Oman and Saudi Arabia have strengthened their bonds with the signing of a memorandum of understanding between their sovereign wealth funds, the Oman Investment Authority (OIA) and the Public Investment Fund (PIF).
The agreement builds on the work of the Saudi Omani Investment Company (SOIC) which is looking to invest US$5 billion in the Omani economy. The MoU provides benefits and incentives for PIF and its portfolio companies. It was signed after SOIC closed its first investment in Oman as a 20% anchor investor in Abraj Energy Services’ IPO. SOIC is not the only vehicle chosen for PIF’s investments. Last August, PIF invested US$300 million in Oman’s private equity infrastructure fund Rakiza. Rakiza is co-managed by OIA subsidiary Oman Infrastructure Investment Management and Equitix, and focuses on the renewables, power and water, social infrastructure, telecommunications, and transport and logistics sectors.
Mulhem Basheer Al Jarf, Deputy President for Investment at the US$41.5 billion OIA, said: “This MoU builds on our existing relationship with PIF and enables greater cooperation, driving economic diversification in Saudi Arabia and Oman. It aims to facilitate partnership opportunities for the private sector in both countries, in alignment with OIA’s efforts to attract FDI to the Sultanate of Oman through Oman’s 2040 vision."
The OIA was launched in June 2020 as a merger of the Oman Investment Fund and the State General Reserve Fund. The SGRF has been used largely as an oil revenue stabilization mechanism and to diversify the economy away from oil and gas in more than 25 countries worldwide. The OIF on the other hand was the successor of the Oman Oil Fund and invested in long-and medium-term projects at home and abroad.
The OIA is planning US$5 billion of investments in 2023, funded in part from divestment of eight assets. It is predicting returns exceeding US$1.3 billion this year and is also looking to raise debt and co-invest with local and foreign private partners. One of the key goals over the coming five years will be privatizing and/or floating 30 of the 160 government companies it currently holds. This is in line with OIA’s efforts to attract expertise, technology, and foreign investment to the country’s strategic sectors.
As a result of its activity, the Omani fund has emerged as a go-to partner for investors, particularly in the infrastructure sector where it has already won significant support from Abu Dhabi SWFs. In February, the Oman and Etihad Rail Company (OERC), a joint venture established last September by Oman Rail, an OIA portfolio company, and Etihad Rail, the developer and operator of the UAE’s National Rail Network, has won the support of sovereign investor Mubadala. The Abu Dhabi investor signed a cooperation agreement with the OERC to support the development of the 303km railway network, which connects Oman and the UAE, with an overall investment value of US$3 billion. Passenger trains will run up to 200km per hour along the route, reducing the time of the journey between Sohar on the Gulf of Oman coast and Abu Dhabi to 100 minutes.
The OERC was one of several partnerships mooted last September when Abu Dhabi’s US$157 billion state-owned investor ADQ announced it was looking at opportunities in Oman worth over US$8 billion and bolstering bilateral economic and political relations, in partnership with OIA. Joint investment collaboration in low carbon electricity generation, utilities, and metal production were all sited as target areas by officials of both organizations during visit of Abu Dhabi leader and UAE President Sheikh Mohamed Bin Zayed to Oman. The Abu Dhabi fund signed an agreement with OIA subsidiary the Oman Information, Communication and Technology Group (ITHCA) to establish a US$160 million venture capital fund to invest in high-growth tech startups in Oman.
ADQ and OIA signed a partnership agreement worth OMR1 billion (US$2.7 billion) and identified initial investment opportunities worth OMR3 billion (US$8 billion) and agreed to proceed with the feasibility studies.. The Abu Dhabi investor is exploring sectors such as food, tech, health and logistics as it seeks to expand its footprint in Oman. The fund signed an agreement with OIA subsidiary the Oman Information, Communication and Technology Group (ITHCA) to establish a US$160 million venture capital fund to invest in high-growth tech startups in Oman.