Getting a successful vaccination campaign to coincide with economic stimulus measures that will ensure a smooth ‘return to normalcy’ is one risk factor facing emerging countries around the globe, said Yasir Al-Rumayyan, Governor of Saudi Arabia’s Public Investment Fund, one of the largest sovereign wealth funds in the world. A second risk factor is the impact of covid on government budgets, deficits and currency valuations, he added. For India, a worry in the immediate post-covid context is maintaining the momentum of investments. The PIF governor however said that he sees a lot of promise in India–in its startups, digital economy and growing infrastructure. Edited excerpts from an interview.
What do you think is the biggest risk factor for emerging economies currently? What has your experience in India been like so far? Where does India sit among emerging market economies in terms of promise?
The impact of covid-19 has been unparalleled across the global economy. However, it has been most varied and remains the most uncertain in emerging economies. The first risk factor facing emerging economies is the successful roll-out of the vaccination programme, timed with economic stimulus that ensures a smooth ‘return to normal’ and not a stop–start experience that will delay growth and undermine business and investor confidence. Secondly, the impact covid-19 has and will continue to have on government budgets/deficits and indirectly currency valuations is a key risk too.
India like other BRICS nations is seeking to invest its way out of the covid-induced recession to stimulate growth—the capacity for other emerging markets to do so and sustain the investment required varies considerably. In the case of India, the government's focus on investments in healthcare with a 137% increase in spending, infrastructure and connectivity, such as the construction of 13,000-km of road and rail network are emblematic of a prudent national investment agenda that will boost productivity in the long-term while stimulating growth in the short-term. A further challenge in the immediate post-covid environment includes maintaining investment momentum in the face of fiscal concerns.
Attracting foreign investment is a key mitigator to these concerns but also a long-term accelerant to growth. We see a lot of promise in India, specifically with its innovative startups, the potential of the Indian digital economy and its growing infrastructure. We see likely future opportunities in traditional infrastructure that will harness and coalesce the growing population and talent through better connectivity and economic stimulus around new transportation and logistics. Throughout the last year, PIF has continued to invest in emerging markets both in accordance with its overall strategy and in opportunistic investments that have materialized as a result of the crisis.
As a long-term investor, the market fundamentals for many emerging economies such as India remain unchanged on a relative basis. Our outlook for India is very positive. To date, PIF, either directly, or indirectly through our partners, has invested in a broad array of Indian sectors including financial services, real estate, healthcare, pharmaceuticals, manufacturing and telecommunications—many of which, we believe, will benefit from the growth focus and which, in turn, can and should provide additional best practices to catalyze growth in the Kingdom of Saudi Arabia.
How was PIF's exposure in India prior to the pandemic and in which areas? Are you looking at any changes post-pandemic?
We see significant potential in India to recover post-covid and will continue to explore investing in several sectors in the country. In June 2020, we invested nearly $1.5 billion in Indian technology company Jio Platforms, which gives us access to the exciting Indian digital economy. And as recently as November 2020, we invested $1.3 billion in India’s Reliance Retail. We are pleased to further our trusted partnership with Reliance Industries Ltd, a leading player in some of India's most exciting sectors. The transaction is one of the many that demonstrates PIF's commitment to long-term investing and partnering with innovative businesses in India and around the world that lead and transform their sectors.
What are the prospects of investing in India’s infrastructure sector?
Infrastructure is a vital component of emerging economies, and we see a lot of potential in India’s infrastructure sector, particularly its digital infrastructure. We recently invested $500 million in the Digital Fiber Infrastructure Trust (DFIT), the infrastructure investment trust that holds Reliance Jio’s telecom fiber assets. Jio Platforms provides us with an excellent opportunity to support growth of the Indian digital economy. In Saudi Arabia, we are similarly focused around stimulating activity through the creation of economic or growth corridors. These enable connectivity, create new employment opportunities, including within manufacturing and logistics. Alongside our partners, we will seek to identify similar investments within India that may have broad synergies with our own endeavours while creating attractive long-term returns.
Given the pandemic and the current economic realities, what would be the factors that you would take into consideration while looking at investments?
The covid-19 pandemic changed the world’s investment priorities, demonstrating the importance of new sectors, highlighting the growing need for advanced digital infrastructure, and refocusing the world on key priorities, such as sustainability and healthcare. Consequently, we believe that there is an important role and opportunity for us to actively support markets, industries and businesses by deploying significant capital over a long-term horizon.
For example, in 2020, we identified opportunities created by the pandemic and invested in a range of public companies and Exchange Traded Funds (ETFs) across sectors that we believe are positioned to help lead global economic recovery. As a patient and long-term investor, we are able to invest and provide capital to the companies and sectors that we believe are best-positioned to lead the global economic recovery. These investments will generate long-term financial returns that help diversify the Saudi economy away from oil–which PIF is driving as part of its mandate–while localizing sustainable skills, investment and jobs of the future for Saudi citizens.
Has the pandemic provided any newer areas with an investment potential?
The pandemic has impacted all countries, industries and sectors. It has shown the importance of diversification for ensuring stability and generating sustainable growth. PIF is looking to invest in businesses and sectors with the potential to drive local, regional, and global growth. Globally, there are several industries that will lead economic recovery in a post-covid world. These “sectors of the future" include pharmaceuticals, renewables, technology, agriculture, and infrastructure, including digital infrastructure. It is also true that the pandemic is accelerating existing trends–most notably technologically driven changes in how people work and live. As the global economy looks to adapt to those changes, significant levels of capital, invested on a long-term basis, will play a vital role in enabling this transition.
The Crown Prince Mohammed bin Salman has announced the NEOM project. This is a really ambitious idea–combining the smart city and zero emission concepts. Could you share some details on how this will reach fruition?
THE LINE will be a 170-km belt of hyper-connected future communities within NEOM, without cars and roads, and built around walk ability and nature. It is a direct response to some of the most pressing challenges facing humanity today such as legacy infrastructure, pollution, traffic and human congestion. Through its implementation, THE LINE will set new global standards for living and urban development. Everyday needs such as schools, medical clinics, leisure facilities and green spaces, will be within a five-minute walk. This human-centric approach represents the first time modern cities have been designed for people, rather than cars.
THE LINE will rely entirely on clean energy, with zero carbon emissions and zero environmental, noise or visual pollution. In all, THE LINE takes the smart city concept to the next level—advanced technology, including artificial intelligence and robotics, enables the communities to continuously learn and predict ways to make life easier for residents and businesses. NEOM is a substantial project; it is not a real estate project, but a complex economic and social ecosystem that needs nurturing. PIF’s role is to provide oversight for NEOM as it develops, to make sure it receives the capital it needs when it needs it, and the financial muscle and influence to attract other investors. THE LINE will see a number of world-leading innovations realized, all focused on making it the world’s most effective urban development.
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