INTERVIEW: Amin Nasser, Saudi Aramco’s Davos man, spells out blueprint for IPO

Amin Nasser, the president and CEO of Saudi Aramco, had a busy few days at last week’s World Economic Forum (WEF) annual meeting in Davos. (Illustration: Luis Grañena)
Updated 27 January 2019
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INTERVIEW: Amin Nasser, Saudi Aramco’s Davos man, spells out blueprint for IPO

  • Nasser was speaking in a private meeting salon at the Hotel Grischa near the main railway station of Davos
  • Just a few weeks ago, Aramco announced the results of an audit by DeGolyer & MacNaughton, the leading independent expert on the oil industry

DAVOS: Amin Nasser, the president and CEO of Saudi Aramco, had a busy few days at last week’s World Economic Forum (WEF) annual meeting in Davos.

“We had about six hours at the International Business Council, three hours at the oil and gas community, two hours on the climate change initiative — and then about 40 bilateral meetings. In Davos, you make every minute count,” he said.

Nasser was speaking in a private meeting salon at the Hotel Grischa near the main railway station of the Swiss Alpine town. He had a plane to catch, but spent some of his precious remaining minutes at Davos speaking to Arab News — about the Fourth Industrial Revolution, technology, the environment, carbon emissions and sustainability.

But first we talked about the forthcoming initial public offering (IPO) of Saudi Aramco. The planned stock exchange listing of the world’s biggest oil company and the Kingdom’s economic dynamo had been slated for later this year, but that timetable slipped into 2021, as Nasser explained.

Did he feel any sense of disappointment or anticlimax that the IPO had been delayed? “No. What I have to say about the IPO is that a lot of work has been done and the commitment is definitely there. The proof of that is what has already been done by the government and by the company. We have changed the tax rules, made a new concession agreement, changed Aramco into a joint stock company, and introduced a lot of fiscal reforms to facilitate a listing,” he said.

Just a few weeks ago, Aramco announced the results of an audit by DeGolyer & MacNaughton, the leading independent expert on the oil industry, which showed Aramco is sitting on a treasure trove of 263.1 billion barrels of oil within its concession area, higher than previous estimates. That was one of the essential requirements for the IPO.

“Everything that is required for listing is there. If the government decided, it could be done in no time,” he said. So why had it not happened?

Basically, Nasser explained, because an alternative strategic play came into view. Aramco decided there were more pressing priorities, especially a tie-up with SABIC, the Kingdom’s petrochemicals and industrial giant.

“We came to the government and said that our desire is to be the leading petrochemical company globally. We can do that organically or inorganically. We are always looking for opportunities in this field and we have huge investments in petrochem with Dow Chemical and Sumitomo. However, if you want to be the leader, you need an acquisition, a major acquisition. You need a platform, a good platform so you can go global, especially with our decision to have 2 million to 3 million barrels of oil going to petrochemical.

“So we approached the Public Investment Fund (Saudi Arabia’s ambitious sovereign wealth fund) to see if it was interested in selling their shares in SABIC, and they were interested. We have been in discussions with them and we went back to the government and said … based on our governance requirements and regulations, you cannot list Aramco while we are going through a major acquisition. It doesn’t work. That process needs to take its course, and the government said that’s fine. Because also you cannot list and then come in three or four months later and say you’re going to acquire a company. That would have to be in the IPO prospectus.

The deal with SABIC — which is valued in the region of $70 billion — will transform Aramco into a global petrochemicals giant, and will take time to put together.

“We need to close a share-purchase agreement and we’re in discussions now with PIF about that. When we reach an agreement we have to go and seek regulatory and antitrust approval. That will take almost until the end of the year 2019, or maybe a little bit more; we don’t know because you need approval from a lot of countries where SABIC has major operations. SABIC is not a small company, it’s a huge company, so you need a lot of approvals from lots of countries,” he said.

“After you finish that you need a minimum of one year to reflect the purchase in your balance sheet. It has to be consolidated and show what is the impact on our balance sheet — where is the integration, where is the value, because the investors will want to see … After that you can go to the market,” he said.

“It’s going to happen. There is no doubt the commitment is there, and it was also further confirmed by the Crown Prince Mohammed bin Salman and by the Minister of Energy Khalid Al-Falih. Both of them say the commitment for the IPO is there,” he insisted.

But Nasser admitted the issue is how to fund the SABIC acquisition, which will be the biggest takeover ever in the Middle East.

