#SaudiArabia’s PIF writes $8bn off value of flagship megaprojects

Saudi Arabia’s PIF writes $8bn off value of flagship megaprojects

Saudi Arabia’s sovereign wealth fund has cut $8bn from the value of its holdings in the kingdom’s gigaprojects, including its flagship development Neom, as efforts to transform the domestic economy are hit by budget overruns and lower oil prices. 

The Public Investment Fund, the main driver for Saudi Arabia’s economic transformation efforts, said its investments in Saudi gigaprojects were worth $56bn (SR211bn) at the end of 2024, 12.4 per cent lower than a year earlier. The writedown is equivalent to $8bn. 

“There were impairments to certain projects primarily relating to global economic market conditions, changes to operational plans and increases in budgeted costs,” said a person familiar with the matter. 

The PIF owns five so-called gigaprojects, including Neom, which is designed to include a linear city inspired by science fiction. 

The projects are central to de facto ruler Crown Prince Mohammed bin Salman’s plans to modernise the kingdom and diversify the economy to reduce its reliance on oil. 

But Saudi officials have said the kingdom is taking stock of the ambitious projects, as lower oil prices weigh on state spending. Neom’s projects are under review, with many expected to be scaled back and phased out. 

Elements of the $500bn Neom project have faced delays and challenges due to the scale and ambition of the development, which is being built from scratch in a remote area by the Red Sea. 

While there has been robust growth in other sectors in recent years, the kingdom still relies on oil exports for more than 60 per cent of its revenue. 

Ana Nacvalovaite, a research fellow at Oxford university who focuses on sovereign wealth funds, said that geopolitical turmoil and engineering challenges may have affected the PIF’s valuation of its gigaproject holdings. “I don’t think [PIF] are too worried about it, of course it’s a colossal sum of money . . . but there will be some losses before we hit 2030,” she said. 

The fund disclosed the reduced valuations in its 2024 annual report, published on Wednesday. Gross assets under management rose to about $913bn, up 19 per cent from the end of 2023. The gigaprojects account for 6 per cent of the fund’s assets, down from 8 per cent in 2023. 

The rise was driven partly by an increase in the PIF’s holdings of state oil company Aramco during 2024, when the Saudi government transferred an additional 8 per cent stake to the fund, bringing its shareholding up to 16 per cent. 

More than a third of the PIF’s investments were in Saudi companies by the end of last year. 

The holding in Aramco has been under severe pressure as low oil prices bite. Aramco’s shares have lost 14.3 per cent of their value since the start of the year and it has also cut dividends. 

The PIF said that its average annual returns were 7.2 per cent in 2024, down from 8.7 per cent the previous year. Earlier this year, it reported that its net profits had dropped 60 per cent, with the fall driven by higher interest rates, inflation and impairments on projects. 

Nacvalovaite pointed out that Norway’s sovereign wealth fund also reported losses last year, saying the PIF “does not stand alone”. 

The kingdom’s economic modernisation programme, Vision 2030, transformed the PIF from a sleepy state holding company, used to investing in local companies, into a major player at home and abroad. 

But the fund, once known for splashy bets on international golf tournaments and a Tesla rival, has scaled back the global portion of its overall holdings, preferring to focus its efforts domestically. 

International investments accounted for 17 per cent of the PIF’s portfolio at the end of 2024, compared with 20 per cent a year earlier. 

The IMF this month reported that the PIF and Aramco had both repatriated some of their foreign assets in 2024.

Can #Dubai keep its crown as the Middle East’s finance capital?

Can Dubai keep its crown as the Middle East’s finance capital?

As the financial crisis infected economies across the globe in 2009, the Dubai International Financial Centre — with its office towers buttressed by ground floor restaurants — became so sleepy that the offshore district’s denizens jokingly dubbed the Gulf’s banking hub the “Dubai International Food Court”. 

Back then, it took a $20bn bailout to pull Dubai out of its debt crisis. No such rescue was needed after the next great economic contagion. When Covid-19 hit, the autocratic emirate bet that a rapid reopening would lure hordes locked down elsewhere. While bankers in London, Hong Kong and Singapore endured isolation, those in Dubai got to work. 

Today, the Dubai International Financial Centre is heaving. In four and a half years, the DIFC’s number of active registered companies has more than doubled to 7,700; the first half of 2025 was its best for new company registrations. It now counts 47,900 workers — 21,000 more than in 2020 — from gilet-wearing Canary Wharf transplants to traders from Mumbai. 

