Kuwait – Saudi Arabia’s Crown Prince, Mohammed bin Salman, will have to face several challenges in the upcoming phase on the political and economic levels.
The Kingdom will soon be witnessing many changes, including the Aramco IPO and the rise in oil prices.
The crown prince is working on the implementation of an ambitious plan to reduce Saudi Arabia’s dependence on oil. In this regard, Saudi Aramco’s IPO is considered one of the main pillars of Vision 2030.
In earlier remarks, Prince Mohammed underlined the importance of the IPO in financing huge investments, which are worth hundreds of billions of Saudi Riyals, and which the crown prince is seeking to implement on the local and foreign levels, through the Public Investment Fund.
However, the public offering of a giant company such as Aramco is not an easy task. The difficulty lies in the fact that the IPO is scheduled to take place next year, while oil prices are expected to witness a sharp drop during the same period.
Moreover, many pending issues related to the IPO are yet to be resolved. Those include the choice of foreign markets and the size of the share to be put for public offering.
For example, the London stock market requires that 25 percent of a company’s capital be offered to the public, while the Saudi government intends to sell around 5% of Aramco.
As for oil prices, those have dropped on Wednesday to below 45 USD for the first time since last year. The percentage of price decrease in the first half of 2017 could reach its highest level since the Asian crisis in 1997.
According to Dr. Mohammed al-Ramadi, former Economy Professor at King Fahd University of Petroleum and Minerals, the Kingdom would deploy all efforts to lift oil prices above the margin of 50 USD.
“This is the appropriate level for Aramco’s IPO,” he said.
“The Kingdom needs to reach this price in order to be able to provide more funds to diversify its economy,” he added.