“We have different funding mechanisms to finance it. We have our cashflow, and also other funding mechanisms like the bond market, and other tools that are needed for a sustained capital program. So all of these financial tools will be utilized as soon as we reach an agreement,” he said, without disclosing the amount of the bond issue. It will be Aramco’s first foray into global debt markets, but Nasser was encouraged by the recent enthusiastic response toa $7.5 billion bond the Kingdom raised.

The upcoming Aramco bond will take place amid market conditions that were the subject of much gloomy prognosis in Davos. The thought-leaders at the WEF see turbulence in global economic and financial markets in 2019, and worry about the trade “war” between the US and China, and other global economic disruptions.

The implications for the oil markets are obvious. An economic slowdown in China and other big economies would sap the appetite for oil and gas, and potentially lead to a price fall for the Kingdom’s most precious asset.

However, based on his conversations in Davos, Nasser did not appear over-concerned about global economic forecasts.

“It’s our view that the market, in terms of global inventories, is moving toward staying within the five-year average. That’s a sign of balanced-out tightness of supply and demand, which is very important. We are optimistic about the market in 2019 in terms of pricing and in terms of tightness of supply-demand. The more it is balanced, the better for the market. And our view is that there is still healthy demand,” he said. He reckoned there was only a 15 percent chance of a global recession in 2019.

“So far China is healthy in terms of demand, as reflected in imports from Saudi Aramco, and it has been growing. Asia in general is a major market — it is the epicenter of demand in terms of global energy right now, and there is a lot of growth. China and India are very important for us,” he said.

So that leaves the way clear for Aramco to get on with its core long-term strategy — to be a global leader in oil, gas, petrochemicals, refining and energy trading — as well as a pioneer in energy technology.

Aramco is already one of the dominant forces in the global oil industry, of course, helping to set the price of crude through its supply deals with other oil producers. But its immediate ambitions are in gas, where it has so far played a lower-profile role globally. Nasser wants to change that, especially in terms of domestic Saudi consumption.

“By 2030, 75 percent of the utilities sector (in the Kingdom) will be on gas, and the rest will be renewable and nuclear alternatives. So we will have gas going outside the Kingdom to export markets, either by pipeline or by LNG. So (we) will be exporters for the first time,” he said.

Aramco is looking at potential deals in the international gas business, with potential partners in Russia, the US and Australia, he said, adding: “We will be a global leader in gas from within the Kingdom, but we are also looking to be a major player globally.”He is also said to be considering acquisitions in the US shale gas industry. “We have no interest in shale oil ... we have plenty of conventional oil at a much lower cost. But we are interested in gas, let me put it that way,” he said.

At Davos, one of the major themes was the challenge posed by climate change, and Nasser was keen to point out that Aramco is among the “best in class” of the big energy groups. He welcomed a recent academic study that classed Saudi Arabia as the second best in the world among energy producers for carbon intensity in upstream emissions, second only to energy minnow Denmark and way ahead of the other big producers, the US and Russia.

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MORE ARAMCO NEWS FROM DAVOS

Saudi Aramco’s Amin Nasser warms the night in glittering Davos reception

Saudi Aramco chief sets out roadmap for share sale in 2021

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Technology is key to Aramco’s future as a clean energy company. While at Davos, the company was recognized as a technology leader for its gas plant at Uthmaniya, the only energy producer in the world to receive the WEF’s “Lighthouse” award for technology innovation.
“Aramco is already in the era of the Fourth Industrial Revolution,” Nasser said.

The company is investing heavily in technology across 12 centers globally, each looking at aspects of innovation in energy conservation, fuel formulation, engine technology, and carbon capture.

Nasser sees a big role for alternative and renewable energy sources, but thinks that the challenge to the traditional energy business from the electric vehicle industry has been overstated.

He pointed out that there were only 5 million electric vehicles (EV) in the world today, which roughly amounted to the displacement of just 50,000 barrels of oil out of a total global consumption of 100 million barrels. Many of those EVs are, of course, running on power generated by the highly polluting coal industry.

“You do the math. Our view on EV is that it will continue to grow and it will be a great growth story. However, we firmly believe that by 2040 we will need to use all sources as part of the energy mix to supply the world.”

By then, if all goes to the strategy set out by Nasser and the Saudi energy minister, who is also chairman of Aramco, the world’s leading oil company will be a public-listed corporation, a global leader in the energy industry and a champion of digital industrial technology. But Nasser insisted it would remain true to its roots as the fountain of the Kingdom’s fortunes.

