Saudi G20 faces up to global challenges

Mohammed Al-Jadaan, the Saudi Arabia’s finance minister.
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Updated 26 January 2020

Saudi G20 faces up to global challenges

  • Riyadh summit’s top three priorities will be empowerment, environment and tech change, minister tells Davos

DAVOS: The G20 summit to be held in Saudi Arabia later this year will help the world resolve some of its biggest challenges in geopolitics, climate change and social issues, Mohammed Al-Jadaan, the Kingdom’s finance minister, told delegates at the World Economic Forum in Davos. 

“Fortunately, the world is becoming more connected as well, and that means we can think about solutions through consensus,” he said at a special session on the Kingdom’s strategic priorities ahead of the G20. 

Al-Jadaan said that the top three priorities for the summit were empowerment, the environment and technological change. 

“We have to continue empowering people — women, young people, small- business people,” he said. 

Another big priority was “protecting planet Earth, and at the centre of that is climate change,” but the “most ambitious” was the search for “new frontiers in technology and innovation that is shaping the world,” he said. 

G20 summits in the past have played a big role in stabilizing global financial systems, especially during the crisis of 2009. Al-Jadaan said that would be a “very significant element” of the Saudi presidency, and he highlighted sustainable growth, debt vulnerabilities and the prospect of digital taxation as three financial focal points for the Riyadh G20 Summit. 

Energy Minister Prince Abdul Aziz bin Salman said that Saudi Arabia was not a newcomer to the G20. “We have been involved for some time, and that is in recognition of the Kingdom being a vital part of the modern world,” he said. 

He added that the Saudi energy industry — Saudi Aramco being the biggest oil company in the world — played a key role in the global economy and was therefore a crucial member of the G20. “There is only one country in the world that has excess capacity in the oil market, and that is being used to mitigate the problems we face from wars, conflict and disasters.” 

Davos delegates also heard that women in Saudi Arabia had gender equality with men in the workplace after recent advances in employment across the country. 

Iman Al-Mutairi, assistant minister for commerce and investment, said that the Kingdom was the top performer in a recent World Bank survey of employment and that it had reached the average global level of gender equality. “We have gender equality now. Women can be builders, welders, fireman and lots of other professions. We are serious about inclusiveness,” she said. 

Al-Mutairi was speaking at a special session of the WEF on the strategic priorities of the Kingdom 

She said that the progress made by Saudi Arabia sent a strong message to the Arab and Islamic world about Saudi Arabia’s modernization plans, but more remained to be done. “We have to keep reskilling women, especially in finance, artificial intelligence and other STEM subjects. 

“Saudi Arabia has to act immediately and spread this ‘good virus’ to our neighbors,” she added. 

Other Saudi members of the top level panel reinforced her comments about importance of inclusion as an element of the G20 agenda. Mohammed Al-Tuwaijri, the Kingdom’s minister of economy, said that making progress towards the UN’s sustainable development goals (SDGs) would also be a big priority. “Every one of the 17 SDGs is addressed in the G20 agenda. We want the summit to take action and be practical,” he said. 

He was uncertain whether the world could meet all of the SDGs by the target date of 2030, though. “We will achieve a lot by 2030, but much depends on how other global institutions deal with policymaking and financial aspects of the SDG targets,” he said. 

Abdullah Alswaha, the Kingdom’s minister for communications and information technology, said that the biggest challenge of the G20 presidency was with regard to new technology.

“How do we make sure that artificial intelligence and new technology acts in the interest of human kind?” he asked, adding that the digital world was a major potential source of employment. 

The digital world was also a “social equalizer, but the analog world is polarized, so it needs to come together in the digital world.”  

Al-Swaha highlighted the need for cyber-resilience in modern technology. “In a few years’ time quantum computers will be able to decrypt most of the encryption mechanism that are in place today,” he said. 

Prince Abdul Aziz said that the environment remained a top priority for the Saudi energy industry. “We have to provide energy for the world, and still deal with climate change. If we’re going to be good G20 hosts, we have to have ideas and suggestions on these issues.” 

He added that the G20 would highlight the role of the energy industry in reducing harmful emissions and utilizing the potential for carbon capture technologies. It would also showcase the Neom mega-project, and its emphasis on renewable energy and hydrogen fuels, as well as developments in climate-friendly fuels. 

