Saudi Arabia’s newly launched SAR27 trillion programme Shareek is in line with the kingdom’s Vision 2030 objectives of diversifying the economy, said industry stakeholders.
Shareek, the Arabic word for partner, will facilitate investments of SAR5 trillion from Saudi private sector businesses by 2030, to be led by Saudi Aramco and SABIC, according to Crown Prince Mohammed bin Salman thus enabling the private sector to create thousands of jobs.
“The inauguration of this programme is very much aligned to the wider objectives of Vision 2030, including economic diversification and increasing private sector contribution to GDP to 65 percent. Once implemented, the Shareek program is also likely to play a part in creating additional private sector employment and further business opportunities across the kingdom,” said Gabriella De La Torre, director of consulting at CBRE.
The Saudi Public Investment Fund will contribute SAR3 trillion, and SAR4 trillion will come in under the country’s new national investment strategy.
Shareek’s impact on businesses will depend on the “details of how the programme will be implemented and whether it leads to good business investment or whether it essentially becomes a means to finance government programmes. If it is the former, then it could lead to expansion of businesses footprint and less money flowing out of Saud Arabia,” explained Scott Livermore, ICAEW Economic Advisor and Chief Economist at Oxford Economics.
“The Shareek programme demonstrates the seriousness with which the government is pursuing the goals of Vision 2030 but also highlights that the size of the investment needed is likely beyond what the government and foreign direct investment (FDI) alone can generate,” he continued.
Scott Livermore, ICAEW Economic Advisor and Chief Economist at Oxford Economics
“It also makes domestic businesses even more invested in successful development and diversification of the Saudi economy as their longer-term returns will be increasingly dependent on this,” added Livermore.
When it comes to real estate, private-public-partnerships are fundamental to the success of large-scale projects and developments, which are plentiful in Saudi Arabia and include the mega projects in Riyadh and the tourism-led destinations in the Red Sea, explained De La Torre.
“The Shareek programme is well-placed to further support partnerships between public and private entities across a variety of sectors, a collaboration which is critical to delivering the ambitions plans for the country by 2030 and beyond,” she said.
Gabriella De La Torre, director of consulting at CBRE
Livermore said: “Shareek clearly reduces the ability of businesses to pay dividends but the approach is not that dissimilar to countries such as Estonia where there is a zero rate of corporation tax on reinvested profits and this is used to incentivise businesses to increase investment rather than distribute earning.”
“Saudi Arabia’s approach is more direct, however, as it does not have the tax lever available,” he added.
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