DUBAI Jan 7 Saudi Arabia's government is
considering whether to sell shares in state oil giant Saudi
Aramco as part of a privatisation drive to raise money in an era
of cheap oil, deputy crown prince Mohammed bin Salman told The
Aramco is the world's largest oil firm with crude reserves
of about 265 billion barrels, over 15 percent of all global oil
deposits. If it went public, it could become the first listed
company valued at $1 trillion or more, analysts have estimated.
"This is something that is being reviewed, and we believe a
decision will be made over the next few months," Mohammed bin
Salman said in an interview published on Thursday.
"Personally I'm enthusiastic about this step. I believe it
is in the interest of the Saudi market, and it is in the
interest of Aramco, and it is for the interest of more
transparency, and to counter corruption, if any, that may be
circling around Aramco."
Salman did not say how large a stake the government might
sell in Aramco, which produces over 10 million barrels of oil
per day, three times as much as the world's largest listed oil
A sale could in the short term cover much of the huge state
budget deficit which Riyadh is running because of low oil
prices; the deficit totalled nearly $100 billion last year.
But while it could increase foreign investors' interest in
the Saudi stock exchange, the sheer volume of equity could
initially weigh heavily on the market, which has a
capitalisation of $384 billion.
Salman, who as chairman of the powerful new Council of
Economic and Development Affairs has broad authority over the
economy, said the government would sell assets in a range of
state firms, healthcare, education and some military industries.
"It will decrease some of the pressure that the government
has, and some of them may create good profit."
International investors have become increasingly concerned
about Riyadh's ability to cope with low oil prices in the long
run; the riyal dropped to a record low against the U.S. dollar
in the forwards market on Thursday.
But Salman said Saudi Arabia's low debt and huge array of
assets meant it could cope easily with financial pressures. He
said the government planned to provide state-owned funds with
assets worth $400 billion in the next few years.
The funds will generate profits from unused assets, turning
them into companies that will eventually go public, Salman said,
citing as one example five million square metres of land on the
coast in central Jeddah that are currently owned by the air
As part of efforts to diversify revenues beyond oil, the
government has said it plans to introduce a value-added tax in
coordination with neighbouring Gulf countries. Salman said the
tax would not apply to basic items such as water and dairy
products, to protect the welfare of lower-income people.
"We'll try to do that by the end of 2016 or 2017, and we'll
try to expedite it," he said, stressing that "there are going to
be no income taxes, and no wealth taxes."
Saudi Arabia faces a challenge creating jobs for a young and
growing population. Salman said he was confident of succeeding,
but if necessary, the government could take more steps to have
companies provide jobs now held by foreigners to Saudi citizens.
"I have reserves now, 10 million jobs that are being
occupied by non-Saudi employees that I can resort to at any time
of my choosing. But I don't want to pressure the private sector,
unless this is the last resort."
With Western and local consultants, Salman has been drawing
up a five-year plan, the National Transformation Project, to
diversify the economy beyond oil and develop the private sector.
Details are expected to be announced in the next few weeks.
(Reporting by Andrew Torchia, editing by David Evans)