The Women’s Tennis Association (WTA) will hold its next three finals in Riyadh, Saudi Arabia, following an agreement with Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF). The announcement was made on April 4 in the wake of another major partnership between this same fund and the Association of Tennis Professionals (ATP), leading, among other things, to the creation of the PIF ATP world ranking.
Hardly a week goes by without an attention-grabbing story involving the PIF. In recent months, the $925 billion fund has spearheaded a deal to revolutionize the world of professional golf, brought soccer stars like Cristiano Ronaldo to the kingdom and acquired stakes ranging from Heathrow Airport to Nintendo in even going through Live Nation, a company associated with the group behind the Montreal Canadiens.
The PIF’s flamboyant style, large-scale acquisitions and connection to the Saudi government raise concerns about the motivations behind its activities. The objective of the PIF is more the political stability of the kingdom than a geopolitical standoff.
Fast and dangerous
What is a sovereign wealth fund? Without wishing to simplify what is in reality a complex landscape, sovereign wealth funds are in some ways similar to the Caisse de dépôt et placement du Québec. These are national savings accounts, created mainly by governments rich in oil revenues, in order to prudently invest their surplus in international markets.
The PIF is nevertheless very different from other sovereign funds. The fund deploys nearly 80% of its assets inside the kingdom. He leads pharaonic projects like the multi-hundred-billion-dollar futuristic city The Line, while being behind more than 60 firms operating in diverse sectors, from coffee production to military industries and even having his own brand of vehicle. electric.
In comparison, Norway’s Government Pension Fund invests 100% of its wealth internationally while Singapore’s Temasek or Qatar Investment Authority invest only a quarter of their wealth domestically.
If its investment portfolio diverges, PIF’s strategy is also much more aggressive than that of its peers. It is the most active in the world, deploying more than $53 billion internationally since 2022, and its approach is more like that of a hedge fund than a savings account.
Moreover, Crown Prince Mohammed bin Salman (MBS), de facto ruler of the kingdom, pushed for the fund to deploy 35 billion in falling markets during the COVID-19 pandemic only to eventually sell its shares a few months later. only late.
To fully understand the PIF and the origin of its particularities, it is imperative to look inside the kingdom.
The PIF, MBS’s tool to stay in power
The PIF reflects not only changes in the kingdom’s economic policy, but also the concentration of power in the hands of MBS. Founded in 1971, the PIF was reorganized in 2015 under the leadership of MBS, becoming the main tool to achieve his ambitious Vision 2030 plan aimed at propelling Saudi Arabia into a post-oil era.
Although he did not hold any major ministerial position until his father Salman ascended the throne in 2015, MBS has since been elevated to the rank of crown prince, prime minister, and has ensured his control over the Saudi state through the through various feats of strength. The PIF is no exception to the rule. MBS controls all governance levers of the fund and has considerable sway over its day-to-day operations.
At the same time, the Vision 2030 plan is attributed to the individual vision of the crown prince, who presents himself as the architect of the modernization of Saudi Arabia.
If Vision 2030 is often seen as the sign of a new era of diversification, openness and prosperity, Human Rights Watch recalls that the reforms are accompanied by increased repression on the part of the MBS regime.
The deeply authoritarian Saudi state has traditionally used its vast oil resources to finance redistributive rule and maintain the kingdom’s political stability. Two-thirds of Saudi workers are employed by the government, household energy is heavily subsidized, while healthcare and education are free.
With oil prices falling 70% between 2014 and 2016 and 87% between January and April 2021, according to data from the International Energy Agency, Saudi Arabia faces adjustment challenges without precedent, considering that more than 80% of public revenue comes from black gold combined with the scale of its redistributive system. According to statistics from the Ministry of Finance, public debt has increased by 2100% since 2014.
The stakes are high enough for the MBS regime to deliver tangible results and make the transformation of the kingdom a success. The overhaul of the PIF and its prodigious expansion, both domestically and internationally, aims above all to consolidate decision-making and investment processes under one roof, strengthening MBS’s ability to lead the kingdom’s economic development.
From this perspective, the PIF’s substantial investments in sports serve as tangible indicators of attractive prestige and diversification for young Saudis, around 49% of whom are under the age of 25, according to the latest census, while providing income non-oil alternatives to government.
While some see the PIF as a tool advancing the geopolitical interests of the Saudi government, it is important to keep in mind that the fund’s activities are primarily part of a national project, aimed at propelling the economic transformation of the kingdom and to ensure the performance of the regime and, consequently, the survival of the Saudi monarchy.
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reference: www.lapresse.ca