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Further boost for Saudi Vision 2030? PIF swings to USD 36.8 billion profit in 2023

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Saudi Arabia has invested hundreds of billions of dollars through the PIF in projects under the Vision 2030 plan

The Saudi Arabian sovereign wealth fund, Public Investment Fund (PIF), has reported a profit of 138.1 billion riyals (USD 36.81 billion) in 2023, following a USD 15.06 billion loss in 2023.

As per a regulatory filing, the Public Investment Fund’s total revenues increased to USD 88.3 billion in 2023 from USD 44 billion in 2022, a more than 100% increase.

Several factors contributed to the increase in revenues, including higher dividends and better investment and non-investment activities in industries like banking, telecommunications, and gaming.

Crown Prince Mohammed bin Salman, the ruler of the Kingdom, has chosen PIF, which has about USD 925 billion in assets under management, to spearhead an economic agenda meant to wean the Gulf nation’s economy off of oil.

Saudi Arabia has invested hundreds of billions of dollars through the PIF in projects under the “Vision 2030” plan, including NEOM, a massive urban and industrial development project that will be built along the Red Sea coast and is almost the size of Belgium.

Its funding sources include government capital infusions, government assets transferred to the fund, loans and debt instruments, and retained earnings from investments, which range from date farms to multinational conglomerates.

Meanwhile, the Public Investment Fund has given Bain and Company the task of developing an India strategy as part of its plan to take advantage of various infrastructure investment opportunities. PIF, which currently has assets of around USD 600 billion under management, is building “strategic economic partnerships” as part of its core objectives.

After rising global crude oil prices supported Saudi Arabia’s revenue, the fund is searching for opportunities in India, working with the country’s state-run Saudi Arabian Oil (Saudi Aramco), the largest oil company in the world, concentrating on investments in the field of green energy.

The Indian government wants to raise Rupees 111 trillion for 7,000 infrastructure projects, and New Delhi is in favour of impact investors, or sovereign wealth funds, which make long-term investments with modest yields.

In the FY21 Union Budget, The Narendra Modi-led Indian administration extended tax exemptions to sovereign wealth funds on their earnings from infrastructure investments in the South Asian country for FY24.

“In order to incentivise the investment by sovereign wealth fund of foreign governments in priority sectors, Finance Minister Nirmala Sitharaman proposed to grant 100% tax exemption on interest, dividend, and capital gains income in respect of investments made in infrastructure and other sectors before 31 March 2024, and with a minimum lock-in period of three years,” the government said in a February 2020 statement.

The government had also raised capital expenditure for FY23 by a record 35% to USD 7.5 trillion, with a majority of the capex expected to back infrastructure projects, as per a report from the Mint.

Some active sovereign wealth funds in India’s infrastructure space include Abu Dhabi Investment Authority, the UAE’s Mubadala Investment, and Singapore’s GIC Holdings and Temasek Holdings. As per the reports, PIF has been looking to invest in India and has been scouting for opportunities, including buying a stake in Tata Power’s green energy business. A consortium led by the world’s largest asset manager BlackRock and Mubadala agreed to invest a 10.53% stake in Tata Power Renewables.

More than 12 foreign investors have so far secured tax exemptions for infrastructure investments in India under a provision introduced in the Finance Act, 2020, which took effect on 1 April 2021. These include Singapore-based sovereign wealth funds Chiswick Investment, Stretford Investment, Dagenham Investment, Anahera Investment, Bricklayers Investment, and the UAE’s sovereign wealth fund MIC Redwood 1 RSC. Canadian and Australian pension funds also secured tax breaks under this provision.

India is working on the world’s largest clean energy programme. At the COP-26 summit in Glasgow in November 2023, it announced plans to boost non-fossil fuel power generation capacity to 500 gigawatts by 2030 and committed to achieve net-zero carbon emissions by 2070.

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