Since 1945, the world has seen an era of American leadership. Now, with the populist mindset swaying in favor of protectionist policies and the 2008 Financial Crisis still reverberating in the pockets of the public, a new stage has been set with the receding role of the US in international leadership. Reminiscent of, though not entirely resembling, the American isolationist period of the 1930s, this power vacuum will grow and peak in 2018, when the full impact of the Congressional budget comes into play. The fair question: which actors will fill this vacuum, and with what currency?
The Saudi Arabian government has stated that the valuation of the company will by $2 trillion on the public market , but other estimates, like that of Wood Mackenzie Ltd., come up with a valuation of $400 billion . However, these lower bound estimates are based on the current financial structure of the company, and with JPMorgan working with the Saudi authorities on broad changes in regards to regulatory exposure, disclosure rules, dividend policy and exchange listing options, this valuation estimate is likely to be higher .
Further, the Saudi government’s financial restructuring and other initiatives in line with Vision2030 will be the greatest factors of success before this momentous listing. One such government scheme is the Citizen’s Account, which will dole out $6.7 billion worth of public disbursements in 2017, increasing to almost $20 billion by 2020, in order to limit the influence of energy price increase on citizens and subsequently soften the effect of austerity measures. Additionally, a new excise tax on ‘harmful products’, like tobacco and energy drinks, will begin, along with a 5% value-added tax in 2018 . As well as that, there have been talks to review Aramco’s income tax rate from 85% to as low as 50% . Further, the biannual reduction of fuel, water and electricity subsidies that started in 2015 will continue. Moreover, to counter the current slowdown, considering the 3.4% to 1.1% growth from 2015 to 2016 and an expectant growth of 0.9% in 2017, a stimulus package of almost $60 billion will be allotted until 2020 .
Along with the dynamic attitude of the Saudi government, Aramco’s own restructuring and diversification projects are underway. Advisors and company executives are discussing whether to make Aramco a ‘global industrial conglomerate’ or a ‘specialized international oil company’. Leaning towards the former, Saudi officials are considering the reformation into something reminiscent of a ‘Korean chaebol’, a reference to South Korean family-owned conglomerates, thus expanding the company’s role in petrochemicals and other sectors. As Aramco begins to diversify, with a $5 billion ship repair and construction complex on the East coast, $400 billion forging and casting projects with General Electric and plans to build solar and wind power facilities, the risks of investment become more diverse and the company gets harder to value . However, the synchronization of company and government initiatives, as enabled by Deputy Crown Prince Mohammad bin Salman Al Saud, doubling as the owner of Aramco and chairman of the Council for Economic and Development Affairs, will result in the growth and valuation of the company at a much higher level than some anticipate.