Frankly Speaking: SoftBank Vision Fund accelerating hi-tech investment, globally and in Saudi Arabia, says CEO

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Updated 13 June 2021

Frankly Speaking: SoftBank Vision Fund accelerating hi-tech investment, globally and in Saudi Arabia, says CEO

  • Rajeev Misra made the remarks on Frankly Speaking, a series of video conversations with leading decision-makers
  • Speaking of Saudi Arabia, he said “It’s a 30 million population, it’s young, it’s growing. You have dynamic leadership”

DUBAI: More multibillion-dollar Vision Funds that will invest in high-technology startups around the world, including in Saudi Arabia, are being planned over the coming years.

Rajeev Misra, the chief executive of the business that currently oversees $130 billion of high-tech global investment, told Arab News that further funds are planned once the cash from Vision Fund 2 is fully invested. “There will be many Vision Funds over the next many decades,” he said.

Interviewed on Frankly Speaking, the series of video conversations with global decision-makers, Misra also revealed plans for the fund’s first investment in a Saudi company, its strategy to bring jobs and company start-ups to the Kingdom, and his desire to entice big Middle East investors back into the funds.

“We exist because of them. The Vision Fund is a joint effort by our two major partners — the Kingdom of Saudi Arabia and Mubadala of the UAE — and whenever they decide to join in the next one, we’ll be ecstatic,” he said.

Saudi Arabia’s Public Investment Fund was the biggest backer of the first Vision Fund, with a stake of $45 billion out of a total of roughly $100 billion, but both it and Mubadala declined to join Vision Fund 2, which launched with a $30 billion investment wallet backed by SoftBank of Japan.




Rajeev Misra

Once Vision Fund 2 is fully invested — roughly $20 billion has so far been spent — Misra and his team will look to other funds. “There will be Vision Fund 3, there will be Vision Fund 4. The important thing is to create an infrastructure of 450 employees in 11 offices who can continue the work for the next 10 or 12 or 20 years,” he said.

Misra’s confidence has been boosted by the big contribution he made to the profits of SoftBank of Japan recently. Legendary investor Masayoshi Son, founder and chief executive of the financial giant, reported the biggest ever profit by a Japanese company, $46 billion, with the bulk of that coming from Vision Fund gains.

Misra acknowledged that Vision Fund has benefited from the strong financial markets of the pandemic crisis, when governments intervened with big stimulus packages and technology stocks boomed because of new working and travel patterns.

 

“COVID-19 last year validated our vision and accelerated it dramatically. It would have happened anyway; it just accelerated (things) by a few years. The pandemic catalyzed the adoption of digital services. The markets helped. The buoyancy of the markets is important, but the companies have to do well. A bad investment even in a good market does not make you money,” Misra said.

The Vision Funds enjoyed a string of successful initial public offerings (IPOs), notably the multibillion-dollar profit it made on the public offering of South Korean e-commerce group Coupang in New York.

“We had several IPOs that had huge profits in the past five months. Coupang is an exciting outcome and it is an amazing story because we stuck with Coupang even when they were not doing well,” Misra said.

The investments by the PIF and Mubadala in 2018 were motivated partly by the desire for financial returns in the fast-growing technology sector, but also by the need to create jobs and attract corporate start-ups in the Middle East from Vision Fund portfolio companies.

Misra told Arab News that he was “on the cusp” of the fund’s first investment in a Saudi company — a messaging company — but he declined to give details until the company itself made the announcement. A deal could be announced in the course of the next week, he added.

“I believe we have created thousands of jobs from our portfolio companies in the region, whether it’s in construction, whether it’s in hospitality or technology. And we work very closely not just with the PIF but also with the Ministry of Investment in doing so. We are a four-year-old fund, so this will continue over the next many years,” he said.

 

Misra is a trustee of the King Abdullah University of Science and Technology (KAUST). “It is one of the top science universities in the world. There’s amazing talent in Saudi Arabia,” he said.

