Saudi Arabian prince plans $2 trillion fund

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Source:   —  April 01, 2016, at 5:46 PM

Saudi Arabia'south prince has outlined bold plans to construct a mega $2 trillion investment fund to assistance wean his country off its heavy reliance on oil.

Saudi Arabian prince plans $2 trillion fund

Saudi Arabia'south prince has outlined bold plans to construct a mega $2 trillion investment fund to assistance wean his country off its heavy reliance on oil.

Prince Mohammed Bin Salman, who's second in line to the throne, outlined his plans in a five-hour interview with Bloomberg.

"Within twenty years, we'll be an economy or state that doesn't depend mainly on oil," he told Bloomberg.

About seventy-five percent of Saudi Arabia'south income comes from the oil industry, making it necessary for the country to diversify into other industries as oil prices have recently been trading around their lowest levels in over a decade.

The prince revealed that his country would sell a tiny piece of its giant state-owned oil company, Saudi Aramco, on the open markets. The IPO could happen as early as following year, he said.

Aramco is the world'south largest oil producer: It claims to pump twelve percent of the world'south crude oil and it'south estimated to be worth trillions of dollars. But the prince told Bloomberg he hopes to mold the oil giant into an industrial conglomerate.

The oil producer had said in Jan that it was considering a potential IPO of the grouping or some of its subsidiaries.

Saudi Arabia'south Prince Mohammed Bin Salman is also the country'south defense minister.

The prince also said his country would soon announce a "National Transformation Plan" to outline ways to lift non-oil revenues. The plan, which is expected to comprise new sales tax, should be announced within a month.

However, there are doubts that the prince will be able to draw off his plans successfully.

"Following the IPO of Aramco, the government will transfer its remaining shares in the company ... to the Public Investment Fund, which will expand its size. In other words, it reflects a shift on balance sheets, rather than any new assets," well-known William Jackson, a senior emerging markets economist at Capital Economics.

As for plans to transmute Aramco into an industrial company: "That's likely to get an extremely long time to materialize," he said.

Saudi Arabia has been cutting back on spending as oil prices have plunged since mid-2014. It even trimmed its military spending latest year, according to new IHS data.

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