Finance Minister Mohammed Al-Jadaan discussed the country's economic outlook, international borrowing and the future international listing of Saudi Aramco with Bloomberg Television. He spoke with Francine Lacqua at the World Economic Forum's annual meeting in Davos, Switzerland on Wednesday. He said in the interview that an international listing of Saudi Aramco is "still on the cards" but likely won't happen soon. He expressed optimism at the Kingdom's economy growing, stating he is "very confident" that the Saudi economy is picking up. He also spoke on the Eurobond issuance, saying, after issuing a $5 billon eurobond, the country could borrow another $4 billion more this year and is considering debt in euros, riyals as well as sukuk. He said that demand for Saudi credit is very high and very healthy. Here are the excerpts: Francine Lacqua: Joining us now for an exclusive interview is Mohammed Al-Jadaan, minister of finance, Saudi Arabia. Thank you so much for joining us. Let's go through bond issuance first. Yesterday, you had some $23 billion of orders for the $5 billion bond dollar, were you satisfied with pick up? Al-Jadaan: We are satisfied. I think Saudi Arabia has made it clear they are going through a well-articulated strategy in terms of having to the debt market, whether international or local. I think yesterday, they showed clearly demand is high and very healthy. We are pleased not only with this level of demand but the pricing. Investors have really started pricing Saudi in the right way. We reduced the pricing significantly compared to the last year's issuances. Francine: What comes next? How much issuance can you expect in 2020? Will it be in euros next? Al-Jadaan: We are considering euros, we are considering obviously Saudi riyals and also sukuk and dollars, but that will depend a lot on the market. Sentiment is very positive. Demand is very positive. We are starting seeing results of Vision 2030. The numbers are proving that reform is working. We are basically cashing on the successes. Francine: When will you decide and what amount are you looking at? Al-Jadaan: I think internationally we are likely to go for more than $9 billion equivalent throughout the year, $5 billion is done already so 4 is remaining. This will either be through issuances as we did yesterday or through alternative government financing. We are also talking to ACAs and other funding institutions just to make sure we diversify our funding portfolio. Francine: Government spending will fall this year, are you worried that will impact the non-oil economy? Al-Jadaan: Not at all, government expenditures are reducing but are reducing relatively in a small way. It is about 30 billion Saudi riyals out of 1 trillion, a small amount. The reason for that action is the result of all the efficiencies we have done over the past three years have now started yielding results. Second, actually is the private sector's involvement. We have awarded quite a lot of private sector projects in infrastructure and soft structure in the last two years, and now actually more work to the private sector has been given. Francine: If you see a slowdown or a recession, could the government start spending quickly? Al-Jadaan: We are prepared. We are very dynamic, you saw that in 2017, we spent when we needed to spend. I am confident the economy is picking up. You have seen the third-quarter results. The private sector GDP grew by 4%, which is the highest in five years. Non-oil GDP is growing the highest in the last 4/5 years, 3.1%. We are confident the economy is picking up and we are seeing leading indicators say private sector confidence is back. PMI indices are at the highest in the last five years. Francine: How much are you expecting the PIF national development fund to spend domestically? Al-Jadaan: The national development fund is mandated on domestically. So their forecasts are aligning with the seven sub funds — the real estate, industrial, agriculture, tourism. We have just established a new fund of 15 billion riyals for the tourism industry. It is one of the sectors that is very promising. We have seen successes there although we have just launched it softly. That is the national development fund. For PIF the mandate is to focus on local markets, they are investing in sectors that are newly opened, that requires large investment. That requires self-movers. They are also catalysing the private sector with them. We are still investing internationally but less than locally. Francine: If you look at the Epat levy fund. Do you expect to increase that this year? Al-Jadaan: We do not, it is as planned. We have the maximum, which is 800 riyals for those who don't employ an equivalent number of Saudis. That will remain going forward. Francine: If you look at Saudi Aramco, is it likely some of the commitments for dividends will increase compared to what was promised to shareholders? Al-Jadaan: Obviously it is a listed company, it's a public company, I cannot comment on that, but they have made it clear they are committed for the next five years to a minimum dividend. Depending on their cash flow, they will distribute but I cannot comment on that. Francine: Are you looking at an international listing for Saudi Aramco? Al-Jadaan: It is on the cards, we have made that very clear but I do not think it will be anytime soon. Francine: What are investors asking you now? Is there a problem of perception with Saudi Arabia? Or are they focusing on the fundamentals? Al-Jadaan: I think investors are focusing on fundamentals. They see the growth they see the potential. We are seeing a growth in FDI, a growth in the number of applications for licenses. The confidence is back in a strong way. With G20, we are also focusing on that and working with our partners to bring consensus to world challenges and bring about world solutions. Francine: Where do you see the world economy going? Are we risking miss pricing a downturn, or are you confident the trend is here to stay? Al-Jadaan: Obviously the economy goes through cycles, but I do not think there is any serious risk in 2020. I think it will be stable. A little bit of growth with trade tensions easing with geopolitical tensions easing. That will give the markets a good kick to continue growth through the year. Francine: Thank you so much for joining us, Mohammed Al-Jadaan, Minister of Finance, Saudi Arabia. — Bloomberg Television
