Is the 2026 slowdown a deliberate Saudi restructuring?

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WHAT WE’RE TRACKING TODAY

KAFD’s cooling assets are on sale:

Good morning, folks. We’re leading today’s packed issue by questioning whether the 2026 slump should be blamed on regional tensions or whether it is due to a deliberate structural reorganization. A contrarian (and bullish) take from TMF’s Saudi head reframes the slowdown as a growing pain, signaling a healthy, expanding economy.

PLUS- The government capped work visas for new firms at five, linking future visa availability to compliance with Saudization rates and 10 specific operational conditions.

PIF’s diet could cost consultants

Consultants are set to lose substantial revenue over the PIF’s strategy recalibration, and one stands to lose the most. Boston Consulting Group (BCG) could miss out on hundreds of mns of USD as the Public Investment Fund (PIF) tightens its budget, Bloomberg reports, citing unnamed sources. The fund is reducing its reliance on external advisers, with BCG expected to witness a stronger hit due to its sizable collaboration with PIF over the past few years.

Trimmed, but not severed: The PIF has not completely cut ties with consultants, with BCG still involved in some work linked to major developments, including Neom, the sources said. Meanwhile, despite the slowdown, giant consultants like BCG and McKinsey remain well-positioned in the region due to their growing exposure to the private sector.

It’s all part of the plan: The fund is adopting a more disciplined approach to megaprojects, shifting its focus toward profitable investments, strengthening local champions, and developing strategic sectors under its new strategy. The pivot comes as Saudi Arabia faces a widening fiscal deficit, geopolitical uncertainty weighing on foreign investment and oil exports, and a broader push to trim reliance on international deployments, limit volatility, and improve long-term stability.

Gulf’s cooling sector heats up

KAFD’s cooling assets are on sale: The King Abdullah Financial District (KAFD) is advancing talks to sell its district cooling business for USD 500 mn, Bloomberg reports, citing unnamed sources. The sale has already drawn competitive interest from UAE-based Tabreed as well as PIF’s own subsidiary Saudi Tabreed District Cooling Company, with Standard Chartered advising on the process.

Cooling projects are having a moment: In Riyadh, the Kingdom is preparing the Riyadh cooling project next year, which aims to decrease pavement and building temperatures by up to 15 degrees. Meanwhile, Qatar is looking to consolidate its own infrastructure, with state-backed Qatar Cool and Marafeq reportedly exploring a merger to create a local giant, Bloomberg says, citing people familiar with the matter. The industry is also heating up across the UAE, with Tabreed and CVC DIF acquiring Pal Cooling Holding last year in an AED 3.8 bn deal.

Data point

10.6% — that’s how much the Kingdom’s Operating Revenues Index rose y-o-y in April, according to Gastat’s Short-Term Business Indicators report (pdf). The annual increase was driven mainly by gains in mining and quarrying (22.5%), financial and ins. activities (14.2%), manufacturing (10.3%), wholesale and retail trade and motor vehicle repair (6.9%), and construction (5.4%).

ALSO- The Employees Compensation Index climbed 10.1% y-o-y, and issued building permits jumped 28.2% y-o-y.

Sports

Saudi Arabia lost 4-0 to Spain last night in their second match of the 2026 World Cup, with Lamine Yamal scoring Spain’s first goal of the match in just 10 minutes. Two more strikes by Mikel Oyarzabal were followed by an unfortunate own goal by KSA’s Hassan Al Tambakti. The Green Falcons will face Cabo Verde next Saturday at 3am.

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The big story abroad

Ongoing US-Iran peace talks in Switzerland have made “encouraging progress,” establishing a 60-day roadmap for a final agreement, mediators said. The parties agreed to set up a communication line for safe shipping through the Strait of Hormuz and a “de-confliction cell” with Lebanon to help maintain the halt in military operations.