Almost nobody seems to have expected that the DIFC would get this big — even those who championed its development. “I was here in those early years,” said Ian Johnston, who stepped down in May as head of the Dubai Financial Services Authority (DFSA). “We had no idea that the centre would grow to this size.” 

With offices full, the centre is building 1.6mn sq ft of extra commercial space by 2027. A bald tract of land on its periphery points to further expansion plans. 

But while Dubai has spent decades trying to build a financial centre to challenge the world’s best, the city long defined by boom and bust now has to fend off competition from ascendant cities in its own backyard. 

Abu Dhabi, the United Arab Emirates’ oil-rich capital, dangles its estimated $1.7tn in sovereign wealth funds to attract asset managers and hedge funds. Saudi Arabia, the region’s biggest economy, wants bankers and consultants to make their base in the kingdom instead of flying into Riyadh from glitzy Dubai. 

Dubai believes it has transcended its status as a regional business hub and become a global financial centre, and its relatively diverse and open economy — for decades, an anomaly in the region — has become a test case for mass immigration and a more liberal lifestyle. 

The government is supportive of businesses as long as they “do things properly and work within their rules and regulations, and don’t get involved in politics or get involved in things that are disruptive to the economy or to the population”, said May Nasrallah, a Dubai dealmaker at advisory firm PJT deNovo. 

Both Dubai’s promise in terms of quality of life and its infrastructure are showing the strain of the tens of thousands that have relocated to the city, however. 

Many junior employees feel that salaries have not kept up with rising living costs, while rocketing property prices may be unsustainable. “It’s surprising just how far prices have risen and it makes them more susceptible potentially to a correction,” said James Swanston of Capital Economics. 

More foreign workers are choosing to stay in Dubai for longer, making the city feel less transient but increasing pressure on its road network. Bankers complain about the traffic, which is especially bad around the DIFC: everyone has a story of someone missing a meeting while trapped in gridlock just a few blocks from their destination. 

Dubai’s “sharp rise in population . . . since the pandemic has increased domestic demand”, said Monika Malik, chief economist at Abu Dhabi Commercial Bank, “but also the need for increased critical infrastructure”. 

The increasingly crowded feel has not stopped Chinese banks, for instance, flocking to open branches in the DIFC, along with hedge funds and asset managers. Beyond the DIFC, the emirate’s commodities centre — the Dubai Multi Commodities Centre — has also boomed. 

Some of that growth has been for geopolitical reasons. Russia’s full-scale invasion of Ukraine triggered a wave of émigrés from both countries. Russian traders in particular quit Switzerland for a new base in the DMCC. Others have followed suit. 

Those moves hint at some of the reputational issues Dubai has had to fend off. 

The Russian influx troubled European nations looking to use financial sanctions to pressurise Russia’s President Vladimir Putin, and in 2022 the UAE was placed on a watchlist by the Financial Action Task Force, an anti-money laundering watchdog. 

The country has since been returned to normal status by the FATF. But the low-tax jurisdiction has struggled to shed its image as a dirty money laundry and hub for sanctions-busting. Its multitude of free zones still provide little transparency, despite reforms that followed the UAE’s grey-listing. 

“We’re in a jurisdiction and in a city in a country that’s very open and has an open economy. So we are always alive to the risk of financial crime,” said former regulator Johnston. “We’ve always recognised that it’s the greatest reputational risk.” 

The DIFC has faced its share of scandals too, notably the high-profile collapse of Dubai-based private equity group Abraaj in 2018. The DFSA fined two Abraaj companies $315mn in 2019, accusing them of “serious wrongdoings” including misleading investors. 

Dubai has nonetheless embraced new industries such as cryptocurrency, shunned by many regulators because of its volatility, secrecy and connections with illicit financing. Keen to project itself as an agile financial centre — and to attract freshly minted crypto millionaires — Dubai has introduced regulations to govern them. 

Dubai wanting to be a cryptocurrency hub was “less about the asset class” than the emirate’s desire to establish itself as a centre for the “new economy”, said Deepa Raja Carbon of Dubai’s virtual assets regulator, Vara. 

Among those it licenses is the world’s biggest cryptocurrency exchange Binance, which was fined $4.3bn by US authorities in 2023 for money-laundering failings and international sanctions violations — although Vara only regulates its UAE business. 

Kristian Ulrichsen, an academic who has authored a book on the UAE, said wagers on the new economy were not without risk. 

