School buildings and desalination facilities producing fresh water will be among the first deals made as a part of Saudi Arabia’s privatization plan. As the government aims to transfer approximately a quarter of its’ economy to the private sector.
Riyadh is working on attracting foreign and local capital to the projects, whilst addressing potential investors’ concerns about control over projects and their ability to hire and fire employees, said Turki Hokail, chief executive of the National Centre for Privatisation and Public-Private Partnerships.
“This is a big change in the economy. The government is moving from operating projects to monitoring and regulating them,” he said in a telephone interview. “Operations will be the job of the private sector.”
Riyadh announced on Tuesday that it expected to generate SAR35bn to SAR40bn of non-oil state revenues from the privatization programme by 2020.
This will be generated through part sales or direct transfer of assets or through initial public offerings, through the sales of shares.
Hokail said Riyadh was willing to consider 100 per cent sales of state firms, but it would vary from deal to deal and depend on investor demand and the state of the market.
Public-private partnerships (PPPs) will make up the rest of the money, where the private sector entity invest in the infrastructure and are paid to operate it for a period of time, before transferring it back to the state.
Authorities are working towards releasing a draft law on PPP frameworks for public consultation within a week before implementing a final version later this year, said Hokail.
The lack of such a law have hindered progress in the privatization programme.
By 2020, government authorities aimed to have completed 5 asset sales, 14 PPPs and 4 corporatisation exercises, where state entities will be transformed into independent entities in preparation for sale in the future.
Hokail said, authorities will be specific about the identity of the buyers of state assets, examining them on how they plan to add value to the economy, increase employment and develop skills among local staff.