Getting a successful vaccination campaign to coincide with economic stimulus measures, that will ensure a smooth return to normal, is one risk factor facing emerging countries around the globe, said Yasir Al-Rumayyan, governor of Saudi Arabia’s Public Investment Fund (PIF), one of the largest sovereign wealth funds in the world. For India, a worry in the immediate post-covid context is maintaining the momentum of investments. The PIF governor, however, said that he sees a lot of promise in India, in its startups, digital economy and growing infrastructure. Edited excerpts.
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What do you think is the biggest risk factor in emerging economies? Where does India sit among emerging market economies in terms of promise?
The impact of covid-19 has been unparalleled across the global economy. However, it remains the most uncertain in emerging economies. There are two risks that emerging economies face. The first is the successful roll-out of a vaccination programme timed with an economic stimulus that ensures a smooth ‘return to normal’ and not a stop-start experience that will delay growth and undermine business and investor confidence.
The second is the impact covid-19 will continue to have on government budgets/deficits and indirectly on currency valuations.
India, like other BRICS nations, is seeking to invest its way out of the recession caused by covid-19 to stimulate growth. In the case of India, the focus of the government on investments in healthcare with a 137% increase in spending and in infrastructure and connectivity, such as the 13,000 km of new road and rail are emblematic of a prudent national investment agenda that will boost productivity in the long term while stimulating growth in the short term. Maintaining the investment momentum in the face of fiscal concerns is another key concern. Attracting foreign investment is a key mitigator to these concerns but also a long-term accelerant to growth.
We see a lot of promise in India, specifically with its innovative startups, the potential of the Indian digital economy and its growing infrastructure. We see likely future opportunities in traditional infrastructure that will harness and coalesce the growing population and talent, including through increased connectivity and economic stimulus around new transportation and logistics.
As a long-term investor, the market fundamentals for many EMs such as India remain unchanged or improved on a relative basis. Our outlook for India is very positive.
What was the exposure of PIF in India prior to the pandemic? Are you looking at any changes post the pandemic?
We see significant potential for India to recover post-pandemic and we will continue to explore investing in several sectors in the country.
In June 2020, we invested nearly $1.5 billion in Jio Platforms, which gives us access to the hugely exciting Indian digital economy.
As recently as November 2020, we invested $1.3 billion in India’s Reliance Retail. We are pleased to further our trusted partnership with Reliance Industries, the leading player in some of India’s most exciting sectors. The deal demonstrates PIF’s commitment to long-term investing and partnering with innovative businesses.
What are the prospects of investing in India’s infrastructure sector?
Infrastructure is a vital component of emerging economies and we see a lot of potential in India’s infrastructure sector, particularly its digital infrastructure. We recently invested $500 million in the Digital Fiber Infrastructure Trust (DFIT), the infrastructure investment trust that holds Reliance Jio’s telecom fiber assets. Jio Platforms provides us with an excellent opportunity to support the growth of the Indian digital economy.
In Saudi Arabia, we are similarly focused on stimulating activity via the creation of economic or growth corridors. These enable connectivity creating new employment opportunities, including within manufacturing and logistics. Alongside our partners, we will look to identify similar investments within India that may have broad synergies with our own endeavours while creating long-term returns.
Given the pandemic, what factors will you most take into consideration while looking at making investments?
We believe that there is an important role and opportunity for us to actively support markets, industries, and businesses by deploying significant capital over a long-term horizon.
In 2020, we identified opportunities created by the pandemic and invested in a range of public companies and exchange traded funds (ETFs) across sectors that we believe are positioned to help lead global economic recovery.
As a patient and long-term investor, we are able to invest and provide capital to the companies and sectors that we believe are best-positioned to lead the global economic recovery. These investments will generate long-term financial returns that will help diversify the Saudi economy away from oil, which PIF is driving as part of its mandate, while localizing sustainable skills, investment and jobs of the future for Saudi citizens.