Complex Made Simple

Fear of Saudi crackdown gone: Businesses drooling at $100bn Aramco IPO

As the world gravitates around Saudi’s Vision 2030 and the promise of business prosperity that many vision-associated projects bring, the Saudi corruption probe becomes a positively salient point of conversation, instead of a subject of doubt.

Regardless of the fact that up to $124bn could be recovered from detainees of the November 4, 2017 crackdown, Saudi is rightly projecting the image of a reformer state, especially that these monies will be handed in the form of additional social programs, back to the people.

CNN reported that some funds will be used as handouts for the 70% of Saudi nationals who are state employees.

“The government earlier this month announced an annual bonus for all state employees, and a monthly allowance of $266 for government employees for a year,” it said, to be bankrolled using $13bn outside of 2018 budget.

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Show me the money

Saudi Mohammed Al-Jadaan, the finance minister, said at the World Economic Forum meeting in Davos that the government had netted $100bn from the anti-graft drive.

“These are very smart people. They do not just have things in bank accounts, so we’re unlikely to recover cash but there will be assets inside and outside Saudi Arabia,” he said.

Arab News reported Al-Jadaan as saying that the recovered assets “would be used to pay for items of national expenditure for Saudi citizens, such as the Citizens’ Account and the recent economic stimulus package.”

CNN money quoted Al-Jadaan as telling TV Anchorman Richard Quest on Thursday: “We have received some money in the bank, but most of the assets are unlikely to be in cash… and going to take some time to be liquidated.”

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Don’t be scared

Saudi Majid Al-Qasabi, minister of commerce and investment, told the session that Vision 2030 was “an ambitious and proactive blueprint.”
He added: “In the past, we have lacked the culture of planning. But that has changed now, and we are able to offer potential investors opportunities based on an ecosystem that is investment-friendly.”

Arab News reported that when asked if the anti-corruption drive would deter foreign investment in the Kingdom, Al-Jadaan answered: “Should people be worried about coming to Saudi Arabia? Absolutely not.”

“It is the quality and the cost of your proposition that will determine whether you are successful in doing business in Saudi Arabia, not how much you pay in bribes.”

Read: A second wave of Saudi graft probe coming: $100bn netted is just a start!

Praise for probe  

Private equity billionaire Stephen Schwarzman, CEO of Blackstone, said “It would take a while for the international investors to commit,” he added, but Saudi Arabia was clearly an opportunity “you can’t miss.”

Speaking at a CNBC-hosted panel at the World Economic Forum (WEF) in Davos, Switzerland, Schwarzman said “It’s sort of extraordinary what’s going on in Saudi Arabia… you see economic growth and other good things happen when you have intelligent, informed, reform-oriented governments,” he said.

“As an outsider, this is like a case study. And it’s happening so fast and is so bold.”

Oil accounts for around 92% of Saudi government revenues and just over half of GDP.

Saudi minister of economy and planning Mohammed Al-Tuwaijri, in charge of the Kingdom’s $200bn privatization program, said that there were three challenges facing Saudi’s non-oil drive: The capacity of people to achieve it, the communication necessary for the outside world to take part in it, and the cost involved.

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According to Amin Nasser, president and CEO of the nation’s state oil giant, Saudi Aramco, Saudi Arabia’s anti-corruption campaign has bolstered investor confidence in the kingdom, CNBC reported from Davos.

“Anything that is tackling corruption should be creating a more healthy environment for the investment community,” he said.

“There is a lot of appetite for more investment, and we don’t have any issues so far.”

Prince Turki Al-Faisal, Saudi Arabia’s former ambassador in Washington and London, was also an anti graft campaign supporter.

“I cannot accept the proposition that fighting corruption will drive away investors. It will attract them, because they know they will not have to pay the extra 5 or 10 percent for bribes,” he told Davos delegates.
Alain Bejjani, chief executive of the UAE-based conglomerate Majid Al Futtaim, said “…we have had the anti-corruption campaign, which I believe is a great thing in our part of the world.”

“But I do believe the business world needs more communication about what is going on,” Bejjani said.

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Hello IPO: Davos to Riyadh

Arab News said that some of the world’s leading investment bankers will go direct from Davos to Riyadh to take part in a “beauty parade” in front of Saudi Aramco officials to pitch for lucrative roles in the oil company’s planned initial public offering (IPO) later this year, looking to fetch some $100bn, from the 5% share sale.

“One banking chief, speaking on the sidelines of the World Economic Forum annual meeting in Switzerland, said that he and fellow executives were preparing to travel to the Kingdom early next week for a round of presentations in response to “request for proposal” invitations from Aramco,” Arab news reported.

“Some of the biggest banks in the world are believed to be making the trip. In addition to HSBC, JP Morgan and Morgan Stanley, all of whom have already been working to advise the Saudis on the IPO, American banks Goldman Sachs and Citibank are believed to be pitching for the next phase of the process.”

Reuters also reported that Aramco is looking to expand in the US where President Donald Trump’s tax cuts and support for the oil industry are making business increasingly attractive there.

Aramco chief executive Amin Nasser told Reuters in a Davos interview that the oil company already controls a large refinery in Texas and preparing to list its shares in New York among several possible exchanges.

“We are looking at new business opportunities in the U.S. and with the tax cuts it will make it much more profitable … It is part of our strategy to grow our business in the US,” he told Reuters.