Saudis plan to end ‘oil addiction’

The powerful young prince overseeing Saudi Arabia’s economy has unveiled ambitious plans aimed at ending the kingdom’s “addiction” to oil and transforming it into a global investment power.

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Deputy Crown Prince Mohammed bin Salman on Monday said Riyadh would raise the capital of its public investment fund to 7 trillion riyals ($A2.60 trillion) from 600 billion riyals and would sell up to five per cent of shares in state oil giant Aramco.

The plans announced by Prince Mohammed also included changes that would alter the social structure of the ultra-conservative Muslim kingdom by pushing for women to have a bigger economic role and by offering an improved status to resident expatriates.

“We have developed a case of oil addiction in Saudi Arabia,” Prince Mohammed said in a televised interview with al-Arabiya news channel, owned by the Al Saud ruling family, adding that Riyadh needed to cut its dependence on revenue from crude.

Even before oil prices started to plunge in 2014, economists and political analysts had long regarded Saudi Arabia’s fiscal policy and economic structure as being unsustainable, but reduced income from energy sales has made reform more urgent.

At the centre of the “Vision 2030” reforms is the restructuring of its Public Investment Fund (PIF), which Prince Mohammed said would become a hub for Saudi investment abroad, partly by raising money through selling shares in Aramco.

“We restructured the fund. We included new assets in the fund, Aramco and other assets, and we fixed the problems of the current assets that the public investment fund owns, both in terms of companies and other projects,” he said.

“Initial data say the fund will have control over more than 10 per cent of global investment capacity.”

The part privatisation of Aramco was also central to the plans, and Prince Mohammed said it would be transformed into an energy company that he valued at more than $US2 trillion ($A2.60 trillion), and that up to 5 per cent of it would be listed on the stock market.

So big is the state oil company because of its rights to the kingdom’s crude reserves, that selling even 1 per cent of its value would create the biggest initial public offering (IPO) on earth, he said.

He said other Aramco subsidiary companies would also be listed along with other publicly held companies, and added that one major benefit of privatisation was that it would increase transparency and help limit corruption.

Since the prince was appointed to oversee Saudi long-term planning through the Council of Economic and Development Affairs, Riyadh’s focus on reform has grown far more urgent and far more acute.

The 31-year-old has enjoyed a dizzyingly rapid rise since his father became king 15 months ago, from being little known outside the ruling Al Saud family to become the driving force of Saudi plans to prepare for a future after oil.