Al-Jadaan said the success of the G20 would be judged according to how it implemented existing policy initiatives, advanced new concepts being developed in the Kingdom, and showcased Saudi Arabia as a destination for tourists and business visitors.

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Aramco faces grilling as oil heads into ‘eye of the storm’

Updated 09 August 2020

Aramco faces grilling as oil heads into ‘eye of the storm’

  • CEO Amin Nasser to discuss quarterly results and outline future strategy in face of rising market uncertainty

DUBAI: Saudi Aramco, the world’s biggest oil company, will submit itself to two days of intense scrutiny by global investors after the biggest shock to global energy markets in decades.

The company is set to announce its financial results for the second quarter of 2020 — which witnessed the collapse of oil prices in April as global demand collapsed because of the COVID-19 pandemic — and CEO Amin Nasser and other executives will open up to questions about future strategy in an uncertain time for crude.

On Sunday, Nasser will field questions from the international media after posting the financials on the Tadawul exchange in Riyadh where its shares are listed — the first time Aramco has staged a press conference for financial journalists since becoming a public company in the record-breaking initial public offering in December.

On Monday, he will answer questions from the world’s investment experts on vital issues such as the future dividend policy, capital expenditure plans, and how Aramco can thrive in the “new normal” of relatively low oil prices.

Both encounters promise to be eventful after a transformational first half of 2020 that has changed many of the basic assumptions of the oil industry. One industry expert said the period was “the eye of the storm” for the oil industry.

With the oil price about $20 per barrel lower than at the start of the year, some European energy giants are reinventing themselves as champions of a new environmentally aware era, cutting investment in crude exploration and writing down the value of their oil assets.

In the US, the shale revolution has ground to a halt as companies struggle under the new financial regime of $40 a barrel. Some have gone out of business, weighed down by debts and heavy financing costs.

Aramco is subject to those same financial pressures. JP Morgan, the giant US investment bank, estimates that Aramco’s operating income will be down by 64 per cent this year, with a similar fall in earnings for shareholders.

Another big US financial institution, Bank of America, also calculates that many of the key financial metrics will be significantly lower.

But both banks, in pre-results research notes, say that Aramco has advantages lacking among its peer group of independent oil companies in the US and Europe.

“While the results will be understandably weak, we believe that Aramco’s advantages such as low cost of production, long reserve lives and free cash flow generation in a lower oil price environment come to the forefront as industry metrics deteriorate rapidly amid the oil price collapse,” BoA said.

JPM analyst Christyan Malek reiterated the firm’s “overweight” recommendation for Aramco shares — advising investors to buy the stock — highlighting the strength of Aramco’s energy and petrochemicals portfolio, its financial strengths, and the advantage of its low-cost profile to win it increasing market share from rivals.

Accoding to Malek, the “key strategic focus points” of the meetings with journalists and analysts will be the “reiteration” of Aramco’s commitment to a total dividend payout of $75 billion this year, Nasser’s insights on the strength of the global recovery in oil demand, and an update on plans for capital expenditure, slated at around $25-$30 billion for this year.

BoA also highlighted Aramco’s strengths in a fast-changing global market. “Aramco dwarfs its oil and gas peers both by the sheer size of its production and lowest global extraction cost structure. Aramco’s financials also were ahead of such stock market champions as Google, Apple and Amazon,” the firm said.

The second quarter of 2020 was “the eye of the storm”, the bank said. “The second quarter will be a tough one for Aramco as we expect earnings to decline by 60 percent year-on-year. The decline will be mainly driven by oil price collapse, exacerbated by lower official selling prices in April and May,” it added.

Malek agreed. “The second quarter will be a transitory quarter of tough macro-economics, lower crude production at 9.3 million barrels per day, widened realization discounts and rising gearing,” he said.

Both investment houses also expected an impact on Aramco’s financial position from the $69 billion acquisition of SABIC earlier this year.

But they also believe there could be more value to be had from holding Aramco shares, which traded at SR32.95 on the Tadawul last week. BoA set a target price of SR34, while JPM said the shares could reach SR36.