Saudi Arabia’s surprisingly high-profile injection of USD 3.5 billion into Uber signals a more aggressive global investment presence by a kingdom trying to wean its economy off oil.
San Francisco-based Uber, a smartphone app that connects passengers and drivers around the world, said on Wednesday the funding from Saudi Arabia’s Public Investment Fund would help Uber’s global expansion.
The PIF acted roughly six weeks after Deputy Crown Prince Mohammed bin Salman announced a wide-ranging plan to transform the kingdom’s oil-dependent economy.
At the heart of the Vision 2030 plan is a revamped PIF.
“Like many, I am caught off guard by this massive investment in Uber,” said Michael Maduell, president of the US-based Sovereign Wealth Fund Institute which studies public investment funds.
“However, it telegraphs to the world that Saudi Arabia will be a major player when it comes to sovereign wealth fund investing in the future.”
Vision 2030 aims to turn the PIF into the world’s largest state investment fund, with USD 2 trillion in assets.
These would include proceeds from the sale of state-owned real estate and other property, as well as roughly USD 100 billion from a share offer for less than five per cent of state oil firm Saudi Aramco.
Profits from the investment fund would help economic diversification and provide an alternative to oil revenues that have fallen by about half since 2014. The collapse has accelerated Saudi efforts to move away from petroleum which still accounts for the bulk of government income.
“The Public Investment Fund will not compete with the private sector, but instead help unlock strategic sectors requiring intensive capital inputs,” Vision 2030 says.
“This will contribute towards developing entirely new economic sectors and establishing durable national corporations.”
The aim is to participate “in large international companies and emerging technologies from around the world”, the plan adds.
Maduell said that in future moves, he would not rule out PIF’s working with US industrial firms to expand manufacturing in the kingdom.
It may also seek exposure to venture-backed companies.
“I see PIF on the prowl for strategic development investments with leading companies to spur job growth, enhance sector diversification and prosperity in the country,” he told AFP.
The head of the PIF, Yasir Al Rumayyan, said in a statement about the Uber deal that it fits with Vision 2030.
It is an investment which marks a new approach by Riyadh, a European diplomat said.
With such a major stake abroad, the government is “following the example of Prince Alwaleed”, the diplomat said.