Tareq Hawasli, Managing Partner, Darin Partners, on the evolving investment environment

On the evolving investment environment

How is Vision 2030 shaping foreign investors views on Saudi Arabia as an investment destination?

TAREQ HAWASLI: Under Vision 2030, Saudi Arabia is becoming a more attractive country to investors. First, Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud has overhauled the Public Investment Fund (PIF) in addition to other local entities to expand the number of mega-projects throughout the Kingdom. 

Second, the Crown Prince’s strong commitment to western outreach, especially his most recent visits to the UK and the US, have created a much friendlier local investment environment as foreigners are becoming acquainted with the opportunities in the country. 

Third, partnerships with key international figures, such as Virgin’s Richard Branson and Softbank’s Masayoshi Son, and many productive conferences and events across different economic sectors are placing Saudi Arabia on the path to becoming an even more modernised and attractive economic powerhouse. Lastly, the stability and increased transparency of the government are making international players more comfortable about entering the Saudi market. 

Which sectors are currently showing the greatest potential for growth? 

HAWASLI: Western institutions and Saudi firms have been investing much more in the Kingdom over the last few years. One area with excellent opportunity for growth is the Saudi entertainment sector, following the liberalisation of movie theatres, concert venues and public leisure spaces. Activities that are very common in the Western and East world are becoming more common, allowing for the Kingdom to become a more open Islamic nation in a way that is comparable to other countries in the GCC. 

Infrastructure, healthcare, education and alternative energy sources also continue to be large pillars of investment and are catching the attention of many public and private investors. In addition, these sectors are crucial for the development of Vision 2030’s mission to diversify away from oil. 

In what ways are the characteristics of Saudi investors evolving under Vision 2030? 

HAWASLI: Currently, the corporate governance structure of investment houses is changing tremendously. There are still many sophisticated 50-60-year-old family offices, but now there are many new entities led by former Saudi investment bankers and private equity professionals that tend to be much more entrepreneurial, relying less on external consultants. These types of investors – who are well-connected, smart, savvy and often under 35 years of age – will become even more prevalent within the next three to five years. 

Investors are also adapting to the Crown Prince’s initiatives, as the people who are being recruited to work in the PIF or other investment divisions are typically educated in the West and equally fluent in both Arabic and English. While the vitality of younger generations is strengthening the current investment climate, Saudis must remember to not lose their cultural identity amidst the rapid progression of Vision 2030. 

In order for Saudi investors to truly succeed, they must be qualified and have strong international partners, but more importantly, they should make sure that their investment methodologies do not harm Saudi culture or break apart its traditional values. 

What are the current investment habits and trends among Saudi Arabian investors looking abroad? 

HAWASLI: Local investors are currently taking advantage of higher yields and returns from many investments abroad. The real estate sector, specifically in the UK, US and Germany remains a main focus for Saudi investors. Real estate, domestically and internally, accounts for around 60% of Saudis’ total investment portfolios compared to around 20-25% by similar investors in other countries. 

Digital technologies are another strong area for investment, as Saudi investors are building stronger relationships with technology ecosystems in Silicon Valley, India and more recently East Asia.

Younger generations have also started to gradually move away from investing in traditional private equity firms such as Blackstone, Carlyle and KKR in order to diversify their portfolios and take advantage of newer opportunities. In general, Saudi investors continue to be very risk-adverse while ultimately striving to attain tangible, first class assets.