Saudi Arabia is trying to “get off the oil needle” by diversifying its economy. She intends to focus on the development of other sectors: the government pays much more attention to the problems of health, transport, water, energy and many others.
Also, the authorities of the Kingdom are planning the IPO of the state oil company Saudi Aramco. This is somewhat contrary to the General plan of Saudi Arabia to get rid of dependence on oil exports, which accounts for 77% of the country’s income.
Kingdom may use funds from the sale of Saudi Aramco to diversify the economy, for example, by expansion of the sovereign Fund of the country with $160 billion to $2 trillion. Authorities said that the Fund will become a center for investment abroad of Saudi Arabia, partly due to the receipt of funds from the sale of shares in Aramco. However, all is not so simple really.
Saudi Aramco controls about 10% of world oil production. It is expected that the listing of the company’s shares will reach $2.5 trillion. Initial public offering of stock is scheduled for 2017 or 2018.
The Saudis are trying to convince Exxon Mobil, BP and Sinopec to buy stakes in, offering long-term access transactions. On Tuesday, the company intends to hold a meeting which will discuss the plans for rapid development.
The CEO of the company Nasser Amin said that the company hopes to create 500,000 jobs in the economy, intends to develop every sector of their business, despite the collapse in oil prices. Nasser described the market as “an area that represents opportunities for significant growth.”
Saudi Aramco requires that Saudi Arabia continued to focus on oil exports. The Kingdom intends to lead the listing, only 5% of the company’s shares, valued at $125 billion on the open market.
This sale could provide the needed money to the country to implement the “Vision-2030” plan, which according to calculations will help to diversify the economy, dependent on oil. However, in order for the company and then continued to play an important role in supporting Finance and economy of the country, you need to be confident in its further expansion and that it will be able to bring healthy revenues and profits, in order to meet the needs of its shareholders.
Some analysts are not sure that the “Vision-2030” is implemented.
“Almost nothing new in the plan, the government has not provided. In addition, there are still a number of key areas with which government must deal. We don’t buy into the assurances of Mohamed bin Salman about the fact that by 2020, the Kingdom will no longer depend on oil exports. In short, we all expected more,” said middle East economist of Capital Economics division Jason Tuvi.
Andy Critchlow from Breakingviews also of the opinion that “an ambitious plan, designed to restructure the economy of the Kingdom”, like the one that was taken in Dubai in 1980-e years, “blurred”.
He noted that the reduction of government subsidies on electricity and the creation of a sovereign Fund was a good idea, however, Prince Mohammed needs a “more radical reform” to really make Vision 2030 a reality by 2030.
So, if Saudi Aramco is a key factor in the implementation of all planned – due to the sale of shares required for the implementation of plans for economic diversification, the country needs to ensure that all attention is focused on a thriving oil sector.
