in the Kingdom does not justify excessive austerity. Saudi Arabia sits on vast financial reserves, has a low debt-to-GDP ratio, and has a good credit standing in the international capital markets. It does not need to tighten the fiscal screw any further, the IMF said. Will Saudi policymakers take heed of that advice, even if it slows some of the sweeping reform measures under the Vision 2030 strategy?
2. What will be the future direction of PIF investment strategy? Yasir Al-Rumayyan, the PIF chief, has stated that, while the fund will continue to play a crucial role in the Kingdom’s economic and social development, it will also act as an investment vehicle at the cutting edge of global technology. Everybody knows about the $3.5 billion stake in Uber and the proposed $45 billion investment in SoftBank’s Vision Fund, but there have also been recent big-money investments in real estate, recycling and entertainment, in addition to holdings across the broad range of Saudi basic industry. Will PIF be able to realize its ambition to become the biggest sovereign wealth fund in the world while still delivering commercial and financial efficiency?
3. When will the huge privatization program actually get underway? The Kingdom’s policymakers have identified $200 billion worth of state assets that can be sold, ranging from utilities and ports to schools, hospitals and even football clubs. That rivals any of the big privatization strategies in history, and is a vital part of the strategy of reducing public-sector control of business. But so far, there has been little actual progress toward achieving this ambitious plan. Attendees at the conference will be looking for some positive signs that the legal and regulatory framework is in place for such a grand strategy, and they will be looking for a specific “liquidity event” (as the bankers refer to flotations on stock markets). Which will be the first Saudi company to go private under the current program?
4. What is the current status of the plans to sell a stake in Saudi Aramco? While the Riyadh conference is not an Aramco event, this, in many ways, is the big one. The initial public offering (IPO) of Aramco has been cast up as the centerpiece of the whole diversification strategy. A $100 billion IPO on an international stock market would be the global financial event of the greatest symbolic significance, heralding a new era of disclosure and transparency in the Kingdom’s business dealings. But recently these plans have become confused by alternative proposals to sell a stake in Aramco to a trade buyer, possibly from China, in a private transaction. Financial experts will be looking for some clarity on the Aramco plans. Is the biggest IPO in history still on track, and, if so, where will it take place?
5. How do the armies of bankers and financial institutions that are descending on Riyadh view Saudi Arabia? Such a massive economic transformation as is underway in the Kingdom inevitably generates rich pickings in fees for the international groups, but the Kingdom’s need now is for real, long-term financial relationships with global capital. Will the big American, European and Asian banks just take the money and run, or will they commit to the Kingdom? There has been a spate of banking licenses being granted by the Kingdom’s financial authorities, but there are some big ones out there still practicing “suitcase banking” — flying in and out according to their diary. Will we see any new bank offices being opened in Riyadh to help it become a financial center to match its ambitions?
By the time the curtain falls on Thursday evening, I hope we will have answers to these key questions. It promises to be quite a show.