“There are limitless opportunities to invest across all sectors. It’s a 30 million population, it’s young, it’s growing. You have dynamic leadership. Riyadh has ambitious plans to become the business hub of the region.

“The recent announcement to attract the regional headquarters involved huge incentives that support relocation. I mean Riyadh was recently recognized in the top 15 most entrepreneurial cities. Globally I think it’s attracting tremendous foreign investments, including as I said from the Vision Fund, with our first investment in a local company.”

Misra was adamant that the fund’s basic strategy — of investing in early stage high-technology companies — was the right one, and dismissed any suggestion of a crash in the valuations of the technology sector.

“The technology revolution is just accelerating. Not just with your regular industries like e-commerce or food delivery, but it’s accelerating within life sciences. In major industries, what are the two biggest industries that impact our GDP? Healthcare and education,” he said.

“Over the next five years, hundreds of billions of dollars in value will be created in customized health care, in reducing the cost of health care, and in personalized medicine.

“Also in democratizing online education, where education is accessible and will fuel quality education online. You will have online high schools and colleges providing Ivy League education globally. We believe AI will transform every industry in the world.”

“Technology is going nowhere. Technology is like what the human DNA is to your daily existence — it is intertwined with you. Either you adopt it or the business goes bust.”

The Vision Fund suffered some high-profile governance issues in the past, notably the demise of the IPO of WeWork in 2019 and subsequent revelations about conflicts of interest involving the founders of the office-space company. Some critics said that they detected a “Wild West culture” at Vision Fund portfolio companies.

Misra disagreed with that label. “In Fund 1 we have 85 portfolio companies. In Fund 2 we have 70 or 80 companies. We take minority stakes in those companies. We don’t run those companies. We sit on the boards. We do keep an eye on them but we don’t day-to-day run those companies.

“But we did make some mistakes and we learnt from it. Since then, we have undergone a major turnaround and now we make sure there are no conflicts of interest with the founder.”




Frank Kane

On the current craze for special purpose acquisition companies (SPACs), which some have called “blank check” companies, he said that there were benefits from accelerating the progress toward a stock market listing, but pointed out that no Vision Fund portfolio companies had used the fund’s own SPAC to go public.

“The most important message here is for a company, once you go public, you have to be ready and you have to be prepared to go public. You have to understand that you have to get up every quarter and explain to the analysts and the shareholders how you have performed,” he said.

Misra was keen to pay tribute to Son, the SoftBank founder who is often described as a “visionary” in the world of high-tech investment. He recalled how Son invested billions in a small mobile phone operator in Japan in 2006, just before the smartphone was launched.

“He said, ‘Rajeev, you don’t understand. Computing is going to move to the hand from the desktop. People are not going to be working off their desktop anymore. They’re going to use phones to compute, and I see that over the next 10 years and I’m willing to take that bet.’

“This shows you the nature of his vision — he saw 10 years forward and was willing to take a $20 billion investment in a highly competitive market when the market cap of SoftBank was $9 billion.”

Misra added: “That was 15 years ago, and it all came true.”

_____________________

Twitter: @frankanedubai

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Saudi Arabia starts trial of the first wind turbine in Al-Jouf

Updated 05 August 2021

Saudi Arabia starts trial of the first wind turbine in Al-Jouf

  • Dumat Al-Jandal is poised to become the largest wind farm in the Middle East

RIYADH: Saudi Arabia has started the operational trial of the first wind turbine at Dumat Al-Jandal wind farm, which once fully operational will reduce CO2 emissions by nearly 1 million tons annually and supply 72,000 homes with clean energy.

The turbines comprise towers, blades, and nacelles, which will be assembled at the project site, 900 kilometers north of Riyadh in the Al-Jouf region. The project will include 99 Vestas wind turbines, each with a hub height of 130 meters and a rotor diameter of 150 meters.

The Kingdom’s first utility-scale wind-power source is being developed by a consortium led by EDF Renewables of France in partnership with Abu Dhabi-based Masdar. The Renewable Energy Project Development Office of Saudi Arabia’s Ministry of Energy awarded the project to the EDF Renewables-Masdar consortium in January 2019 after a competitive tender.