Talks had looked incredibly fragile just hours earlier. US President Donald Trump threw a wrench into the negotiations, threatening to restart strikes and demanding Tehran stop Hezbollah from “causing trouble.” The Iranian delegation reportedly paused negotiations in response to Trump’s threats.

SpaceX flunks ESG metrics: Elon Musk’s SpaceX received the lowest possible environmental, social, and governance (ESG) rating from index provider MSCI, scoring a triple C. The report found that the company is “lagging its industry based on its high exposure and failure to manage significant ESG risks,” and is indirectly involved in one or more serious controversies.

Wars are changing the way VCs look at defence startups: Defence technology startups are attracting USD bns as investors flock to the sector amid drone-heavy wars in Ukraine and the Gulf. Sector companies have raised USD 12.3 bn from VC funds so far this year, already eclipsing last year’s full-year total of USD 10 bn.

It’s shaping up to be a boom year for the box office, with estimates now expecting US theaters to rake in some USD 4.5 bn this year, the highest figure since the Covid-19 pandemic six years ago, thanks to a string of blockbusters, the latest of which is Disney’s Toy Story 5.

Supposed to hurt

The 2026 slowdown that has unnerved investors in Saudi Arabia is a deliberate restructuring rather than fallout from regional conflict — at least according to the firm tasked with getting foreign companies to set up in the Kingdom. Omer Saleem, country head for Saudi Arabia at corporate-services provider TMF Group, tells EnterpriseAM that the soft patch was planned and is healthy for an economy that has run hot for years.

Saudi Arabia has been undergoing a structural reorganization since 3Q 2025, one the market has misread, Saleem says. “People are focusing on the conflict, but… this restructuring was due, and it’s a healthy development if you want to keep growing over the next five years.” The pain is the point: “These changes don't come without pain.”

Saleem’s read is a bullish one: TMF earns its fees from onboarding the companies betting on Saudi, and its own book in the Kingdom has grown at double-digit y-o-y rates for three straight years. That, he said, is why a correction was overdue. “You cannot expect everything to just keep going up.”

Why it matters: The call cuts against the dominant narrative — that the regional security picture is what’s weighing on the Kingdom this year. If Saleem is right, the investors waiting for the conflict to clear before committing capital are watching the wrong variable.

More and more Asian companies are riding out the adjustment. Inbound demand has tilted toward Asia-Pacific markets over the past four years — China, Singapore, Indonesia, and India — after a decade dominated by North America and Europe. “The majority of the business we were seeing in the last 10 years was [from] North America and Europe,” Saleem said. “Now, we're starting to see a lot of it come from APAC.” The interest spans tech, logistics, pharma, industrial services, and smart manufacturing. TMF has onboarded entrants from fast-fashion retailer Shein — which set up in a Saudi special economic zone — to suppliers tied to Lucid Motors.

The bigger prize, and the bigger holdup, is capital markets. Saleem expects financial services to rank among the most attractive sectors over the next four years, with the Saudi Central Bank and the Capital Market Authority moving fast to upgrade the framework. But clients are holding back pending reforms in two specific areas — freezones and a common-law venue.

SOUND SMART- A common-law venue is a ring-fenced financial zone with its own English-language courts and rules, carved out of a country’s onshore legal system. Dubai’s DIFC and Abu Dhabi’s ADGM are the regional templates, and firms can opt into their courts by contract, even on deals with no physical link to the zone. It’s that predictability, not the tax breaks, that draws fund managers and asset servicers.

BACKGROUND- Saudi Arabia is chasing USD 100 bn in annual FDI by 2030, a target it has yet to hit even as the headline programs overshoot. More than 700 multinationals have now established regional headquarters in the Kingdom against an original goal of 500.

What’s next? Saleem is watching 4Q 2026 for the first signs of the restructuring paying off. His advice to anyone rattled by the soft year is to treat it as structural. “If you operate in Saudi and you have a long-term vision, you have to prepare for these. They come every five, six years.”

