World Bank executive stresses importance of Aramco IPO plans

Simeon Djankov, director of development economics at the World Bank, speaks at the Doing Business event in Riyadh. (Photo/Supplied)
Updated 24 October 2019

World Bank executive stresses importance of Aramco IPO plans

  • Saudi Arabia is a platform for growth and expansion, says minister

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.

Transparency

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.


Egypt’s sovereign wealth fund to raise authorized capital five-fold up to $62.15 billion

Updated 12 November 2019

Egypt’s sovereign wealth fund to raise authorized capital five-fold up to $62.15 billion

  • Egypt’s parliament passed a law allotting 5 billion Egyptian pounds of start-up capital for the fund last year
  • Abdel-Fattah El-Sisi: Egypt could dramatically expand the size of its new sovereign wealth fund to ‘more than several trillion pounds’

CAIRO: Egypt’s sovereign wealth fund is expected to increase its authorized capital to up to a trillion Egyptian pounds ($62.15 billion) from 200 billion pounds within three years, depending on investors’ appetite, the fund’s executive director said.
Last year, Egypt’s parliament passed a law allotting 5 billion Egyptian pounds of start-up capital for the fund, called the Egypt Fund, with 1 billion pounds to be transferred immediately from the treasury.
The law also allows the president, who picks the board of directors, to transfer the ownership of any unused state assists to the fund or to any of the fund’s assists or companies.
“We expect to increase our licensed capital within three years to a trillion pounds or less ... it all depends on the investors’ response and investment appetite,” said Ayman Soliman, the fund’s chief executive.
“The sectors we will work in include industry, traditional and renewable energy, tourism and archaeology,” Soliman said.
President Abdel-Fattah El-Sisi said last month that Egypt could dramatically expand the size of its new sovereign wealth fund to “more than several trillion pounds,” and that it “aims to contribute to sustainable economic development through management of its funds and assets.”
The fund plans to buy a stake of about 30 percent in power plants built by Siemens, Soliman said, adding that six international investors have expressed interest.
“So far, six companies submitted offers to the Electricity Holding company to buy shares in the Siemens power plant,” Soliman said.
The plants, billed at the time as the world’s biggest, were built by Siemens in a €6 billion ($6.61 billion) deal signed in 2015. El-Sisi inaugurated them last year.
In May, Electricity Minister Mohamed Shaker said that the government is considering selling the power plants to private investors, but talks were still at an early stage.