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29 March 2024

Saudi to set up SR20bn investment firm

Saudi Arabia is looking for overseas acquisitions to diversify its economy away from oil. (AFP)

Published
By Agencies

Saudi Arabia, the biggest economy in the Middle East, will start operations of a SR20 billion ($5.33bn /Dh19.5bn) investment company in six months.

"A consultancy will start the formation of the company next week," Mansour Al Maiman, Secretary-General of the Public Investment Fund, said in an interview yesterday at a conference in Riyadh. "It will target all sectors abroad and at home. We hope it will start work in six months."

Saudi Arabia, the world's largest supplier of oil, approved in July the creation of Saudi Arabian Investment Company, also known as Saudi Sanabel, according to a statement from the Saudi Press Agency. Sanabel will invest in local and foreign financial, commodities, treasury, asset management and real estate markets.

Gulf countries, including Saudi Arabia and the UAE, are looking for overseas acquisition to diversify their economies away from oil. The Saudi General Organisation for Social Insurance, with SR19.2bn in investments, got approval in March to start the Hassana Investment Company to invest in local, regional and international stock markets.

The Saudi Arabian Monetary Agency, the nation's central bank known as Sama, had $501bn under management at the end of last year, up from $385bn in 2007, economists at the Council on Foreign Relations said in a report on January 15.

Al Maiman said the company plans to venture into mortgage financing, in anticipation of a mortgage law expected to come into effect this year. "I think this is one of the priorities of the Public Investment Fund. We only hope for the mortgage to be issued... to allow financiers, including the Public Investment Fund, to venture into this field," PIF Secretary-General Mansour Al Maiman told an investment conference, in response to a question at a forum.

The PIF is the finance ministry's investment arm. Finance Minister Ibrahim Al Assaf said in February a mortgage law that has been for years in gestation would be implemented this year.

The new law could open up home ownership to more of the 25m population in the most-populous Gulf Arab country, less than a third of whom currently owns property. A draft law, which has been in the works for almost a decade, was approved last year by the advisory Shura Council and is now being examined by the council of ministers, Assaf said.

"It's a maturation phase for Saudi Arabia. Right now the market is 100 per cent cash," said Saud Masud, UBS real estate and construction analyst for the Middle East and North Africa.

"Going forward, mortgage lending may facilitate housing demand but perhaps just marginally in the initial three to five years... a well thought-out mortgage roll-out should prove beneficial to the overall Saudi economy in the long run."

 

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