Saudi Arabia, the world’s second largest oil producing nation, has started a plan to invest in various industries in order to lessen its economy’s dependence on oil revenue. The Future Investment Initiative (FII), being held in the capital Riyadh this week, has been coined ‘Davos in the Desert’, as the nation’s substantial reserves are being offered to international companies in return for stakes. The reign of the new King Salman has indeed seen Saudi Arabia enter a new economic stage, focusing on the ‘next stage’, and so signalling its anxiety about its financial future.
The suggestion that the state oil company, Aramco, is to hold an Initial Public Offering (an IPO), has sparked much speculation in the City, promising to be one of the biggest public floatations witnessed in history. Yet it has seen some restraint from the notoriously conservative Saudi Royal Family, with the Crown Prince – heading the ‘Vision 2030’ plan aimed at protecting Saudi economic interests – now suggesting this shall only take place in 2018. Rumours of how many shares will be sold vary, with some Saudi businessmen such as Prince Al-waleed Bin Talal even suggesting that it could be as much as 5%. Whilst the Crown Prince has denied to comment on this figure, he has pointed to a possible figure of $2 trillion for the valuation of the company. If this figure proves true, the IPO of Aramco will be the largest ever.
The FII has also seen a commitment by Saudi Arabia’s Public Investment Fund (PIF) to Sir Richard Brandon’s US-Based Virgin Galactic to the value of $1 billion. After a test flight in 2014 ended in a Virgin pilot tragically losing his life, the new investment is being treated as a crucial financial lifeline for the company. Being based in the US, Branson has promised it shall not affect US jobs – the Kingdom only holding a minority share in return for its capital.
As the FII summit comes to end, the Kingdom has also planned to build a $500 billion business and industrial zone in the North of the Kingdom.