Investors and businesses looking to cash in on Saudi Arabia’s oil wealth and economic diversification plans should be wary of its Public Investment Fund’s (PIF) ultimate decision maker – the de facto Saudi ruler, Crown Prince Mohammed bin Salman.
The crown prince has consolidated unprecedented state economic power under his sole decision-making through the PIF, with few, if any, constraints on how he deploys his nation’s wealth, our research has found.
This mercurial autocrat effectively has singular, unfettered control of what may soon be the largest sovereign wealth fund in the world. And while the Saudis haven’t had any international scandals lately — the crown prince hasn’t ordered any journalists dismembered or locked up princes in the Ritz until they turned over their businesses in at least a few years — there is immense risk in the crown prince’s personalized control over nearly a trillion dollars in Saudi sovereign wealth.
For decades, Human Rights Watch has documented how a centrally controlled revenue stream, such as oil, can exacerbate a ruler’s worst abuses and misrule by providing the financial resources for enrichment without accountability and transparency. Poor economic decision-making, mismanagement, corruption and human rights abuses thrive. There is no more consequential example than Saudi Arabia’s Public Investment Fund.
Mohammed bin Salman uses the fund to pursue his interests, with few, if any, guardrails. The crown prince is the chairman of the PIF’s board of directors; and he chairs the body that oversees the board, the Council on Economic and Development Affairs. He is also the country’s prime minister, which grants him the authority to appoint all board members with no oversight. His is the only name needed on the PIF’s organizational chart.
The crown prince’s authority over the PIF is mirrored by a broader consolidation of his power over the country’s political and security institutions.
Major PIF investments have involved unilateral decision-making by the crown prince, despite protests from the board of directors and professional advisers. The crown prince has circumvented governance procedures and gone straight to the king when the board opposes his decision. But that may rarely happen because many board members were appointed to their current positions after King Salman succeeded to the throne and his son assumed increasing power; and many are close personal confidants of Mohammed bin Salman.
Some of his decisions are questionable. In early 2020, the crown prince wanted the PIF to buy specific stocks as the markets plummeted during the onset of the global pandemic. In an interview, Yasir al-Rumayyan, the PIF’s governor, said that the board of directors voted against the move because it was seen as too risky but that the crown prince “took the matter to the King” who issued a decree, allowing the crown prince to bypass the PIF’s governance framework.
We have also documented rights abuses directly tied to the PIF, raising serious concerns for investors with any possible links to abuses in Saudi Arabia. Documents show that in 2017, one of Mohammed bin Salman’s advisers ordered al-Rumayyan, then the Fund’s supervisor, to transfer 20 companies that were captured as part of the “anti-corruption campaign” directly into the Fund. There is a risk that these companies were seized from their owners without due process.
The documents also indicated that one of the companies transferred to the PIF was Sky Prime Aviation, a charter jet company that owned the two planes used in 2018 by Saudi agents to travel to Istanbul, where they murdered Jamal Khashoggi, the Saudi journalist who was critical of the Saudi government.
Given that there are few if any domestic checks and balances on the crown price’s decision-making power over the PIF, money managers and executives need to make sure that they carry out their own extensive, thorough, and independent human rights due diligence and other protections before engaging in any business activities with the PIF. Ultimately, firms should refrain from doing business with the PIF if they conclude that serious adverse rights impacts are unavoidable.