“We try to make sure that, wherever you operate, you add value to the community that you are in. There is a lot of emphasis on taking care of all our stakeholders, as well as our shareholders,” he said.


Saudi Arabia permits flour mills to export surplus production

Updated 5 sec ago
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Saudi Arabia permits flour mills to export surplus production

JEDDAH: Saudi Arabia has approved a plan allowing licensed flour mills to export surplus production to international markets, provided local supply remains secure. 

The General Food Security Authority issued the approval, requiring mills to repay the full value of the wheat subsidies provided by the government for the quantities they intend to export, the Saudi Press Agency reported. 

Ahmed bin Abdulaziz Al-Faris, governor of the GFSA, emphasized that this decision aligns with Saudi Arabia’s Vision 2030, which supports national industries and fosters competition based on high product quality. 

Under Article 14 of the Kingdom’s Wheat Flour Production Law, issued in 2018, flour mills are prohibited from exporting wheat, flour, or derived products without prior approval from the relevant authority. Mills must repay the subsidy granted for these products intended for export. Additionally, exports must not disrupt the local supply of these products. 

Saudi Arabia has developed a strategic plan for its agricultural sector, focusing on sustainability, food security, and welfare for farmers, as well as economic contributions and preventative measures. 

Despite its desert climate and limited water resources, the Kingdom’s national policies address critical issues such as food and water security, sustainable agricultural development, and ecological balance. 

These efforts reflect Saudi Arabia’s commitment to enhancing agricultural productivity while ensuring the responsible management of its natural resources. 

In 2023, Saudi Arabia’s grain production reached 1.75 million tonnes, harvested from 323,000 hectares of a total of 331,000 hectares planted, according to the figures released by the General Authority for Statistics.  

Wheat was the leading crop, accounting for 63.4 percent of the total area, with production reaching 1.314 million tonnes. 

Formerly known as the Saudi Grains Organization, the GFSA plays an important role in driving economic development and meeting the food needs of Saudi citizens. 

Established in 1972, the GFSA was created as part of the government’s efforts to ensure national development. Its objectives include establishing and operating flour mills, production facilities, and animal feed factories, as well as developing complementary food industries.  

The authority is also responsible for marketing products, purchasing grains, and maintaining an adequate reserve stock for emergencies, in line with the government’s political-agricultural policy. 


Saudi Arabia forms new committee to spur private sector role in petrochemicals

Updated 24 November 2024
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Saudi Arabia forms new committee to spur private sector role in petrochemicals

RIYADH: Saudi Arabia has launched its first-ever national committee for energy and petrochemicals under the Federation of Saudi Chambers to bolster private sector participation. 

This comes as investments in the petrochemical sector are projected to reach $600 billion by 2030, with the council set to collaborate with ministries, authorities, and major companies to unlock opportunities for local and foreign investors. 

This initiative marks a significant step in fostering closer ties between the private sector and government to shape policies and accelerate investment in energy and petrochemicals. 

Jaber bin Ayed Al-Fahad was elected chairman, with Saad bin Ajlan Al-Ajlan as vice chairman. 


Saudi Arabia’s non-oil exports surge 16.8% in Q3: GASTAT 

Updated 24 November 2024
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Saudi Arabia’s non-oil exports surge 16.8% in Q3: GASTAT 

RIYADH: Saudi Arabia’s non-oil exports reached SR79.48 billion ($21.17 billion) in the third quarter of 2024, a rise of 16.76 percent compared to the same period in 2023, according to official data. 

As reported by the General Authority for Statistics, the Kingdom exported non-oil goods worth SR19.58 billion to the UAE, followed by India and China at SR6.78 billion and SR6.48 billion.

Chemical products led Saudi Arabia’s non-energy exports in the third quarter, accounting for 25.5 percent of total shipments, marking a 5.3 percent annual rise. Plastic and rubber products followed, comprising 24.9 percent of the total, with an 8.9 percent increase compared to the third quarter of 2023. 

Strengthening the non-oil private sector is a key objective under Saudi Arabia’s Vision 2030 as the Kingdom works to diversify its economy and reduce reliance on crude oil revenues. 

“The ratio of non-oil exports (including re-exports) to imports increased to 36.6 percent in the third quarter of 2024 from 34.9 percent in the third quarter of 2023. This was due to a 16.8 percent increase in non-oil exports and an 11.4 percent increase in imports over that period,” said GASAT.  

