Iraq is the latest target for Saudi Arabia’s sovereign wealth fund as it seeks to spread its investments – and soft power – over the Middle East through bilateral investment vehicles.
The Public Investment Fund (PIF) has pledged to invest US$3 billion in its northern neighbour through the new Saudi-Iraqi Investment Company, which is one of six regional investment vehicles the fund said it would establish in Bahrain, Egypt, Iraq, Jordan, Sudan, and Oman. PIF is targeting investments totalling US$24 billion in infrastructure, real estate and various industrial sectors.
Soft power is a motivation behind PIF’s drive, tying a geopolitically important country closer to its orbit and supporting a government that was brought into power following the overthrow of the Muslim Brotherhood – a movement Saudi Arabia regards as highly subversive. However, for PIF returns are a prime consideration.
The Iraqi unit follows the creation of the Saudi Egyptian Investment Company (SEIC) in 2022, which acquired stakes in listed companies last August. A US$16 billion Egyptian investment fund backed by PIF was previously announced in a high profile visit to Egypt by Saudi King Salman in 2016, but the deal was quietly forgotten. PIF appeared to have another push for a massive investment package worth US$10 billion in March 2022 in an agreement signed with The Sovereign Fund of Egypt (TSFE).
PIF established the Saudi Jordanian Investment Fund (SJIF) in 2017 alongside 16 commercial and Islamic Jordanian banks with a capital commitment of US$3 billion. SJIF pursues strategic, sustainable, and economically feasible investments in Jordan’s “vital and promising sectors”. However, in the latest annual report, SJIF reported total assets of just JOD12 million (US$17 million), suggesting the entity was falling far short of its ambitions.
PIF is not the only SWF using country-based investment vehicles in the MENA region with Egypt gaining the biggest amount of attention. ADQ established an office in Cairo in December 2021 to ramp up its investments in the country and support co-investments with The Sovereign Fund of Egypt (TSFE). The Abu Dhabi state holding company created a US$20 billion strategic investment platform with TSFE in 2019, targeting pharmaceuticals, healthcare, financial services, utilities, agriculture, and real estate, but to date less than a quarter of this amount has been invested.
The situation appears to be changing with an acceleration in investments. Last March, ADQ acquired about 18% of the Commercial International Bank (CIB) for around US$1 billion, as well as shares in Fawry for Banking & Payment Technology Services. The fund also acquired Egypt state-held stakes in fertilizer and port companies. In September 2021, it formed a consortium with Aldar Properties – a Mubadala portfolio company – to buy a 90% stake in Egypt’s Sixth of October for Development and Investment Company (SODIC), a real estate developer listed on the ADX. The state-owned investor acquired Egypt’s Amoun Pharmaceutical Company alongside TSFE in March 2021. In October 2020, ADQ signed a non-binding agreement with the Middle Eastern Lulu International Holdings (LIHL) supermarket chain, which could invest up to US$1 billion in expansion of operations in Egypt.