The Political Economy of Saudi Arabia’s Public Investment Fund in relation to external investment

The project focuses on Saudi Arabia and the external investment of its sovereign wealth fund, known as the Public Investment Fund (PIF). The decision to enact Saudi Arabias Vision 2030 economic plan has led to a massive restructuring of the goals and oversight of the PIF. As of 2015, the PIF is controlled by the Council for Economic Development, chaired by Crown Prince Mohamed bin Salman. Previously it was under the operational control of the Ministry of Finance. Originally the PIF was focused on internal investment, creating jobs within Saudi Arabia through subsidies and investments in various internal corporations such as SABIC, Maaden, the Saudi Public Transport company, National Commercial Bank, Riyadh Bank, SAMBA bank and the Saudi Telecom Company. However, with the change in structure in 2015 the PIF has become the primary agent financing the 2030 reforms. This is a large shift in responsibility and as a result the PIF divided its funds into six pools. These pools are 1) international investments, 2) sector development, 3) massive internal projects such as tourism development, 4) real estate and internal infrastructure projects, 5) mega external partnerships and 6) the Treasury. This project is concerned with the utilization of the first and fifth pools. The justification given for use of these funds for external partnerships and investment is to diversify the portfolio of the Kingdom. Previously 90% of the states assets were located internally which could lead to volatility as these assets are highly correlated to the strong fluctuations in oil price. While this is the stated goal of the reforms, the project seeks to understand the political reasoning behind this external investment beyond mere economics. While economically the plan for external investment in technological venture capital, US infrastructure projects and traditional foreign businesses makes economic sense, the project aims to understand why these goals are undertaken politically. Furthermore, it aims to understand why specific companies have been chosen. To quote Lloyd Blankfein, CEO of Goldman Sachs, Not all investment is investment. Investments are a political tool as well as a means to maximize returns. To achieve these aims much of the work will be based upon analysis of Saudi Arabian foreign policy goals in conjunction with economic goals. This research will give a broader picture of the intent and reasoning behind the various choices of the PIF. Furthermore, interviews with stakeholders in the process will be undertaken by myself and Chairman Aldamer in order to get a rare first-hand account of potential reasons for the investments. The article seeks to use a modified version of realist political economy as its theoretical lens for explaining the political reasoning behind the investments. From this research there should be a minimum of a single article published by myself and Chairman Aldamer in an ISI journal. This could possibly be expanded into two articles depending on the depth of information gained as well as the direction of investment by the PIF in the future