DUBAI, Dec 6 — Saudi oil giant Aramco has raised US$25.6 billion (RM106.7 billion) in the world’s biggest initial public offering, sources told AFP. The oil-rich kingdom has put a value of US$1.7 trillion on Aramco as it prepares to sell 1.5 per cent of the company to fund its “Vision 2030”...
An employee in a branded helmet is pictured at Saudi Aramco oil facility in Abqaiq, Saudi Arabia October 12, 2019. — Reuters pic
But why is Saudi Arabia, which has reaped trillions of dollars from its vast energy deposits, having to sell off a piece of its economic crown jewel to position itself for a post-oil future?Despite its almost unimaginable oil wealth, Saudi Arabia’s finances have sagged along with the price of crude, causing its budget deficit to balloon.
“The bottom line is that they need the money, they need that outside investment that is crucial to delivering ‘Vision 2030’.” “It is about making a debut to the international investor community, and to legitimise the state to a global audience of peers.” Since Prince Mohammed came to power, Saudi Arabia has unveiled plans for a series of “giga projects” that will soak up tens of billions of dollars, but also hopefully bring investment and thousands of jobs.
And last year, construction of the Qiddiya “entertainment city” was launched near Riyadh, with the blueprints including high-end theme parks, motor sport facilities and a safari area.Saudi Arabia was hit by high levels of capital outflow in 2017 — the year that Prince Mohammed spearheaded an anti-corruption campaign that led to the arrest of hundreds of elite princes and businessmen.
“I imagine that Aramco may have to go further in terms of transparency though if a successful domestic launch encourages resumed plans for an international one.” While it may revitalise the Saudi economy, some observers ask whether the IPO will be constructive for Aramco, the front engine of an economy strongly tethered to oil.
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