Crown Prince Mohammed bin Salman is banking on Saudi Arabia’s biggest listed companies, including Saudi Aramco, to invest $1.3 billion in the kingdom over the next decade and urges them to cut dividends as he attempts to accelerate plans to diversify the oil-dependent economy.
Prince Mohammed said more than 20 companies had agreed to be involved in his new initiative, with 60% of the investment led by state oil giant Aramco, which listed on the local stock exchange in 2019, and Sabic, a petrochemical company.
“It will not harm the shareholders of these companies because instead of receiving cash dividends, you will get stock market growth,” Prince Mohammed told reporters on Tuesday evening.
“What we are trying to create is growth in Saudi Arabia: GDP growth, more jobs in Saudi Arabia, more revenue for the Saudi government and a better life for the Saudis,” he said. added.
A Saudi official told the Financial Times that the initiative was optional and it would be up to companies to decide whether or not to cut their dividends.
The official added that Aramco should keep its promise to pay its $75 billion annual dividend on a pro rata basis to minority shareholders. The energy company listed 1.7% of its shares on the Tadawul stock exchange.
The move is the latest sign that Prince Mohammed is aggressively seeking investment in Saudi Arabia to support his ambitious plans to modernize the conservative nation. It also suggests it is focusing more on domestic investment, as the kingdom struggles to attract significant foreign capital in sectors other than energy.
Mohammed al-Jadaan, the finance minister, told the Financial Times that the government would offer incentives to companies participating in the program, including tax exemptions, commodity price guarantees for energy-intensive projects and certain loans. concessionaires. He said the aim was to “boost private sector investment”.
“We’re talking about companies in technology, fintech, mining, logistics, food, renewable energy, solar panel manufacturing and other things,” he said. said Jadaan. “We didn’t make any final agreements with them because we wanted them to go through the governance and regulatory process because some of them are listed.”
Saudi officials insist that investments from large state-affiliated companies will boost the private sector, as many small businesses are subcontracted to these companies on projects. The Public Investment Fund, the sovereign wealth fund chaired by Prince Mohammed, has already pledged to invest $40 billion a year in the kingdom over the next five years. The crown prince said his total domestic investment through 2030 would be $800 billion.
Jadaan dismissed suggestions that Aramco would be used as a tool for state development. He was previously in charge of building schools, hospitals and other infrastructure.
“Aramco has its own governance and will invest in its industry as it sees fit. As a publicly traded company, I would not like to speculate on their investment plans, but let’s remember this is a program opt-in,” he said.
Amin Nasser, chief executive of Aramco, told CNBC that the energy group would “undertake commercially beneficial investments that maximize value for us.” “We have a strong balance sheet,” he said, adding that Aramco was “very capable” of executing megaprojects while meeting the “expectations of its shareholders.”
Energy is the world’s must-do business and Energy Source is its newsletter. Every Tuesday and Thursday, straight to your inbox, Energy Source brings you essential news, cutting-edge analysis and insider information. register here.
It is unclear how Aramco, which also pays dividends, taxes and royalties to the state, will seek to finance these projects.
Aramco is Sabic’s largest shareholder after acquiring the sovereign wealth fund’s 70% stake in the petrochemical company in a $69 billion deal orchestrated by the royal court in 2019.
“The demand addressed to the public and private sectors is indicative of the enormous task required to diversify its economy away from oil. It’s a huge ship trying to navigate in limited space and time because the world is changing far too quickly,” said John Sfakianakis, a Gulf expert at the University of Cambridge.
“Including the private sector in the country’s development plans is essential. The numbers are high, but even partial achievement is better than nothing given the enormity of the task to be diversified.