“The concentration of many of the new arrivals in sectors such as AI or tech may leave the emirate vulnerable to a slowdown should the bets that have been made on the economy of the future fail to pay off,” Ulrichsen said. 

If Dubai does stumble, Abu Dhabi has the Gulf’s original finance capital in its sights. Some executives think the wealthier emirate could benefit from mobile foreigners currently in Dubai who want to live in a quieter city. Abu Dhabi is also trying to outcompete Dubai on regulatory ease. 

“I think DIFC is done, apart from being a nice place to have dinner,” quipped one fund executive, arguing that Abu Dhabi Global Market has a lighter regulatory regime that is more appealing to traders and dealmakers. 

As regional competition becomes more acute, bankers and regulators think the expanding city is looking over its shoulder. 

Dubai was “well aware of what’s happening in other places and other markets and other financial centres”, said Johnston. “They wouldn’t be complacent.”

#SaudiArabia Wealth Fund’s Assets Under Management Jump, Returns Dip - Bloomberg

Saudi Arabia Wealth Fund’s Assets Under Management Jump, Returns Dip - Bloomberg

Saudi Arabia’s sovereign wealth fund solidified its position as one of the world’s biggest state-backed investors as assets surged last year, though returns dropped.

The Public Investment Fund’s assets under management rose 19% to $913 billion at the end of last year, it said in an annual report published on Wednesday. Annualized returns since 2017 fell to 7.2%, down from 8.7% a year earlier.

The fund, chaired by Crown Prince Mohammed bin Salman, is a key vehicle for his efforts to reshape the Saudi economy and reduce its reliance on oil. As part of those efforts, the PIF deployed nearly $57 billion across priority sectors last year, it said in the statement.

International investments made up 17% of its portfolio, down from around a fifth of total holdings last year. That’s in line with PIF’s previously stated plan to reduce the share of global investments, though it has stressed that the absolute dollar value of overseas deals is expected to grow.

The PIF is helming the de-facto ruler’s Vision 2030 agenda, which includes dozens of mega projects such as Neom in the kingdom’s northwest. That mission is becoming more challenging as the government runs fiscal deficits and reins in spending amid lower oil prices. Earlier this year, the PIF said its net profit fell by more than half, hurt by high rates, inflation and impairments on some projects.

The fund diversified its funding sources last year, raising $9.83 billion in public debt and an additional $7 billion in private debt, according to the statement. Still, cash and cash equivalents at the end of the year dropped 5% to around $60 billion.

#Dubai developers bring construction in-house as demand surges | Reuters

Dubai developers bring construction in-house as demand surges | Reuters

In a city famed for transforming desert into skyline, developers are taking the building process into their own hands as they seek to turbo-charge a property boom and maximise cash flow.

A growing number of major UAE developers are setting up in-house contracting firms, after long relying on third-party contractors. The move is aimed at increasing control over construction timelines, costs and quality standards, and ultimately, securing a larger share of profits, though it could also carry risks.

In a previously unreported sign of the trend, Emaar Properties (EMAR.DU), opens new tab, which developed the Burj Khalifa, has established Rukn Mirage under its subsidiary Mirage, a spokesperson told Reuters. Emaar joins developers such as Samana Developers, Ellington, and Azizi, all of which have launched in-house contracting units in the past two years.

Arada, the developer co-founded by Saudi Prince Khaled bin Alwaleed bin Talal Al Saud, also confirmed in a statement to Reuters that they acquired part of an Australian contractor this year and plan to integrate it into UAE operations by 2027.

The shift comes as Dubai’s real estate surges, with prices up 70% over four years to December 2024 and a government plan to double the population to 7.8 million by 2040.

Property launches rose 83% in 2024, though completions fell 23%, industry data shows.

The boom has fuelled a new influx of workers, including migrant labourers mainly from South Asia, with high rates of turnover among expatriate staff. It has also led to fears of a downturn in a sector that remains crucial to the UAE economy.

Developers have been struggling to attract bids from outside contractors, amid stiff competition.

Samana Developers had initially planned to allocate 20% of its projects to its new in-house arm, launched in September. Now 80-90% of its new projects are being handled internally, Chief Executive Imran Farooq told Reuters.

"We used to get 25 or 30 contractors bidding for a project. Today you get hardly two or three," Farooq said.

Emaar, meanwhile, is taking a hybrid approach. While some projects — such as a recently announced residential development — will be executed by their in-house construction arm Rukn Mirage, they will continue to outsource others, founder and Managing Director Mohamed Alabbar said.

