Saudi Crown Prince Mohammed bin Salman, Deputy Prime Minister and Minister of Defense, announced on Tuesday a program aimed at strengthening the partnership with the private sector for local companies in Saudi Arabia.
It has the aim of developing a stronger partnership between the government and the private sector and accelerating the achievement of strategic objectives to increase the resilience of the Kingdom’s economy and support sustainable growth and prosperity.
Crown Prince Mohammed stressed during the inauguration of the “Shareek” program that it is a strategic priority of the Kingdom to have a vibrant and thriving private sector. Such a sector can play a pivotal role in the continuing growth, development and success of the nation’s economic prosperity. The private sector will continue to play a vital role in helping the country to achieve the ambitions outlined in Vision 2030.
He later told journalists in a virtual briefing that Aramco and Saudi Basic Industries Corp (SABIC) would represent 60% of the 5 trillion riyal investment.
Crown 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 Crown 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.
Crown Prince Mohammed 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% of a company, PIF should maintain majority at 30% and sell 40%,” he told journalists.
Crown Prince Mohammed 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.
He 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 Qiddiya.
In televised speech declaring the Shareek program, he said: “Building a vibrant and prosperous private sector is one of the national priorities for the Kingdom and that is why we are today inaugurating a new and more powerful era in terms of cooperation and partnership between the government and private sector.”
“The program will strengthen the partnership with the private sector and has the objective of supporting local companies and enabling them to unlock new local investments valued at SAR 5 Trillion through the end of 2030.”
He added that the Kingdom will undergo a step-change in investment over the coming period.
Three trillion riyals will be injected by the Public Investment Fund through 2030, as announced earlier this year; four trillion riyals will be invested under the National Investment Strategy, details of which will be announced soon; and five trillion from the large companies of the private sector, supported by the Shareek Program.
Total investment injected from these three sources in the national economy is expected to reach 12 trillion riyals by 2030. This does not include government spending of ten trillion riyals over the next ten years, and private consumption spending, expected to reach five trillion riyals by 2030. The total across all these sources will reach 27 trillion riyals, or USD7 trillion, over the next ten years, said Crown Prince Mohammed.
“The Shareek program 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% by the end of the decade as part of the goals of Vision 2030,” he added.
“The importance of the Shareek program is not limited to enhancing the private sector's role in the sustainable growth of the national economy. We see it as a long-term investment in the Kingdom's future and prosperity, based on stronger collaboration between the public and private sectors.”
Shareek will contribute to the continued progress of the Saudi economy's ranking among the top global economies, with the goal of rising to its current 18th position to 15th, alongside boosting confidence in the Kingdom's investment environment.
Details of the program will be released soon and will be directly supervised by Crown Prince Mohammed, alongside a committee of ministers and senior government officials.
A series of enablement levers across different business support areas have been created, whereby participating large companies can benefit with the goal of growing their local investments through the Shareek program.
Shareek will operate under the relevant approved guidelines from the World Trade Organization (WTO), and in accordance with other relevant domestic and international regulations and policies.
The program will maximize the resilience and competitiveness of large Saudi companies, both regionally and globally. It will also work as a stimulus for those who will receive support to recover from the impact of the COVID-19 pandemic.
The inception of the new program positions Saudi Arabia as an enabler of business and a supportive environment for investment, through proactive, innovative and forward-looking measures.
The first Memorandums of Understanding between large companies and Shareek are expected to be signed starting in June.
