UAE OVERTAKES SAUDI PIF AS GLOBAL INVESTMENT LEADER, LEVERAGING WEALTH FOR DIPLOMATIC INFLUENCE

Sun 05 January 2025:

Abu Dhabi’s sovereign wealth fund, Mubadala Investment Company, has overtaken Saudi Arabia’s Public Investment Fund (PIF) to become the world’s largest sovereign wealth fund investor in 2024, deploying a record $29.2 billion across 52 deals.

The Saudi PIF, which had previously held the top spot, scaled back its investment spending to $19.9 billion in 2024 — a 37 per cent reduction compared to $31.6 billion the year before. The shift reflects Riyadh’s pivot inward as it prioritises domestic projects under Crown Prince Mohammed Bin Salman’s Vision 2030 plan. This includes the $1.5 trillion Neom megacity project, which has been significantly scaled back, with only 2.4 kilometres expected to be completed by 2030.

In contrast, Mubadala increased its investments from $17.5 billion in 2023 to $29.2 billion last year. Mubadala’s spending spree, focused on sectors such as artificial intelligence, private credit and healthcare, accounted for nearly 20 per cent of the $136.1 billion spent globally by sovereign wealth funds last year. This surge highlights the UAE’s growing ambition to dominate emerging industries on the international stage.

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Mubadala is part of the UAE’s sovereign wealth ecosystem, which collectively manages assets worth $1.7 trillion, placing the country among the world’s wealthiest. Beyond its economic ambitions, the UAE is increasingly leveraging its sovereign wealth to achieve geopolitical influence, particularly in the West.

Sovereign wealth funds like Mubadala and the Abu Dhabi Developmental Holding Company (ADQ) have adopted strategies that blur the line between economic investment and political diplomacy. These funds use their financial power to cultivate relationships with influential governments, corporations and institutions, securing not only returns but also strategic sway in international affairs.

In the US, Mubadala’s partnership with Apollo, led by prominent investor Marc Rowan, exemplifies this approach. Rowan’s close ties to American political circles, including being a potential Treasury secretary under Donald Trump, position Mubadala as a key player in shaping US-UAE relations. Similarly, the UAE’s strategic investments in sectors like artificial intelligence and renewable energy align with the policy priorities of Western governments, ensuring that the UAE remains an indispensable partner.

ADQ has taken this a step further by tying investments to direct diplomatic outcomes. In Egypt, ADQ’s $24 billion rescue package not only stabilised the country’s economy but also enhanced the UAE’s standing in Washington by demonstrating its ability to influence IMF negotiations. Such manoeuvres highlight how sovereign wealth funds can function as instruments of soft power.

The UAE has also used its wealth to shape perceptions and policies in Europe. Recent deals with Turkiye, such as funding a railway across the Bosporus Strait, align with the EU’s goals of enhancing trade connectivity between Asia and Europe. These investments, while economically sound, also position the UAE as a critical intermediary in global trade, ensuring that its interests are prioritised in future diplomatic negotiations.

Critics argue that such strategies raise questions about transparency and accountability. Sovereign wealth funds, while ostensibly economic entities, are increasingly being used to influence foreign governments and international institutions. The UAE’s ability to wield its funds for political gain reflects a broader trend among SWFs globally, where financial power is increasingly translating into geopolitical clout. By combining economic investments with foreign policy objectives, the UAE has positioned itself as a model for countries seeking to expand their influence through wealth.

-MEMO

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