Hire local first, then scale foreign

The Human Resource Ministry’s Qiwa platform has capped instant work visas for newly established businesses at five — tying foreign recruitment capacity to Saudization compliance from day one, the Saudi Gazette reports. Companies less than two years old are now limited to five instant visas, but those operating for more than two years can access up to 50 per week through single or multiple applications at entity level.

The incentive structure is straightforward: Businesses enrolled in the establishment program start with two visas, with headroom expanding as Saudization rates improve. The more locals hired, the more foreign recruitment capacity is unlocked.

Qiwa set out 10 conditions for firms seeking to recruit non-Saudi workers — active operations, valid employee work permits, valid commercial registration where required, Medium Green Nitaqat classification or above, Wage Protection Law compliance, sufficient financial credit on Interior Ministry platforms, completed annual self-assessments for eligible firms, employee location registration through Qiwa, an employer aged 18 or above, and an available recruitment quota for the visa type requested.

SOUND SMART- Nitaqat classifies Saudi companies into color-coded bands — Platinum, High Green, Mid Green, Low Green, and Red (non-compliant) — based on the share of Saudi nationals in their workforce. The higher the band, the more access a company gets to foreign recruitment visas and other government services.

Three visa categories apply — permanent work visas for long-term contracts, temporary work visas for engagements of three months or less, and Hajj and Umrah seasonal visas subject to ministry approval.

Why it matters: New businesses can no longer import a founding team and figure out Saudization later — the local hiring requirement now kicks in at inception. It’s the earliest stage the compliance regime has reached.

REMEMBER- The Kingdom set a target to increase nationalization rates in 269 professions across sectors including engineering, dentistry, accounting, and pharma. The Human Resources Ministry later expanded its 100% Saudization mandate to cover 69 administrative support professions. Meanwhile, the localization rate for marketing and sales professions is now 60% for private sector firms with three or more employees in these roles.

AND- No starting work without a fitness screening

New mandatory health screenings for all employees: The Human Resources Ministry is rolling out mandatory occupational fitness and non-communicable disease screenings for all workers in the Kingdom in three phases, according to a ministerial guide seen by Okaz. New hires cannot start work until their screening result is approved by an occupational medicine specialist.

The plan: The rollout begins with pre-employment screening in the first six months, then it will expand to existing employees at high-risk establishments in months seven through 18 and will reach full compliance across all sectors — including public entities, non-profits, temporary and seasonal workers, trainees, people with disabilities, and remote workers — in the third phase. Employees who fail to meet fitness requirements cannot continue in their role; establishments must reassign them or conduct additional tests to verify capacity.

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Solutions’ Pulse eyes Gulf listing by 2028

STC’s digital arm is lining up another listing — and turning Egypt into the cost base behind it. Solutions by STC, the Tadawul-listed digital arm of STC Group, plans to float its systems-integration subsidiary Pulse by Solutions (formerly Giza Systems) on a regional exchange by 2028 at the latest, Pulse CEO Ahmed El Harany told reporters at a briefing EnterpriseAM attended. Tadawul is one of three exchanges in the running.

Tadawul, Cairo, or Abu Dhabi: Solutions by STC is targeting the IPO by 2028, with Saudi Arabia, Egypt, and the UAE all under review and no venue settled, El Harany tells EnterpriseAM. He didn't disclose the size of the stake or the proceeds sought. “The capital markets need to be ready to absorb a company of this size,” he said, adding that the decision will come “at the right time.” To prep, management is running a three-year restructuring that began in 2025 to tighten governance and meet listed-company standards, and is working with a financial adviser on listing readiness.

The Egypt cost play: The unit Solutions by STC bought in 2022 is flipping its revenue mix to capitalize on Egypt’s lower operating costs, El Harany said. Foreign business — once representing 40% of revenues against 60% domestic — will climb to 75% by mid-2026, with a target of 90% from exports next year.

BACKGROUND- Solutions by STC acquired an 88.19% stake in Giza Systems for an enterprise value of USD 158 mn in October 2022, its first acquisition of its kind, and rebranded the company Pulse by Solutions in May.