Its tariff of $21.3 per megawatt-hour (MWh), the lowest bid submitted, was reduced to $19.9/MWh at financial close, making Dumat Al-Jandal the most cost-efficient wind-energy project in the world. According to the US-Saudi Arabian Business Council, the development of Saudi Arabia’s renewable energy sector could create up to 750,000 jobs over the next decade, as the Kingdom pushes to generate 7 percent of its total electricity output from renewables by 2030.

It will also benefit from a 20-year power purchase agreement with the Saudi Power Procurement Co., a subsidiary of the Saudi Electricity Co., the Kingdom’s power generation and distribution company. Saudi Arabia’s renewable energy program aims to contribute to a sustainable future, preserve nonrenewable fossil fuel resources, and safeguard the Kingdom’s international energy leadership, according to the King Abdullah City for Atomic and Renewable Energy. That way, the program aims to ensure greater long-term global energy market stability.

Renewable energy projects, including wind and solar, are planned across more than 35 parks in Saudi Arabia by 2030.


Saudi youth move away from cash, says report

Updated 05 August 2021

Saudi youth move away from cash, says report

  • Revenue in the Saudi e-commerce market is projected to reach $7.05 billion in 2021, according to data firm Statista

RIYADH, DUBAI: Saudi youth are increasingly drawn toward using digital payment channels rather than cash, a trend indicating that the Kingdom’s plan to create a cashless society is on course.

Only 18 percent of Saudis aged between 16 and 22 years use cash, while almost half of the people who are 60 and above still prefer using cash, a report by Fintech Saudi showed.

The report also showed that only 20 percent of the population in the central region of Saudi Arabia, which includes the capital Riyadh, use cash in their everyday transactions, while 37 percent of those living in the western region, use paper money in their daily dealings.

The use of paper currency is declining at a rapid pace.

Fintech Saudi survey results showed that around 60 percent of individuals Kingdom-wide still use paper money at least once a week and one out of four people in Saudi Arabia uses cash every day.

Under Saudi Vision 2030, the Kingdom aims to increase the number of non-cash transactions to 70 percent by 2025.

“The coronavirus disease (COVID-19) outbreak has led to an acceleration in cashless activity with digital payments increasing by 75 percent over the last year, while cash withdrawals from ATMs and other payment points have declined by 30 percent over the same period,” the report said.

Revenue in the Saudi e-commerce market is projected to reach $7.05 billion in 2021, according to data firm Statista. 

The numbers are expected to show an annual growth rate of 5.38 percent in the coming years, resulting in a projected market volume of $8.69 billion by 2025.


Gulf economies expected to grow 2.2 percent this year, says World Bank

Updated 05 August 2021

Gulf economies expected to grow 2.2 percent this year, says World Bank

  • Most GCC countries are expected to continue to post deficits over the coming years
  • The countries that posted the largest deficits in 2020 — Bahrain, Kuwait and Oman — are expected to remain in deficit until 2023

RIYADH: Economies of the Gulf Cooperation Council (GCC) will likely grow at an aggregate 2.2 percent this year after a 4.8 percent contraction last year caused by the pandemic and lower oil prices, the World Bank said on Wednesday.

“With recent progress made with the rollout of the COVID-19 vaccine globally and with the revival of production and trade worldwide, the prospects for an economic recovery are firmer now than at the end of last year,” it said in a research report.

“Although downside risks remain, the forecast stands for an aggregate GCC economic turnaround of 2.2 percent in 2021 and an annual average growth of 3.3 percent in 2022–23.”

It remains vital for GCC countries — which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the UAE — to diversify their economies, the World Bank said, as oil revenues account for over 70 percent of total government revenues in most GCC countries.

It said it expects Kuwait and Qatar to introduce a value-added tax (VAT) this year, following the example of other GCC states that have implemented the revenue-diversifying measure in different phases over the last few years.

On the fiscal side, most GCC countries are expected to continue to post deficits over the coming years, the World Bank said, after shortfalls intensified last year because of the coronavirus crisis.

