On 30 March 2021, the Crown Prince launched Shareek program, a major program that aims to strengthen the collaboration between the public and private sectors to fuel growth, diversify the economy and create job opportunities. The program will encourage the private sector to spend SAR5.0trn by 2030f through providing financial, regulatory and operational support. This will increase the total amount spent in the economy to SAR27trn by 2030. We believe Shareek is a key long-term theme that will fuel earnings growth and impact the stock market going forward. We expect investors focus to shift from dividends to growth stocks.
Shareek Program is a cooperative government framework led by the Crown Prince, Prince Mohammed bin Salman. It aims to strengthen the relationship between the public and private sector to accelerate economic growth and diversify the economy to reach sustainable prosperity. This program follows a series of ambitious initiatives, projects and strategies that were announced recently to support future economic growth, including the Green initiative, the Line, Riyadh strategy, Soudah project and PIF 2021-2025 strategy.
Shareek program will become an essential part of the national investment strategy, enhancing the business-friendly environment of Saudi to accomplish the goals set by Vision 2030. It is expected to provide a wide range of tools to fuel the growth of the private sector, including financing, operational support and accommodative laws and regulations. Further details about the program are expected to be announced soon.
The cumulative spending in the economy is expected to reach SAR27trn by 2030. Government spending is expected to reach SAR10trn (37%) while PIF’s spending, as per the recently announced strategy, will be SAR3.0trn (11.1%). The National Investment Strategy, to be launched soon, will contribute SAR4.0trn (14.8%). Saudi consumers are also expected to contribute SAR5.0trn (18.5%) over the next 10 years.
We believe the program will benefit capital intensive companies such as oil & gas, petrochemicals and heavy industries to capture attractive investment opportunities. The program will also support digitalisation and encourage investments in technology (such as fintech). Banks are expected to play an essential part to enable participating companies to reach their goals.
We believe the program reflects a major promising transformation for local companies. Large corporates are expected to reduce dividend pay-outs to finance potential new investments. Although investors might be negatively impacted by the potential dividends cut, we believe they will be more than compensated by capital gains as stock prices begin to reflect the growth potential.