Saudi Arabia's decision to merge the two state-managed funds for pensions and social insurance will lead to the creation of a new entity, which will possess a substantial portfolio of local and foreign stocks valued at approximately 110 billion riyals (the dollar is equivalent to 3.75 riyals). Last Tuesday, the Saudi Cabinet approved the merger of the General Organization for Social Insurance (GOSI) and the General Organization for Retirement.
Finance Minister and Chairman of the GOSI, Mohammed Al-Jadaan, stated in a statement that this merger will enhance investment returns, reduce costs, and help diversify them.
**Portfolio Including Stocks, Bonds, and Real Estate**
The two funds hold significant stakes in Saudi companies, including a combined stake worth $8.5 billion in National Commercial Bank and a $4.3 billion stake in Al Rajhi Bank, according to Bloomberg data. They also have investments worth $207 million in the coronavirus vaccine manufacturer AstraZeneca and $170 million in HSBC Holdings. Their portfolios also include real estate and bonds.
Recently, Saudi Arabia has been taking successive steps to merge and restructure several entities, aiming to enhance efficiency as part of its strategy to diversify the economy away from oil. Meanwhile, the Public Investment Fund, the country’s sovereign fund valued at $430 billion, is focusing on investing in new industries within the Kingdom, alongside acquiring stakes in international companies.
Additionally, Saudi Arabia has placed several local funds focused on specific sectors, such as real estate, industry, and agriculture, under the umbrella of the National Development Fund to reduce overlap and lower costs.
**Administrative Reform and Restructuring**
Nader Al-Wuhaibi, Assistant Governor for Insurance Affairs at the Saudi Social Insurance Institution, stated in remarks to Al Sharq TV that the merger of the General Organization for Retirement into the Social Insurance Organization is part of the reform plans and administrative restructuring aligned with Saudi Vision 2030. He clarified that the merger will result in one of the largest Saudi investment funds, estimated to be worth billions of riyals.
He explained that merging the investments between the two institutions, approved by the Cabinet yesterday with such a large financial volume, will contribute to maximizing returns and reducing expenses by tens of millions of riyals. According to data from the Social Insurance Institution, the number of contributors who are currently employed in the private sector is 8.32 million as of the end of Q2 2020. In comparison, the number of contributors in the General Organization for Retirement was more than 1.2 million employed individuals by the end of Q1 2021.