The road to USD 1 bn: Pulse posted SAR 2.6 bn in turnover last year — roughly USD 690 mn — and is targeting USD 1 bn by 2028, a climb of around 45%. El Harany said the company plans to get there on the following tracks:

Acquisitions, funded from revenues and backed by the Saudi parent, across three target sectors — digital banking, digital health, and applied AI use cases.
Talent exports beyond engineers: Pulse has moved past software engineers into technical labor for the first time, sending around 200 Egyptian technicians abroad to staff digital transformation projects. The 3k-person company plans to hire 1k-1.5k workers a year to keep pace.

What’s next? Pulse will announce a regional outsourcing center in New Cairo's Fifth Settlement in 3Q — starting at 1k staff, targeting 3k, and serving the whole of STC Group, El Harany said. Beyond its existing presence in Saudi Arabia, Oman, Bahrain, Kenya, and Tanzania, Pulse will soon announce projects in Algeria and East Africa, with the northern and eastern Mediterranean targeted by 2027.

Al Rajhi and Osus partner to accelerate Makkah redevelopment

Al Rajhi and Osus contribute to Makkah project momentum: Al Rajhi Capital and Osus Real Estate have joined forces to invest SAR 1 bn in three residential towers located within Makkah’s Masar Destination. The 7k sqm site was sold by Umm Al Qura for Development and Construction for SAR 239.8 mn — doubling its SAR 114.2 mn book value — to fund ongoing works, according to a Tadawul disclosure and a press release.

The move further expands Al Rajhi’s Makkah development pipeline, joining a SAR 3.5 bn redevelopment of the 628k sqm Jarham South district in partnership with Maad International, and a SAR 6 bn project spanning 1.2 mn sqm at the Hindawiya West and South sites with Umm Al Qura for Development and Construction.

A new CEO for Modern Mills

Majed Nofal (LinkedIn) will take over as CEO of Modern Mills starting 1 July, it said in a Tadawul disclosure. Nofal brings over 25 years of experience in food manufacturing and FMCG — most recently as CEO of Takween Advanced Industries, from which he recently departed and resigned from the Modern Mills board ahead of the appointment. Acting CEO Ahmad Hijazi (LinkedIn), who has held the role since February, will return to his position as VP of Modern Mills’ Feed Business.

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Al Masar eyes stake in Al Qalam

Another Saudi school is changing hands: Al Masar Al Shamil Education inked a non-binding MoU to acquire 60% of Al Qalam Educational Trading, according to a Tadawul disclosure. The MoU — which runs until 30 September, extendable — covers due diligence and a negotiation phase spanning commercial, legal, and tax assessments. No financial advisors have been appointed yet.

Saudi private education is consolidating: EFG Hermes has deployed over USD 100 mn across six Saudi schools in roughly a year through its Saudi Education Fund, Ashmore closed its second school acquisition in April, and Maarif absorbed Ibn Khaldoun in May 2025.

A fashion district for Riyadh?

Sidra Capital and Four Directions signed a SAR 450 mn MoU to develop Riyadh’s Fashion District — a mixed-use project in Riyadh combining a luxury hotel, office spaces, residential and retail units, and an events venue. This signing follows an MoU in January between Four Directions and the Fashion Commission for the district.

REMEMBER- Saudi Arabia's fashion sector is starting to attract real capital. In April, Merak Capital and the Cultural Development Fund launched the ZYA fund — the Kingdom's first private equity fund dedicated to fashion.

Miahona’s first Uzbek contract

Miahona secures USD 105 mn Uzbek contract: Miahona signed a USD 105 mn (c. SAR 395 mn) public-private partnership with the Uzbek water utility Uzsuvtaminot to operate and maintain the Zomin Water Treatment Plant in Jizzakh for 25 years, according to a Tadawul disclosure.

