Ousted From Oil, Saudi Minister Can Make a Mark in Investing

(Bloomberg Opinion) -- After a week of drama in global financial markets, it’s worth pointing out an intriguing development in Saudi Arabia that warrants watching. 

In a surprise move on Tuesday, the kingdom’s ruler King Salman announced the return to government of former oil minister Khalid Al-Falih, who will become head of a newly established ministry of investment. Just six months ago, Al-Falih was unceremoniously dismissed, his removal seen as a “fall from grace” – specifically the good graces of Crown Prince Mohammed bin Salman, who was reportedly displeased with Al-Falih’s slow and cautious approach to the Vision 2030 Saudi economic reform plan and the related IPO of state-owned oil company Saudi Aramco. Now, Al-Falih has been placed in charge of a ministry with an undefined mission and unclear responsibilities – but also much potential for helping Saudi Arabia become the welcoming partner for foreign businesses that it says it wants to be.

The choice of Al-Falih – who was at various times also the CEO of Aramco, the Minister of Health, a top adviser to the crown prince and a board member of the Saudi sovereign wealth fund – indicates that King Salman is hoping the new Ministry of Investment will be more than just a rubber stamp for the existing investment authorities. With extensive experience in the upper echelons of Saudi government and business, Al-Falih has the skills, knowledge and connections to mold it into something more powerful. 

The Saudi government’s investments are currently made by several authorities, most notably by the Saudi Arabia Monetary Authority (SAMA) and the country’s sovereign wealth fund, otherwise known as the Public Investment Fund (PIF). The PIF controls roughly $300 billion with the intention to grow its size to $2 trillion. SAMA, along with functioning as Saudi Arabia’s central bank also manages a sovereign wealth fund with $494 billion in assets, as of 2018. SAMA, unlike the PIF, has taken a typically conservative approach and avoided public attention.

Right now, the Saudi PIF — which is central to the kingdom’s efforts to diversify the economy away from oil — is overseen by Yasir Al-Rumayyan, a close adviser to the crown prince. Investments include some high-profile technology holdings such as Uber Technologies Inc., as well as a $400 million stake in Uber founder Travis Kalanick’s CloudKitchens startup. The PIF sold almost all of its shares in Tesla Inc. right before a massive rally and put $45 billion into SoftBank Group’s first Vision Fund, whose losing bets include WeWork. Al-Rumayyan and the PIF also raised eyebrows recently by tapping Carla DiBello, an entrepeneur and socialite friend of Kim Kardashian West, as an adviser on the fund’s proposed acquisition of Premier League soccer team Newcastle United.

With the appointment of Al-Falih and the creation of the new Ministry of Investment, Saudi Arabia has a chance to heighten its credibility in the business and investment world. In Saudi Arabia’s bureaucracy, the influence and strength of a ministry is largely determined by the ambitions and assertiveness of those who run it. Ministries have long been run as fiefdoms, according to Middle East scholar Steffen Hertog. If Al-Falih exerts influence over the various existing investment authorities in the kingdom, he could exercise some needed oversight.

King Salman could have picked anyone to run this new Ministry of Investment. Choosing Al-Falih, especially after he was let go for reportedly pushing back against the crown prince’s investment agenda, appears to be sending a message that the King expects a change to be made. It was Al-Falih who King Salman tapped to fix the Ministry of Health in just one year after an outbreak of Middle East Respiratory Syndrome (MERS).

Foreign businesses generally have a good impression of Al-Falih, as both a bureaucrat and a businessman. But they shouldn’t take his appointment alone as reason to jump into deals with the Saudi government. Global businesses that are considering opportunities in the kingdom and partnerships with Saudi government investments will need to wait and see what Al-Falih does with this new position. Will he employ the full weight of his authority and try to rein in and oversee the kingdom’s investment authorities? The potential is there, but will he be able to assert himself and his ideas? And if he faces pushback, will he be able to prevail in a power struggle?

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Ellen R. Wald is president of Transversal Consulting and a nonresident senior fellow at the Atlantic Council's Global Energy Center.

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