In October, Moody’s projected the Kingdom’s non-hydrocarbon real gross domestic product would grow between 5 percent and 5.5 percent from 2025 to 2027, driven by increased government spending. 

The International Monetary Fund projected the Saudi economy would expand by 4.6 percent in 2025, supported by diversification efforts to strengthen the non-oil private sector. 

However, GASTAT highlighted that overall merchandise exports decreased by 7.3 percent year on year in the third quarter, primarily due to a 14.9 percent drop in oil exports. 

Consequently, oil exports as a share of total exports fell to 71.3 percent in the third quarter from 77.3 percent recorded during the same period last year. 

To stabilize the market, Saudi Arabia implemented a production cut of 500,000 barrels per day in April 2023, a reduction extended until December. 

Key trade partners 

China remained Saudi Arabia’s top export destination in the third quarter, receiving SR41.94 billion worth of goods. Japan and South Korea followed at SR25.62 billion and SR25.50 billion, respectively, while India received SR24.35 billion. 

GASTAT data revealed that imports to the Kingdom increased by 11.4 percent year on year in the third quarter, reaching SR217.25 billion, while the nation’s surplus of the merchandise trade balance decreased by 43.4 percent.  

In the third quarter, China accounted for the largest share of imports at SR53.78 billion, followed by the US and India at SR17.58 billion and SR11 billion, respectively.  

King Abdulaziz Sea Port in Dammam was the primary entry point for goods in the third quarter, with imports valued at SR64.88 billion, representing 29.9 percent of the total inbound shipments.  

Among the other major terminals of entry for imports was Jeddah Islamic Sea Port, which handled 20.1 percent of the incoming shipments, followed by King Khalid International Airport in Riyadh and King Abdulaziz International Airport, which handled 12.6 percent and 6.4 percent of the imports to the Kingdom.  

September figures 

In a separate report, GASTAT revealed that Saudi Arabia’s non-oil exports increased by 22.8 percent year on year in September, reaching SR25.95 billion.  

The authority revealed that the Kingdom sent non-energy goods valued at SR6.54 billion to the UAE in September, while India and China received inbound shipments worth SR2.35 billion and SR1.73 billion, respectively.  

Plastic and rubber products comprised 25.7 percent of non-oil exports in September, a 19.5 percent annual rise, while chemical products accounted for 25.3 percent, marking a 4.4 percent increase. 

The ratio of non-oil exports to imports rose to 37.1 percent in September, compared to 34.8 percent during the same month in 2023. 

Despite the growth in non-oil exports, overall merchandise exports dropped 14.9 percent in September due to a 24.5 percent decline in oil exports. Consequently, the share of oil exports in total exports fell from 79.7 percent in September 2023 to 70.7 percent in September 2024. 

China remained the leading trade partner, receiving SR13.91 billion in exports, followed by Japan at SR7.98 billion and the UAE at SR7.49 billion. 

Other major destinations for Saudi Arabia’s exports include India, South Korea, the US, and Egypt, as well as Singapore, Bahrain and Poland.  

In September, Saudi Arabia’s exports to the Gulf Cooperation Council countries stood at SR12.08 billion, while the value of outbound shipments to Islamic non-Arab nations was SR6.71 billion.  

According to GASTAT, the Kingdom’s imports increased by 15 percent year on year in September, reaching SR69.88 billion, while the surplus of the merchandise trade balance decreased by 56.9 percent during the same period.  

China held the first position in the Kingdom’s imports, constituting 25.8 percent of total imports in September, valued at SR17.99 billion.  

In September, Saudi Arabia received incoming shipments valued at SR5.39 billion and SR3.45 billion from the US and Germany, respectively.  

The report revealed that the Kingdom handled inbound shipments valued at SR19.65 billion or 28.1 percent of the overall imports at the King Abdulaziz Sea Port in Dammam in September.  

Jeddah Islamic Sea Port handled 17.9 percent of the overall inbound shipments, while King Khalid International Airport managed 13.1 percent of the total incoming goods.  

Saudi Arabia’s non-oil sector is a key focus of its Vision 2030 plan to reduce reliance on oil and diversify the economy.  

Initiatives like giga-projects, renewable energy investments, and expanding industries such as manufacturing, logistics, and tourism aim to drive growth and boost job creation.  

These efforts are strengthening the Kingdom’s global trade position and attracting foreign investment, with the non-oil sector playing an increasingly vital role in its economic transformation. 


