Oil and petrochemical giants Aramco and SABIC are to spearhead a new $1.3trn Shareek (Partner) programme as part of Crown Prince Mohammed bin Salman’s (MBS) Saudi diversification drive, he announced yesterday. They will lead attempts to galvanise the Kingdom’s existing private sector into action and is part of a larger, $3.2trn investment package designed to wean the Saudi economy off its reliance on oil exports.
Another 24 companies – most of them already publicly listed, – will be contributing a further $533bn to the programme by 2025 and then an additional $800bn by 2030. The government is asking the biggest participating firms to lower their dividends to raise capital spending. In return, it will offer support in the form of soft loans from Saudi development institutions and tax incentives that comply with WTO guidelines such as free trade zones. “The new programme will create hundreds of thousands of new jobs and boost the contribution of the private sector [to GDP] by up to 65 % by the end of the decade,” the prince said.
The Shareek programme follows the recent government announcement that it would be encouraging Saudi diversification and encouraging the localization of businesses by foreign companies by only granting new work contracts to those of them who have established regional headquarters within the Kingdom by 2024. MBS also reaffirmed Riyadh’s commitment to part privatise a number of government-owned companies in the coming years – and to launch a series of IPOs to raise funding for some of the new projects in the pipeline.These may include its flagship Red Sea tourism project, the $500bn Neom economic zone and the Qiddya entertainment hub. Its PIF sovereign wealth fund is also heavily involved in the Saudi diversification programme and is working with other sovereign wealth funds in the region to create an ‘Invest In Saudi’ fund.