Experts welcome Saudi Arabia’s transformational plan

Global financial and economic experts have welcomed the transformational plan to privatize large parts of the Saudi economy, but believe there is more work to be done before the program can really get down to the business of selling state assets to domestic or global buyers.
The National Center for Privatization (NCP), which is helping coordinate the program, recognizes that the plan is at an early stage. “In this initial phase our priority is to support individual government agencies to create the right framework for privatization, and to guide potential investors through the beginning of this process and create a blueprint for the future transfer of assets to private ownership,” said Hani Alsaigh, director general of the NCP’s strategic communication and marketing.
But experts pointed out that there was still a lot to be done in setting up the appropriate legal, regulatory and accounting infrastructure for the $200 billion program.
Nasser Saidi, who was minister of economy in Lebanon when that country considered a privatization program in the early 2000s, said: “When you approach privatization you have to have a legal and regulatory framework. This is being worked on fast in Saudi Arabia, but it is not there yet.”
He said that a crucial stage was the setting up of a privatization body separate from the authority of ministries that has a mandate to see the program through, and with an appropriate regulatory structure.
One such model is being worked through the privatization of King Khalid International Airport in Riyadh, where the assets are planned to be transferred to the Public Investment Fund (PIF) and regulation in the hands of the General Authority of Civil Aviation.
A Saudi banker, who asked to remain anonymous because his bank was involved in the advisory process for some of the privatization plan, said: “We’re seeing the first stages in the process. It will be difficult to navigate given the bureaucracy involved. It might be complicated to put in place the preparatory infrastructure, but in the end it will be brought to a result because of the political power behind the privatization.”
On the question of the best form the sell-offs could take, the banker thought it was good to have a combination of options depending on the assets: “A straightforward sale to strategic investors might be preferable, but in other cases a local listing, or a dual listing would be good. The government has to have flexibility.”
Saidi said it was important for the local capital markets to be fully involved. “IPOs offer good value, and they also allow Saudi citizens to see the benefit of the sale, if they believe they have a stake in it, as happened in the UK. And of course it would be good for local markets too,” he said.
Ellen Wald, American expert on the Middle East and author of the forthcoming book “Saudi Inc.”, said: “It’s an ambitious plan, to be sure, but the Saudis have stacked the odds in their favor by focusing on areas of strength and on attracting foreign capital to invest through joint ventures.”