The details: The partnership covers enhancement works, long-term operations, and maintenance services for the 50k cbm / day facility. Both the contract value and start date hinge on a government decree under Uzbek law — operations are pencilled in for 1Q 2027.

Why it matters: The agreement converts an MoU signed with Uzbekistan’s Investment Ministry in June 2025 into Miahona’s first contracted position in the country. It also adds a long-term revenue stream outside the Kingdom at a time when the company is simultaneously expanding domestically. Miahona is set to acquire Al Manhal Water Factory for up to SAR 102.7 mn and it joined a consortium bidding for the SAR 3 bn Arana Independent Sewage Treatment Plant in Makkah in December.

Private equity’s exit door remains jammed

Private equity firms are increasingly borrowing against portfolio companies to pay themselves as traditional exits remain difficult. More than USD 3.5 bn of leveraged loans and junk bonds have been launched over the past four weeks to fund sponsor dividends, accounting for roughly half of all dividend recapitalization activity this year, Bloomberg reports.

The resurgence of dividend recaps reflects a broader challenge facing the industry: According to Bain’s latest Global Private Equity Report (pdf), a growing number of portfolio companies are now “essentially trapped” as higher interest rates and stubborn valuation gaps make it harder for buyout firms to sell assets at acceptable prices. Many firms are also holding investments well beyond the traditional three-to-five-year timeline.

This is creating pressure to return money to limited partners some other way: Managers are facing a growing backlog of aging assets, while limited partners are placing greater scrutiny on firms’ ability to generate distributions, Bain says.

The exit market is showing signs of recovery, but not enough to clear the bottleneck: Global buyout-backed exit value jumped 47% y-o-y to USD 717 bn in 2025, making it the second-best year on record, according to Bain. Yet the number of exits fell 2% to 1.6k transactions, suggesting the rebound was driven largely by a handful of blockbuster transactions rather than a broad recovery across the market.

As a result, firms are increasingly turning to alternative liquidity tools: Bain says returning capital to investors is now the top reason sponsors launch continuation vehicles, while secondary sales and dividend recapitalizations are also becoming more common.

Those alternatives remain relatively small: Continuation vehicles still account for less than 10% of global exit value, according to Bain. But their growing use underscores a reality facing much of the industry — selling assets remains harder than buying them.

MARKETS THIS MORNING-

Asia-Pacific markets are trading up this morning, led by South Korea’s Kospi and Japan’s Nikkei. Over on Wall Street, equities are set to open lower with US futures down this morning, as news of US President Donald Trump’s threats of renewed attacks against Iran makes the rounds.

TASI	11,077	-0.4% (YTD: +5.6%)
MSCI Tadawul 30	1,481	-0.5% (YTD: +6.8%)
NomuC	23,202	-0.1% (YTD: -0.4%)
USD : SAR (SAMA)	USD 3.75 Sell	USD 3.75 Buy
Interest rates	4.25% repo	3.75% reverse repo
EGX30	52,679	+0.1% (YTD: +25.9%)
ADX	10,017	-1.0% (YTD: +0.2%)
DFM	6,164	-1.7% (YTD: +1.9%)
S&P 500	7,501	+1.1% (YTD: +9.6%)
FTSE 100	10,363	-0.4% (YTD: +4.4%)
Euro Stoxx 50	6,293	-0.5% (YTD: +8.6%)
Brent crude	USD 80.57	+0.9%
Natural gas (Nymex)	USD 3.20	-1.1%
Gold	USD 4,173	-1.7%
BTC	USD 63,802	-0.4% (YTD: -27.2%)
Sukuk/bond market index	913.43	0.0% (YTD: -0.6%)
S&P MENA Bond & Sukuk	152.44	-0.1% (YTD: +0.4%)
VIX (Volatility Index)	16.78	+2.3% (YTD: +12.2%)

THE CLOSING BELL: TADAWUL-

The TASI fell 0.4% yesterday on turnover of SAR 2.8 bn. The index is up 5.6% YTD.

