Saudi Arabia announces $1.3-trillion private sector investment push

Saudi Arabia announces $1.3-trillion private sector investment push

CROWN PRINCE. Saudi Crown Prince Mohammed bin Salman meets with China's State Councilor and Foreign Minister Wang Yi in Riyadh, Saudi Arabia, March 24, 2021.

Photo from Bandar Algaloud/Saudi Royal Court/Reuters

Oil giant Aramco and petrochemical company SABIC will lead the investment push

Saudi Arabia’s crown prince said oil firm Aramco and petrochemical firm Saudi Basic Industries Corporation (SABIC) would lead investments of 5 trillion riyals ($1.3 trillion) by the local private sector by 2030 under a program announced on Tuesday, March 30, for economic diversification.

The move aims to mobilize the Gulf Arab state’s private sector to help wean the economy off its reliance on oil exports, which still account for more than half the state’s income, and develop new sectors to help create jobs for millions of Saudis.

This is part of 12 trillion riyals worth of investments planned by 2030, Crown Prince Mohammed bin Salman said in televised remarks. That also includes 3 trillion riyals from the Public Investment Fund (PIF) and 4 trillion riyals under a new Saudi investment strategy, of which some 2 trillion would be foreign investment.

The total amount would rise to 27 trillion riyals with government spending and domestic consumption.

“The new Shareek (Partner) program will help the private sector create hundreds of thousands of new jobs and will boost the contribution of the private sector to GDP (gross domestic product) by up to 65% by the end of the decade,” the prince said.

He later told journalists in a virtual briefing that Aramco and SABIC would represent 60% of the 5-trillion-riyal investment.

Prince Mohammed said the government has asked the biggest participating firms to lower their dividends in order to raise capital spending.

“That will lead to growth of the company so stakeholders will own more money. In exchange, the Saudi government will help them with regulations, more subsidies, and other incentives.” The prince said dividends for those owning shares in Aramco, which listed on the local bourse in 2019, would remain stable.

“We promised them that and we will keep that promise,” he said. The Saudi government still owns 98% of the firm.

Finance Minister Mohammed al-Jadaan told Reuters that 24 companies, the majority listed firms, would invest 2 trillion riyals by 2025 and another 3 trillion riyals by 2030. PIF is a shareholder in most of them, he added.

Jadaan said the state would offer support, including soft loans from Saudi development institutions and tax incentives at free zones, in line with World Trade Organization guidelines.

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‘Recycle the money’

The crown prince said the government planned to offload its shares in companies in coming years and to initial public offering (IPO) projects it is launching.

“We will recycle the money. We shouldn’t keep our shares forever. Whatever mature investment we have we have to IPO. So for example if you own 70% of a company, PIF should maintain majority at 30% and sell 40%,” he told journalists.

The prince has said that Aramco would sell more shares as part of plans to bolster sovereign wealth fund PIF, the main vehicle for boosting Saudi investments at home and abroad.

The prince said on Tuesday that PIF is working with other sovereign wealth funds in the region on a fund called “Invest In Saudi” that would be sized at 500 billion riyals to 1 trillion riyals.

PIF is backing domestic mega-projects such as the flagship tourism project at the Red Sea, planned $500-billion Neom economic zone, and the entertainment hub at Qiddya. –

$1 = 3.7503 riyals

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