MIDDLE EAST • SAUDI ARABIA Jeddah Islamic Port
Aramco, the state group valued at as much as $2trn, although only a small part of the wider business will be put up for sale. Experts predict that the much-anticipated IPO will take place in 2018, and that up to $50bn could be raised – twice the amount of the current record.
The sale is a key component of the Saudi government’s long-term plan to diversify the economy away from hydrocarbons, with much of the proceeds from the IPO being invested back into industries such as clean energy and technology.
Adjusting to a new reality
James Henderson looks at how the Saudi maritime sector is moving ahead as the Kingdom seeks to end its reliance on oil revenues.
Until just a few years ago, Saudi Arabia was considered one of the main beneficiaries of an era of booming oil prices, with the Kingdom regularly posting budget surpluses as a result of
hydrocarbon revenues running into hundreds of billions of dollars.
Boosted by a healthy balance sheet the Kingdom embarked on extensive spending programmes to boost the country’s infrastructure and expand the range of activities carried out by its national oil company Saudi Aramco, both at home and abroad.
However, the price decline that took hold in late 2014 has seen exports decline and brought an end – for now at least – to an era of free spending and positive growth on the country’s books.
As detailed in Oxford Business Group’s latest Saudi Arabia report: ‘The resulting altered economic landscape and growing demographic
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pressures have presented the recently reorganised government with a significant test, and its response has been to set in motion a series of the most wide-ranging reforms in the nation’s history.
‘Moving forward the country’s Vision 2030 calls for a major shift in the way the Kingdom’s economy operates, moving from a system of state-led growth and centralised planning to a more open market framework where the private sector takes up a leading role in economic expansion.’
The Kingdom has been forced to become more outward looking in a bid to shore up its finances. For example, delegations of top Saudi aides have visited countries across the world in recent months to discuss trade and strengthen ties with other leading economies.
Furthermore, the world’s leading exchanges are battling it out to win the rights for Saudi Aramco’s Initial Public Offering, with London and New York the favourites for what could be the largest listing of all time.
Executives from the New York Stock Exchange and London Stock Exchange have held talks with Saudi
On the domestic front, the authorities are working hard to generate additional non-oil revenues. Initiatives include increasing prices for fuel, utilities and other public services. The budget deficit amounted to $98bn in 2015, or the first full fiscal year following the collapse in oil prices in mid-2014.
The deficit fell to $79bn in 2016 while the projected figure for 2017 stands at $53bn.
The ports and marine industries are absolutely key to the economic transformation of the Kingdom. The country is one of the world’s leading exporters of products and also imports a significant percentage of its domestic goods, meaning port infrastructure is crucial to the nation’s prosperity.
To highlight the importance of the ports, the latest available figures from Saudi customs (for 2014) shows revenue collected at the country’s seaport customs reached SR20.2bn ($5.4bn) – 83% of the Kingdom’s total customs revenue. By contrast, revenue collected at the Kingdom’s land port customs totalled SR1.5bn ($400m) over the same period, while SR1.9bn ($506.5m) was collected at airport customs.
And in line with the country’s 2030 vision, the King Abdullah Port has been used as an example of the success of public-private partnerships, which the Saudi powers-that-be believe will play a leading role in developing and making a success of new infrastructure.
Seatrade Maritime Review • Quarterly Issue 2 • June 2017 47
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