RIYADH: Listing Saudi Aramco shares on a public stock market is the “single most important thing” the government could do to continue the pace of reform in the Kingdom, a senior executive of the World Bank told Arab News on Thursday.
Simeon Djankov, director of development economics at the World Bank, was speaking on the sidelines of the Doing Business event in Riyadh, at which it was revealed that the World Bank ranks Saudi Arabia as the world’s most-improved business environment over the past 12 months.
Djankov said: “An initial public offering (IPO) of Aramco is tremendously important — probably the No. 1 thing that the Kingdom can do, out of anything in the business environment, because this is a huge company, a global company, and everybody knows about it. It has been delayed a number of times and that has given rise to the question of whether it can ever be done.”
If you make insolvency easier, many more people will decide to start businesses in the first place, and they will take risks.
Simeon Djankov, Director of development economics at World Bank
Djankov, who is also founder of the Doing Business report that highlighted progress in small- to medium-business regulations in the Kingdom, added: “I think that now, for small business, there has been some opening up and some improvement. The next question is if Saudi Aramco starts opening itself for shareholding investors — then KSA is truly open for business.
“The Aramco IPO is the single most important thing the government can do to open Saudi Arabia for business, and everybody is waiting for it,” he continued.
Aramco was on the verge of announcing the IPO last weekend, but pulled back on the advice of some financial institutions, which urged further deliberation in order to maximize the valuation.
Majid Al-Qasabi, minister of commerce and investment, said that a special committee was handling the Aramco IPO and he could not discuss it specifically.
But, he added: “In general, the principle of an IPO is for transparency, for trade, for investment and for growth. Trade is in our history, and Saudi Arabia is a platform for growth and expansion. Procedures such as an IPO will trigger investment (in) Saudi Arabia.”
Djankov said that another priority area for the Kingdom was to fully implement new rules for insolvency and bankruptcy, in place of “archaic” practices that prevent new business start-ups.
“There have been recent changes but they still have to be implemented in the courts. It’s one thing to pass legislation, it’s another thing for the judges and the courts to understand that this is the way to do it,” he said.
“If you make insolvency easier, many more people will decide to start businesses in the first place, and they will take risks. The issue is that now — as we have seen in the report today — it is easer to enter a business sector, but people are still waiting until they see whether the insolvency and bankruptcy regime will adapt,” he added.