Saudi Arabia's surprisingly high-profile injection of $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 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. Vision 2030 aims to turn the PIF into the world's largest state investment fund, with $2 trillion in assets.
These would include proceeds from the sale of state-owned real estate and other property, as well as roughly $100 billion from a share offer for less than five percent 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. It may also seek exposure to venture-backed companies.
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. He was referring to the kingdom's most high profile businessman, Prince Alwaleed bin Talal, whose Kingdom Holding Co has interests ranging from the Euro Disney theme park and Four Seasons hotels to News Corporation and Citigroup. Late last year Kingdom Holding became the second-largest shareholder in Twitter, and invested more than $100 million in Lyft, a San Francisco-based rival to Uber.
Uber is part of the so-called gig economy in which people work flexibly and without labour benefits. Other potential PIF targets in that category could be Airbnb, the online site for accommodation, or US-listed "fintechs", financial start-ups which use computer and Internet technology to develop innovative financial services and applications. Although Uber is the kingdom's first major foreign investment since Vision 2030 was unveiled, PIF last year acquired a 38 percent stake in the engineering unit of South Korea's Posco for $1.1 billion.
