Saudi Arabia announces $1.3 trillion investment for economic diversification

WION Web Team
Riyadh, Saudi Arabia Published: Mar 31, 2021, 08:12 PM(IST)

Saudi Crown Prince Mohammed bin Salman announced establishment of first non-profit city of the world (file photo). Photograph:( AFP )

Story highlights

The announcement by de facto ruler Crown Prince Mohammed bin Salman underscores an effort to jumpstart the domestic economy as the top crude exporter battles high youth unemployment and a coronavirus-triggered downturn

Saudi Arabia announced Tuesday investments worth oil firm Aramco and petrochemical firm SABIC would lead investments of 5 trillion riyals ($1.3 trillion) by the local private sector by 2030 under a programme announced on Tuesday for economic diversification.

The announcement by de facto ruler Crown Prince Mohammed bin Salman underscores an effort to jumpstart the domestic economy as the top crude exporter battles high youth unemployment and a coronavirus-triggered downturn.

"The total investment injected... into the national economy is expected to reach 12 trillion riyals ($3.2 trillion) by 2030," Prince Mohammed said in a speech carried by state television.

The move aims to mobilise 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.

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

"The new Shareek (Partner) programme will help the private sector create hundreds of thousands of new jobs and will boost the contribution of the private sector to GDP by up to 65 per cent by the end of the decade," the prince said.

He later told journalists in a virtual briefing that Aramco and Saudi Basic Industries Corp (SABIC) would represent 60 per cent 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 per cent of the firm.

The programme is part of a mammoth 27 trillion-riyal ($7 trillion) investment plan over the next decade, which will include huge government spending to spur the domestic economy, the prince said.

It is designed to "promote the development and diversification of the national economy", the state-run SPA news agency said, adding that it will "strengthen cooperation between public and private sectors".

The crown prince said the government planned to offload its shares in companies in coming years and to 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 per cent of a company, PIF should maintain majority at 30 per cent and sell 40 per cent," 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.

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