Startup Wrap – International venture capital interest in MENA rises despite global challenges

Updated 24 November 2024
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Startup Wrap – International venture capital interest in MENA rises despite global challenges

RIYADH: International venture capital investors have increased their presence in the Middle East and North Africa region despite a challenging global economic climate, according to a new report by MAGNiTT.

The study highlights significant growth in global participation, with their share of MENA-based startup investments rising from 28 percent in 2020 to 51 percent in 2024.

The global economic climate in recent years has been marked by persistent challenges, including rising inflation, geopolitical tensions, supply chain disruptions, and tightening monetary policies by central banks.

These factors have created a volatile environment for investors, prompting cautious capital deployment and heightened scrutiny of high-risk markets.

In particular, the venture capital landscape has faced headwinds due to declining valuations, slower funding cycles, and a shift toward profitability over rapid growth.

Despite these challenges, regions like MENA, Southeast Asia, and Africa have demonstrated resilience, attracting both local and international capital due to their untapped potential and strategic efforts to foster innovation.

This 23-percentage-point increase underscores MENA’s growing appeal as a destination for venture capital.

The ecosystem continues to be shaped by strong regional investor engagement, driven largely by sovereign wealth fund mandates such as Saudi Arabia’s Saudi Venture Capital Co.

Local investors accounted for 49 percent of the 1,361 unique investors in the region’s startups, with 62 percent of all disclosed capital invested in MENA coming from within the region, MAGNiTT revealed.

However, international interest has surged, with the first nine months of this year marking a 60 percent increase in global investors compared to the previous year.

Philip Bahoshy, CEO of MAGNiTT, attributed the region’s growth to the role of regional Limited Partner programs and high-profile events that spotlight opportunities in emerging markets.

“If you recently attended events like FII in Riyadh, GITEX in Dubai, or Web Summit in Qatar, you would have seen firsthand the growing presence of international investors interested in Emerging Markets. Many of these investors are exploring opportunities but are yet to make substantial commitments,” Bahoshy said.

The UAE has been a standout in the region’s venture growth, with international investor participation climbing from 25 percent in 2020 to 62 percent in 2024, positioning the market as a global hub akin to Singapore.

Saudi Arabia has also seen notable progress, with international investor participation rising from 18 percent in 2020 to 25 percent in 2024, reflecting the Kingdom’s increasing focus on venture capital.

Events such as LEAP and the Future Investment Initiative have played a key role in attracting global attention to Saudi Arabia’s burgeoning venture ecosystem.

In Africa, international development finance institutions have helped foster a growing local investment base.

African investors’ share of total capital deployment increased from 15 percent in 2021 to 35 percent in 2024. This upward trend reflects efforts to strengthen regional ecosystems while still leveraging international expertise.

Internationally, US-based firms such as 500 Global and Y Combinator emerged as the most active of these investors across MENA, Africa, and Southeast Asia between 2020 and 2024.

The influence of American venture capital remains dominant, with US investors topping deal counts in all three regions. However, Southeast Asia attracted the largest capital deployment, with $11.65 billion invested by top international players, compared to $1.177 billion in Africa and $947 million in MENA.

Saudi Arabia-based EdfaPay secures $5m to scale tap-to-pay solution

Fintech startup EdfaPay has closed a $5 million pre-Series A funding round led by OmanTel Innovation Labs, with participation from Aljabr MENA and Waad Investment.

Founded in 2022 by Ghormallah Al-Ghamdi and Nedal Sabbah, EdfaPay offers a tap-to-pay solution that allows small and medium-sized enterprises to use smartphones as point-of-sale devices.

The funding will be used to strengthen the company’s market position in Saudi Arabia and expand its footprint across the MENA region and Pakistan.

The startup previously raised $1.6 million in a pre-seed round in early 2022 and has since entered several new markets, including Tunisia and Morocco.

Social networking app Bubbl raises $350k pre-seed

Saudi social networking platform Bubbl has raised $350,000 in a pre-seed funding round led by angel investor Abdullah Al-Dosari.

Launched in 2024 by Aya Al-Hammoud, the app has already attracted 60,000 daily active users.

The funds will support Bubbl’s plans to scale its user base, with a goal of reaching 1 million daily active users in the near future.

