OREANDA-NEWS. The Saudi cabinet has approved an ambitious plan to cut the economy's dependence on oil with diversification into trade, arms manufacturing, and tourism, alongside restructuring and part sale of state-owned Aramco.

King Salman bin-Abdul Aziz said in a short televised speech that the plan Saudi Vision 2030 was agreed. His son Prince Mohammad bin Salman — deputy crown prince, defence minister, chairman of the supreme council for economic and social development and chairman of the supreme council of Aramco — gave further detail in a TV interview.

The roadmap includes plans to restructure Aramco into a holding company that is not involved in any upstream or downstream operations, create subsidiaries that handle the company's activities, and place the entire company and its subsidiaries into a newly restructured Public Investment Fund (PIF), which Prince Mohammad said will be the largest sovereign wealth fund in the world. Aramco would have a board of directors elected by its shareholders, he added.

An initial public offering (IPO) of less than 5pc of Aramco's shares will be made, followed by listings of its subsidiaries, he added without giving a timeframe. A senior Saudi oil official told Argus last week that the IPO would likely occur in early 2017.

The roadmap will be followed by several specific five-year plans, including one for the restructuring of Aramco.

Prince Mohammad said that the main benefit of privatising Aramco would be transparency.

"Offering Aramco shares has benefits, the first of which is transparency. People were unhappy that Aramco's files and data were unannounced, unclear and non-transparent," said Prince Mohammad.

"If Aramco is offered on the market, it will have to announce its financial statements. It will have to make an announcement every quarter, and it will be under the scrutiny of all Saudi banks, all the Saudi analysts and intellectuals, all global banks, and all planning and research centres in the world will monitor Aramco intensively."

The process of valuing Aramco has not been completed, but "we expect it will be more than $2 trillion" he added.

Even offering 1pc of the company's shares for sale "will be the largest share offering in the history of the globe, so will the world be able to take listing 5pc of Aramco shares or not?" said Prince Mohammad.

He added that the creation of funds both in Saudi Arabia and in the US for the sole purpose of selling Aramco shares is being studied as one possible mechanism for launching the IPO.

Prince Mohammad criticised the status that the oil industry has occupied in the country for decades, saying that his ancestors had managed to establish and run the monarchy prior to the discovery of oil. "But today, it has become like our constitution, the Holy Book, the sayings and life of the Prophet and then oil. This is very dangerous, and we now have a condition of addiction to oil in the kingdom of Saudi Arabia," said Prince Mohammad.

The country's addiction to oil "has held up the development of many other sectors over the past years," he added.

He said that "you should own it as an investment, not as a main commodity or a main source of revenue".

The prince denied that the collapse of oil prices prompted the plan to overhaul the Saudi economy. "The vision would have been launched irrespective of whether the oil price was high, or low," he said.

He added that the roadmap would not be affected if oil prices rise and stabilise at higher levels, although "this will create strong support and a strong incentive, because it will make many procedures easier."

Asked when he thinks Saudi Arabia will no longer need its oil revenues, Prince Mohammad said: "I think that in 2020, if oil were to stop, we could live. We need it, we need it, but I think in 2020 we can live without oil."

[Saudi oil revenues came to $118.5bn in 2015]( https://direct.argusmedia.com/newsandanalysis/article/11608900, providing 86pc of government revenues. This year, they are expected to provide revenues of around $100bn, equivalent to 61pc of projected government revenues.

Listing Aramco shares would increase the size of the Saudi stock market and the country's investment portfolio would become more varied in the coming years, he added.

The public investment fund into which a restructured Aramco will be placed "will control more than 10pc of investment capabilities in the world," and its holdings "will be more than 3pc of all the assets that exist around the globe," said Prince Mohammad.

Other assets, such as large areas of state-owned, unutilised lands around the country have already been put into the investment fund, and Aramco and its subsidiaries will only be part of its holdings, he added.

Following its restructuring, the PIF turned a profit of SR30bn ($8bn), helping to lift non-oil revenues by 35pc over the year, said the prince.

He predicted that the new Saudi sovereign wealth fund will be "the largest in the world", will be "a major engine globally, not only regionally" and "there will not be any investment or movement or development in any area of the world without the voice of the Saudi sovereign investment fund."