We need to understand that a one-way flow of cash – from the state treasury to our wallets – is no longer feasible nor appropriate under current circumstances.
Let me start with the positive news. Saudi Aramco achieved the largest profit globally, even before its initial public offering in December 2019. The company managed to operate with lower costs than its competitors, with a declared lifting cost of only $2.80 per barrel.
Western Press does not address the fact that since the 1970s oil boom, the government has asked its citizens for little or no financial assistance. Western Press also does not cover issues such as the state compensating the poor, nor increasing social freedoms including women driving and allowing adult Saudi women to travel without permission. Western Press does not provide space for Saudi Arabia opening public movies and encouraging live music to be played in restaurants and live concerts. Western media barely covers curbing the powers of religious police in Saudi cities.
Aramco, the majority state-owned oil company, is valued at $1.7 trillion – equivalent to the combined worth of Google and Amazon. It delivered solid earnings and strong cash flows combined with reliable operational performance and continues to expand in downstream despite economic global disruptions.
Forbes indicates that Saudi Aramco achieved the most profit of all public businesses in 2019. By selling off just a tiny fraction – 1.5 per cent – of Saudi Aramco, Saudi Arabia raised more than $25 billion in the biggest share listing in history. Furthermore, Saudi Arabia relaxed a 49pc limit for foreign strategic investors, and is stepping up its investments in agriculture and farming projects.
Now let me address the sensitivities. Aramco has seen its net profit fall by 25pc in the first quarter of this year due to the collapse in crude oil prices. However, it continues to expand in downstream. Once famous for being tax-free, Saudi Arabia will increase its value added tax (VAT) from 5pc to 15pc. Riyadh will cancel the living subsidy, and a few portions of the kingdom’s economic diversification programme, Vision 2030, may be placed on hold.
It is not all bad news, cost of living allowance for government employees is still in place. As we have a lot of built-in resilience, I am convinced we will overcome the coronavirus situation. We have enjoyed for a long time generous subsidies, cheap energy, food, housing and low-effort jobs. Actually, petrol, electricity, desalinated water and natural gas prices were ridiculously low in the past, and needed to go up closer to world market prices. It is our duty to learn how to earn our living and not depend on government subsidies.
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