KPMG’s Chairman for the Middle East and South Asia Region (MESA), Abdullah Hamad Al Fozan talks to TOGY about implications of changes in the financial market in Saudi Arabia and their impact on the hydrocarbons industry. KPMG is a global network of professional firms providing tax, audit and advisory services.
CONTINUED GROWTH: During the past 10 years, Saudi Arabia’s economy has been growing in all sectors. Unlike much of the rest of the world, the country has not been facing difficulties and did not have to deal with recession or financial difficulties in the economy.
Even during the 2008 financial crisis and oil price fluctuations, business continued to make a profit. Government investment has not been affected by the price of oil, whether it was $40 or $140. Even with the current price of oil, the economy is still growing.
PROMISED DIVERSIFICATION: The expression “economic diversification” was a motto for the past 40 years, but unfortunately the country still depends on oil and gas for about 75 percent of its revenue.
On the other hand, oil prices are driving the ambitions of the country. During the 1990s, there was a comprehensive plan of privatisation and driving the economy away from the oil and gas. The prices during that time fell as low as $8 per barrel. Since that time, economic diversification initiatives have been on the daily agenda.
When oil prices picked up again in 2000, the government decided to spend more on investments and infrastructural development. As a result, only few out of the 22 sectors were privatised including municipal water supply, electricity and telecommunications. Regarding healthcare and education, these sectors were only partially privatised. This is a dilemma and a fight between two schools of thought.
The recent changes that took place in the country are likely to push forward the modernisation and diversification of the economy. Already, some changes can be noticed. National oil and gas giant Saudi Aramco was detached from the Ministry of Petroleum. The ministry itself is undergoing restructuring.
WRONG PERCEPTION: As a major energy player, Saudi Arabia is monitored by global investors. Some of them have a dubious perception about the country’s economic potential and its capacity to diversify its potential. One of the explanations for that is its energy-oriented market together with the impact of the media that generated a pessimistic opinion for the region and the country’s future.
The media attention on the regional stability and prolonged discussions on regional geopolitics influences risk assessment calculations. On the other hand, the common thinking that Saudi Arabia is a chronic “Dutch disease” country makes potential investors underestimate the potential and opportunities in Saudi Arabia. This is a very misleading way of thinking and in fact, any investor looking for an opportunity should take a closer look at the Saudi market.
Saudi Arabia has a lot of merits and characteristics that are not even tapped yet. Natural resources aside, the fast-paced development of petrochemicals and the chemicals industry as well as existing demographic and geographic characteristics create high potential for manufacturers and logistics services. We see the Kingdom of Saudi Arabia now emerging as a main global industrial energy hub.
TOGY talks to Sylvain Itté, French Ambassador to Angola, about the strong economic and cultural ties between the two countries,… Read More
TOGY talks to Li Patrik, director of energy, environment, infrastructure at the China-Britain Business Council (CBBC), about the difficulties of… Read More
TOGY talks to Río Negro province Secretary of Hydrocarbons Sebastian Caldiero about policies implemented by the provincial government to manage… Read More
TOGY talks to Heba Filobbos, area manager of the Northern Gulf for Halliburton, about the company’s experience working as an… Read More
TOGY talks to Christopher Gunson, partner at Amereller, about the oil and gas industry in the UAE and the surrounding… Read More
TOGY talks to Graeme Taylor, Vice President for Angola at Halliburton, about forecasted stabilisation, onshore potential and the qualities required… Read More
This website uses cookies.