In the green: Saudi Fisheries (+10.0%), Tamkeen (+4.0%), and Maadaniyah (+3.8%).

In the red: Liva Ins. (-5.3%), Jarir Marketing (-3.8%), and Budget Saudi (-3.3%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.1% yesterday on turnover of SAR 14.5 mn. The index is down 0.4% YTD.

In the green: Molan Steel (+9.5%), Digital Research Co. (+8.5%), and Jamjoom Fashion (+6.5%).

In the red: Rimath (-6.6%), Al Modawat (-6.5%), and Al Ashghal Al Moysra (-4.5%).

CORPORATE ACTIONS-

Cenomi Center’s board proposed an 8.98% capital boost to SAR 5.18 bn, according to a Tadawul disclosure. The SAR 426.6 mn capital increase comprises two components — 39.6 mn bonus shares issued to existing shareholders at a ratio of one share for every 12 held, and 3.1 mn new shares allocated to an employee share ownership program it will establish with the move.

CALENDAR

JUNE

21-24 June (Sunday-Wednesday): Saudi Food Exhibition and Conference, Riyadh Front Expo.

21-24 June (Sunday-Wednesday): Saudi Print & Pack, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Riyadh International Industry Week, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Saudi Plastics & Petrochem, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Saudi Smart Logistics, Riyadh International Convention & Exhibition Center.

22-24 June (Monday-Wednesday): The Future Hospitality Summit, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

AUGUST

30 August-1 September (Sunday-Tuesday): The Saudi Entertainment and Amusement Expo, Riyadh Front Exhibition and Conference Center.

31 August-3 September (Monday-Thursday): Leap Tech Conference, Riyadh Exhibition & Convention Center - Malham.

SEPTEMBER

8-10 September (Tuesday-Thursday): The WTM Spotlight Riyadh, Riyadh Front Exhibition & Conference Center (RFECC), Riyadh

15-17 September (Tuesday-Thursday) The Global AI Summit, King Abdulaziz International Convention Center, Riyadh.

23 September (Wednesday): Saudi National Day.

28 September-1 October (Monday-Thursday): The International Conference on Theory and Practice of Electronic Governance (ICEGOV), Prince Sultan University, Riyadh.

OCTOBER

12-15 October (Monday-Thursday): World Energy Congress, Riyadh.

26-28 October (Monday-Wednesday): ACHEMA Middle East, Riyadh International Convention & Exhibition Center.

28-29 October (Wednesday-Thursday): Procurement and Supply Chain Futures Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

28-29 October (Wednesday-Thursday): Real Estate Supply Chain Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

NOVEMBER

11-12 November (Wednesday-Thursday): Aluminum Arabia, The Arena, Riyadh.

16-19 November (Monday-Thursday): Cityscape Global, Riyadh Exhibition and Convention Centre (Malham), Riyadh.

25-29 November (Wednesday-Sunday): Aero Middle East and Sand & Fun, Thumamah Airport, Riyadh.

Signposted to happen sometime in 2026:

2H: Sabic’s USD 6.4 bn Fujian project in China to start production;
September: Saudi Paper and Packaging Expo, Riyadh International Convention & Exhibition Center;
November: The UN Trade and Development Global Supply Chain Forum to take place in Saudi Arabia;
November: The Esports Nations Cup, Riyadh;
The World Economic Forum’s Global Collaboration and Growth Meeting, Jeddah;
SkyMove Air Cargo MENA, Riyadh;
The Intervision international music competition will take place in Saudi Arabia.

Signposted to happen sometime in 2027:

The World Water Forum takes place in Riyadh;
The Ocean Race finishes in Amaala on the Red Sea;
Riyadh-Kudmi transmission line to be completed;
Capital Markets Forum takes place in March in Riyadh.

Signposted to happen sometime in 2Q 2027:

The Hail Region Water Networks Project is expected to be completed.

2027f

FEBRUARY

1-3 February (Monday-Wednesday): Energy Regulators Regional Association annual conference, Riyadh.

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