The Public Investment Fund’s Jada Funds of Funds has announced a commitment to invest in SEEDRA Ventures Fund II. (Supplied)

PIF’s Jada commits investment in SEEDRA Ventures Fund II

The Public Investment Fund’s Jada Funds of Funds has announced a commitment to invest in SEEDRA Ventures Fund II, a newly launched venture capital fund managed by SEEDRA Ventures.

The fund aims to invest in early-stage startups with a sector agnostic approach, which coincides with Jada’s strategy.

Bandr Al-Homaly, managing director and CEO of Jada, said: “Our commitment to SEEDRA Ventures Fund II underscores our focus on enabling early-stage businesses that contribute to the Kingdom’s economic transformation in alignment with Vision 2030.”

EFG Hermes launches $300m Saudi education fund

EFG Hermes’s private equity arm has unveiled a $300-million Saudi Education Fund to develop a world-class K-12 operator in Saudi Arabia.

The fund seeks to capitalize on the growing demand for private education, fueled by an expanding student population.

SEF will also acquire a portfolio of international schools in Saudi Arabia, the UAE, and Bahrain, currently managed by GFH under the Britus Education brand.

Amenli secures $2.3m to expand insurtech offerings

Egypt-based insurance tech company Amenli has closed a $2.3 million funding round led by the European Bank for Reconstruction and Development’s Venture Capital arm, with additional participation from Y Combinator.

Founded in 2020 by Adham Nauman, Omar Ezz El-Din, and Shady El-Tohfa, Amenli provides accessible insurance solutions tailored for individuals, families, and SMEs.

The funding will support technology upgrades, product innovation, and market expansion.

Qara raises $2.6m to advance supply chain traceability

Supply chain startup Qara, based in Egypt, has raised $2.6 million from undisclosed investors to fuel its expansion.

Founded in 2021 by Hassan Abouzeed and Khaled Hassan, Qara provides a digital platform enabling product authentication and full traceability for producers.

The company, already active in Egypt, Saudi Arabia, and Kenya, plans to use the funding to expand further into Saudi Arabia under the National Technology Development Programme’s Relocate Initiative.

Logistics startup Locad secures $9m for global growth

Singapore-based logistics platform Locad has raised $9 million in a pre-series B funding round co-led by Global Ventures and Reefknot Investments.

Other participants included Sumitomo Equity Ventures and existing investors such as Antler Elevate and Febe Ventures.

Founded in 2020 by Constantin Robertz, Jannis Dargel, and Shrey Jain, Locad provides a cloud-based logistics engine that helps e-commerce businesses optimize their supply chains.

The funds will support Locad’s international expansion, with a focus on launching in the UAE and Saudi Arabia by the end of 2024.

Egypt-based furniture and home decor e-commerce platform ariika has raised $3 million in a series A extension round. (Supplied)

Furniture e-commerce platform ariika secures $3m to expand

Egypt-based furniture and home decor e-commerce platform ariika has raised $3 million in a series A extension round led by Beltone Venture Capital and Citadel International Holdings.

Founded in 2016 by Khaled Attallah and Shahir Arslan, ariika collaborates with artisans worldwide to design and curate modern home décor products.

Having recently launched in Iraq, ariika plans to enter the Saudi market by January 2025. This follows a previous series A round in which Beltone acquired a 20 percent equity stake.


Natural resources and young population driving Saudi Arabia’s economic growth: BlackRock Investment Institute

Updated 23 November 2024
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Natural resources and young population driving Saudi Arabia’s economic growth: BlackRock Investment Institute

RIYADH: Saudi Arabia can attract global investments and successfully diversify its economy thanks to the Kingdom’s abundant natural resources and youthful workforce, said BlackRock Investment Institute.

In its latest report, the asset management firm said Saudi Arabia offers substantial opportunities across public and private markets, though success will depend on the progress of governance, regulatory improvements, and labor market reforms.

The Kingdom is currently embarking on an economic diversification journey known as Vision 2030 by strengthening the non-oil private sector and reducing its decades-long dependence on oil revenues.

With its predominantly young population and labor reforms, the Kingdom reduced the unemployment rate among Saudi nationals to 7.1 percent by the end of the second quarter of 2024, representing a quarterly drop of 0.5 percentage points and an annual decline of 1.4 percentage points.

By the end of the second period of the year, joblessness among Saudi females also witnessed a sharp quarterly decline of 1.4 percentage points, reaching 12.8 percent.

In terms of natural resources, Saudi Arabia holds abundant mineral wealth estimated at $3 trillion, and Vision 2030 aims to turn the mining sector into the Kingdom’s third pillar of economy.