The countries that posted the largest deficits in 2020 — Bahrain, Kuwait and Oman — are expected to remain in deficit until 2023, but with narrower ratios than in the 2020 downturn. While a rebound in oil prices may lift economic prospects in the short term, the World Bank said downside risks to its outlook are “extremely high” because of the region’s heavy exposure to global oil demand and the service industries.

“Mobility restrictions including for international travel may hurt attendance at future high-profile events in the GCC — the 2020 (rescheduled to 2021) World Expo in the UAE and the 2022 Federation Internationale de Football Association (FIFA) World Cup in Qatar,” it said.


SABB records net profit of $504 million

Updated 05 August 2021

SABB records net profit of $504 million

JEDDAH: The Saudi British Bank (SABB) recorded a net profit after zakat and income tax of SR1,889 million ($504 million) for the six months ended on June 30, 2021.

This is an increase of SR7,785 million or 132 percent compared to the loss of SR5,896 million for the same period in 2020.

Operating income of SR3,984 million for the six months ended June 30, 2021, a decrease of SR703 million, or 15 percent, compared to SR4,687 million for the same period in 2020.

Lubna Suliman Olayan, board chair of SABB said: The bank’s “performance in the second quarter of 2021 builds on the progress made in the first quarter of the year, as we continue the implementation of our five-year strategic plan.”

She said the bank is now focused on supporting the Kingdom’s economic transformation.


Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Updated 04 August 2021

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

  • The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate

ALEXANDRIA: The Central Bank of Yemen in Aden has injected billions of riyals in old large-sized 1,000 banknotes into the market to address a chronic shortage of cash.

The bank also implemented several other economic measures to control the chaotic exchange market and put an end to the fall in the Yemeni riyal.

Since late 2019, the Iran-backed Houthis have banned the use of banknotes printed by the Yemeni government in Aden, creating a severe cash crunch in areas under their control which has led to local exchange firms and banks stopping paying salaries and raising remittance charges.

The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate and carrying Saudi riyals or US dollars.

In a challenge to the Houthis, the central bank has put billions of riyals in old banknotes into the market and started withdrawing the newly printed 1,000 banknote. Yemenis can get old banknotes from local banks and exchange firms.

However, the Houthis warned people against using the large banknotes and published copies and serial numbers of the newly circulated cash.

In a bid to regulate the exchange market and curb the plunging value of the riyal, the central bank has tightened regulations for opening new exchange shops or firms, demanding that applicants produce a three-year feasibility study prepared by a certified accountant showing estimated budgets.

Existing exchange companies must now send their annual financial statements to the bank, use an approved software for their financial activities, apply international financial reporting standards, and audit their accounts by accountants certified by the central bank.

Some Yemeni economists, however, have cast doubt over the central bank’s ability to enact the regulations after the Yemeni riyal on Wednesday broke another historic record low against the dollar.

Local money traders told Arab News on Wednesday that the Yemeni riyal was trading at 1020 to the dollar in government-controlled areas, compared to less than 980 a month ago. When the war broke out in late 2014, the Yemeni riyal was sold at 215 to the dollar.

The Yemeni government previously relocated the central bank’s headquarters from Sanaa to Aden, floated the Yemeni riyal to bridge the gap between the official rate and the black market, closed many exchange shops, and printed billions of riyals to pay public servants. But all the measures proved ineffective on the ground as the Yemeni riyal continued to drop.

Waled Al-Attas, an assistant professor of financial and banking sciences at Hadhramout University, told Arab News: “The central bank is required to control the market and close unlicensed exchange shops in parallel with tightening control and procedures on existing exchange entities.”

He noted that the latest injection of cash into the market had boosted foreign currency speculation activities and pushed up inflation.

“The large 1,000 banknote that the central bank pumped into the market represents an additional burden and additional liquidity that will cause more inflation, higher prices, and speculation on exchange rates,” he added.

The continuing devaluation of the Yemeni riyal has pushed up food and fuel prices in government-controlled areas and triggered protests.

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