The Vision - Softbank Fund was supposed to be a means to achieve the economic transformation in Saudi Arabia, but did Riyadh lose all the billions that it spent on this fund?

In a report published by the British Middle East Eye website, the writer Paul Cochrane said that when Crown Prince Muhammad bin Salman in 2015 directly controlled the Public Investment Fund in Saudi Arabia, and when the fund's program was announced in 2017, it was supposed to be a catalyst. The Kingdom's efforts to diversify the economy.

Softbank Fund

It is a Saudi-Japanese investment fund managed by a subsidiary of the Japanese SoftBank Group. The fund was opened in November 2016 by Saudi Crown Prince Mohammed bin Salman and Masayoshi Son, president of SoftBank Group.

In May 2017, the fund became the largest direct investment fund after raising more than $ 93 billion, and the Vision-SoftBank aims to finance future developments in the field of artificial intelligence, robotics, and genetic sequencing.

One of the oldest and largest branches of the vision fund - Softbank - which costs $ 100 billion - is based in Tokyo, which has invested in prominent technology companies.

Indeed, the investment with the Japanese bloc seemed to be in full conformity with the Kingdom's 2030 vision, especially with SoftBank's commitment to enabling diversification efforts in Saudi Arabia by engaging in technology and renewable energy, and in the $ 500bn “NEOM” city project on the Red Sea coast, according to Writer.

However, the ties that Softbank has with Saudi Arabia and Muhammad bin Salman became a subject of careful investigation in October 2018, in the wake of the killing of journalist Jamal Khashoggi, before Riyadh was able to overcome the negative publicity it faced.

According to Rory Fife, CEO of MENA Advisors, Riyadh was initially keen to participate in the "Vision 2 Fund," but retreated last year after problems arose with the first fund, as media outlets promoted SoftBank as a major cause of turmoil in the corporate technology landscape. Emerging and Venture Capital.

And in late 2019 - according to the author - financial problems began to appear in the American company "WeWork" in which SoftBank invested $ 18.5 billion in addition to other investments, and the year ended with SoftBank losing $ 13 billion, to exacerbate the problems this year due to the economic repercussions of the epidemic. Sk.

The announcement of the Fund's program in 2017 was supposed to be a catalyst for the Kingdom's efforts in economic diversification (Reuters)

A painful blow

The writer mentioned that of the 88 companies that invested in a vision fund, SoftBank announced in mid-May that it expects the success of 15 companies and the bankruptcy of 15 others.

"This bet was disastrous, it is a real painful blow," the author quoted Hugh Miles, chief editor of Arab Digest, as saying, but - according to Fife - also claimed that damage to the property of the Public Investment Fund in a vision fund was "not as serious as the headlines indicate." Main".

The writer also quoted Rachel Zimba - an associate fellow at the New American Security Center - as saying that the Public Investment Fund is a relatively large investor compared to others, so its loss may be less, but there are many inquiries, and ambiguity still surrounds some details.

Bad investment for everyone

In turn, Miles mentioned that while SoftBank prospects do not appear bright as the planned vision funds are expected to be canceled, the impact on the Public Investment Fund may be an isolated problem, and the losses may be compensated for by other investments of the Public Investment Fund, such as online education .

"Softbank is an economic dilemma for the Saudis, but one should not overestimate its importance for the economy in general," Miles added.

For his part, Theodore Karasik, senior advisor at Gulf State Analyzes Company, said that "SoftBank was a bad investment for everyone, in terms of the way it was designed and implemented, it was a long-term investment approach, but it faced some obstacles."

Saudi Arabia was hoping to take advantage of the Vision Fund stakes in many idle companies and advanced technologies at the local level as part of the economic diversification strategy and future plans for the city of Neum, according to the author.

According to the author, the Sovereign Wealth Fund managed to move despite the SoftBank disaster, investing $ 7.7 billion this year in companies such as Facebook, Disney and major international oil companies.

In this regard, Karasik said that "SoftBank numbers are a disaster when placed in their private domain, but at the same time, the investments made by the Public Investment Fund during the pandemic of the virus across a number of industries and countries will pay off in the future."

Aramco revenues decreased due to lower oil prices (Reuters)

And the writer stated that the biggest impact on the public investment fund was linked to Aramco whose revenues decreased due to the drop in oil prices, at a time when Riyadh wanted to offer 5% to raise up to a hundred billion dollars to strengthen the fund.

Fife believes that the long-term future sales of Aramco shares were aimed at converting the public investment fund into a fund worth $ 3 trillion, but this became more difficult due to the skepticism of international investors in the IPO when the oil price expectations were more clear.

The writer quotes that the drop in oil prices affected Aramco's plans for 2019 to acquire a 70% stake in the country's giant petrochemical giant, SABIC, from the Public Investment Fund for $ 69.1 billion.

And with the value of "SABIC" declining by 40% this year, it is possible that the value of the deal is currently $ 45 billion, of which $ 25 billion will be paid by Aramco in advance, the writer says.