“Saudi Arabia stands at the crossroads of economic transformation. Unlike many developed economies, we think it benefits from low debt levels, ample energy resources, and a young, expanding workforce — a combination that supports long-term economic growth and creates opportunities in infrastructure and urban development,” said BlackRock.

It added: “However, realizing these opportunities hinges on sustained investment. Historical data shows that Saudi Arabia is already an outlier in terms of population growth and has room to increase investment further.”

A recent report released by the International Monetary Fund also echoed similar views, and said that the Kingdom is expected to witness economic growth of 1.5 percent in 2024 and 4.6 in 2025, driven by activities in the non-oil sector.

In October, the World Bank also projected that the economy of Saudi Arabia will grow by 1.6 percent this year and 4.9 percent in 2025.

Capital investments

According to BlackRock, Saudi Arabia has ramped up capital investments, with about $780 billion invested over the past three years, fueled by a bank lending boom and significant public spending.

The report added that Saudi Arabia is successfully leveraging domestic and foreign private financing, while equity and fixed-income markets are developing rapidly through the rising number of initial public offerings and bond issuances in the Kingdom.

A report released in July by the Kuwait Financial Center, also known as Markaz, revealed that the Kingdom led the Gulf Cooperation Council’s initial public offering market in the first half of 2024, raising $2.1 billion in what was an annual increase of 141 percent.

Another report released by Markaz in October revealed that Saudi Arabia raised $512 million from IPOs in the third quarter.

“Building a large, liquid local-currency corporate bond market is key to boosting non-bank financing across corporate bonds, infrastructure debt, and mortgage-backed securities,” said BlackRock.

Attracting investments

BlackRock revealed that Saudi Arabia’s Vision 2030 aims to establish the Kingdom as a leading hub for infrastructure investment.

The Kingdom’s National Investment Strategy seeks to attract $3.3 trillion over the next decade, spanning sectors from energy to health care to tourism.

“The investments are set to cover energy, water, transportation, logistics, digitalization, and services like waste recycling. The transformation involves three main shifts: transitioning to renewable energy, boosting private sector activity, and expanding non-oil sectors like household spending and tourism,” added BlackRock.

According to the report, the Shareek program launched in 2021 could play a crucial role in fulfilling the investment targets of Saudi Arabia.

Through this initiative, the Kingdom targets $1.3 trillion in funding, representing 40 percent of the Vision 2030 goal.

Foreign direct investment, currently a small share of the Kingdom’s GDP, is also targeted to provide 15 percent of Vision 2030’s total investment.

The report added that regulatory improvements such as simplifying business licensing, reducing red tape, enhancing transparency, and introducing investor rights measures are key to elevating investments in the Kingdom.

“Becoming a major investment destination requires broad economic and societal changes, stronger governance frameworks, and regional security assurances to attract capital,” said the analysis.

It added that global investors will also need confidence in regional stability before committing significant capital, as geopolitical tensions remain a major concern determining the future economic growth in the region.

Reliance on oil

According to the report, Saudi Arabia’s future economic growth and diversification plans will not be without any hurdles, as oil revenues have direct impacts on the country’s progress.

“Saudi Arabia’s economic trajectory remains heavily reliant on oil revenue, making it vulnerable to shifts in global energy markets. A decline in oil prices – potentially influenced by increased US production or a slowdown in global demand – could challenge its reform agenda and economic resilience,” the analysis said.

On a positive note, Blackrock added that the Kingdom is aiming to strengthen its position as a low-cost oil and gas producer.

“The BlackRock Investment Institute Transition Scenario sees rising global oil and gas demand over the next decade, with declines approaching 2050. Saudi Arabia’s low-cost, low-emission production positions it to maintain or grow market share across various demand scenarios,” said the report.

It added: “Diversifying energy exports through natural gas/LNG could enhance its competitive edge, though an accelerated low-carbon transition could pressure oil prices.”

According to the analysis, Saudi Arabia is also making significant efforts to reduce greenhouse gas emissions.

The report said that the Kingdom is planning to shift power generation from 40 percent oil and 60 percent gas to an equal mix of gas and renewables by 2030.

“Saudi Arabia’s solar installation costs are 40 percent lower than the global average, boosting energy security, reducing emissions, and freeing up oil for export. Investments in carbon capture and hydrogen production could further support decarbonization,” said BlackRock.