Aramco IPO Might Push Other States in the GCC to do the Same

The initial public offering of Saud’s Aramco could encourage other Gulf Cooperation Council (GCC) states to publicly list oil assets, said a leading economist in the region. However, the oil behemoth must clear up some uncertainties due to taxation, ownership of crude and OPEC policy.

Former Lebanon economy minister Nasser Saidi told an interviewer on Dubai radio that Aramco must address how the business will separate assets and liabilities it has from those the state has.

A number of countries could step up across the region such as the UAE said Saidi.

There have been long discussions about how well-performing enterprises owned by the state could be listed. The Aramco deal is one that could possibly open the door for many others.

Saidi, who is also the former head of external relations and chief economist at the Dubai International Center, expects others will follow in Aramco’s footsteps.

While Aramco is the largest oil company in the world, the government of the UAE, Qatar and Kuwait also have major oil assets that state companies manage.

The Aramco listing, expected to be the largest IPO in the world and raise billions of dollars, is the centerpiece of the government of Saudi Arabia’s ambitious plan known as Vision 2030. The plan is to diversify the country’s economy beyond just its oil.

In June of 2016, when officials first introduced the plan, the government pledged to transform the oil producing company into an industrial conglomerate with tentacles worldwide. However, some officials in Saudi still are debating the path the company should take.

The government in Saudi Arabia will list as much as 5% of Aramco in 2018, on its local bourse and the international markets.

Those proceeds are destined for investment in other different sectors such as jobs creation for younger Saudis.

However, for this plan to be successful, Aramco said Saidi must address the issues that relate to transparency, governance and who owns Saudi Arabia’s wealth in natural resources.

Saidi added that there were questions concerning the royalty of 20% and the tax of 85% that Aramco must pay to the Saudi government which investors are beginning to believe could lessen its overall value in an IPO.

There remains uncertainty in the type of taxation would be given to Aramco whether or not its resources in the ground will be included and what is the easiest way to separate them from above ground ones.

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