Developers are also tapping debt markets to fund land purchases and operations, as billions of dirhams in buyer payments remain in escrow until handover. Funds are released only after final inspections, with a one-year delivery grace period before buyers can claim refunds.

Developers, whose ownership varies and includes founding families, public investors and Emirati sovereign wealth funds, want to complete projects on time to unlock cash needed for shareholder distributions and to pay for expansion in the UAE and beyond.

Developers also want to avoid penalties for delays, which are not disclosed publicly but occasionally reported by local media.

In March, a Dubai court ordered a developer to repay 12.4 million dirhams ($3.38 million) plus interest over an undelivered floating villa, Al Khaleej reported, opens new tab.

Developers say owning the full pipeline — from land acquisition to handover — provides greater certainty in an unpredictable market and aligns with the UAE's push for self-reliance in strategic sectors.

But bringing construction in-house may also carry risks.

"When developers try to become builders, they start splitting focus — and that's when things can get muddy," said Gordon Rodger, founder and managing partner at construction consultancy Stonehaven.

"They end up with teams stretched between land acquisition, sales, marketing, events, PR, funding… and now also procurement, site logistics, health and safety, and huge amounts of sub-contractor management."

Rodger also cautioned that developers could be left with idle construction capacity in a downturn.

"You've got a big factory, a pre-cast yard, a huge joinery division, in-house plant, in-house equipment all sitting idle and you’ve got no work because your master developer can't sell any real estate," he said.

As a result of the shift, independent contractors may seek more work outside real estate in sectors such as in government infrastructure, manufacturing or oil and gas, industry sources said.

Gulf bourses mixed on weaker corporate earnings, Fed rate cut hopes | Reuters

Gulf bourses mixed on weaker corporate earnings, Fed rate cut hopes | Reuters

Gulf equities closed mixed on Wednesday, with Dubai and Abu Dhabi stock markets falling, as a raft of corporate earnings weighed, while Qatar hit over two-year high after U.S. inflation data fueled bets for a September interest rate cut.

A mild July CPI report from the U.S. suggested a limited impact of tariffs on prices, reinforcing bets for the Federal Reserve rate cut in September.

Monetary policy shifts in the U.S. have a significant impact on Gulf markets, where most currencies are pegged to the dollar.

The Qatari benchmark index (.QSI), opens new tab jumped 1.9% to 11,635 and hit its highest level since December 2022, with almost all of its constituents posting gains.

Qatar National Bank (QNBK.QA), opens new tab, the region's largest lender, advanced 2.9% and Qatar Islamic Bank (QISB.QA), opens new tab climbed 3.8%.

"Stocks were buoyed by the positive sentiment globally as investors focused on a softer monetary policy in the U.S.," said Milad Azar, market analyst at XTB MENA.

Saudi Arabia's benchmark stock index (.TASI), opens new tab eased 0.1%, dragged down by losses in real estate, consumer staples, health care and energy shares. Al Rajhi Bank (1120.SE), opens new tab shed 0.9% and Al Nahdi Medical (4164.SE), opens new tab slid 4.8%.

Atheeb Telecom (7040.SE), opens new tab advanced 3.7%, after the telecom services provider said on Tuesday it was awarded a project by the Ministry of National Guard.

The Abu Dhabi benchmark index (.FTFADGI), opens new tab fell for a sixth day, ending 0.1% lower. Abu Dhabi Ports (ADPORTS.AD), opens new tab dropped 3.2%, after the port operator's second-quarter profit declined 4% year-on-year, below market expectations.

Alpha Data (ALPHADATA.AD), opens new tab slipped 2.2%, as the technology services firm posted a 4.9% drop in second-quarter net profit.

Dubai's benchmark stock index (.DFMGI), opens new tab slipped 0.4%, pressured by losses in real estate, industry, utilities and finance. Tolls operator Salik (SALIK.DU), opens new tab dropped 1.9% and blue-chip developer Emaar Properties (EMAR.DU), opens new tab lost 1.7%.

Amlak Finance (AMLK.DU), opens new tab closed as the worst performer on the index, dropping 3.7%, after the real estate financier posted a second-quarter net loss on Tuesday.

Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab was down 0.4%, pressured by a 6.2% drop in Qalaa Holdings (CCAP.CA), opens new tab and a 3.1% loss in Madinet Masr (MASR.CA), opens new tab. Developer MASR posted an 11.9% decrease in half-year net profit on Tuesday.