According to Saudi finance minister Mohammed Al-Jadaan, Saudi Arabia hopes to increase by around $55 billion over the next four years through its initiative for the privatization of its finances.
He made the announcement that he is supposed to increase 38 billion dollars in asset sales and 16.5 billion dollars in public-private partnerships.
160 initiatives in 16 industries, involving asset sales and private partnerships until 2025 were proposed by the Saudi government.
Asset transactions include state-owned hotels, television towers, and refreshing and desalination facilities.
This program does not include national investment funds or the purchase of Saudi Aramco’s other holdings. In Saudi Arabia, in July 2021, a privatization law will be passed.
In 2020, Saudi Arabia sold all manufacturing units for around $1.5 billion to a consortium of local and foreign investors and HSBC advised on the acquisition.
In March, the National Privatization Center (NCP) proposed the construction of a Registry of Privatization Initiatives, complete centralized data, and documentation for privatization programs.
The new method aims to better the present privatization program, says Hani Al-Saigh, Director General of Strategic Communication and Marketing at the NCP. One of its main duties is to enhance the current administration and guarantee justice and openness and according to the Milton Prime online broker experts and analysts privatizations will have international interests, but they added that the project mostly attracted local industry because investors from abroad still “circumvent” the Kingdom and the “brand” of Prince Mohammed. His rule has been marred with violations of human rights, notably the assassination of Jamal Khashoggi, a reporter and a dissident.
“The legislation enables private participants to establish a Committee to grant complaints about tendering and privatization project selection processes and to build the legislative framework for compensating those who have fallen victim to the gaps in case the gap cannot be resolved” ” he told journalists.
Ongoing privatization effort is a national effort which is not tied just to government departments, stated Dimah Talalal Al-Sharif, Sauer lawyers at the Majed Garoub company and a member of the International Association of Lawyers.
“Privatization will offer more prospects for employment and enhance the standard of public service because of competition, a major factor in the private industry. Yet more job security insurance will be needed in the state services,” she added. “Continuity will be a shift in the operation and management methods of public projects for all those who demonstrate their performing capacity and comply with the regulations and meet the objectives established for each employee.”
The program’s aim was to revise the government-run, oil-sufficient economy and modernize the realm of Crown Prince Mohammed bin Salman.
“It is no longer an option but a central government obligation that the government no longer administer certain services or utilities,” Jadaan remarked. “It’s bringing it (privatization) to the next step.”
It was aimed at increasing income in Riyadh, with a budget shortfall which struck 79 billion USD last year, that is 12 percent of the GDP, and at enhancing the state sector.
The Minister is hoping to acquire $38 billion in bond sales and $16.5 billion in publicly funded partnerships.
The Kingdom aims at regenerating from the double shocks of last year’s coronavirus epidemic and collapse in oil prices, with the bold objective to reduce its fiscal deficit to 4.9% of GDP in 2021.
Jadaan added that any sales volume of shares of Aramco will go to the PIF, the main focus of Riyadh’s attempts at diversification of the economy and not of the treasury.
“Aramco offers customers two types of sales. They might monetize and transfer their own assets, like pipelines, to new investment projects, however, this is their business,” he remarked. “We will be monetizing Aramco, recycling and generating other economic activities by opening new industries via the PIF when it regards shares.”
Three years ago, Saudi Arabia started its privatization initiative with the announcement of the sale of sports clubs, factories, and a desalination facility. The procedure was nonetheless lengthy and there were just five sales of assets, four milling enterprises, and the Saudi Medical Service Centre.
It is anticipated to be adopted in July, with the Kingdom’s privatization law in progress over several years.
Prince Mohammed’s primary objectives are to develop the private market in the controlled economy and to provide employment for young Saudis outside the official sector.
However, over five years since he initiated his “Vision 2030” project, there have been concerns about the PIF crowding out firms, while costs have risen as Riyadh has reduced fuel and energy subsidies, raised valuation tax, and boosted forcefully imposed quota system on the employment of Saudis, who are more pricey than migrant workers who dominate the private sector.
“The financial industry, significantly the private sector, has been squeezed out and remains muted; they are apprehensive about the increase in fees and taxes, but the government now recognizes that they must involve them,” said John Sfakianakis, a Gulf specialist at Cambridge University. “On the one hand, the state aims to expand a more slimmed-down state and lower its obligations, while on the other side, using the PIF to accomplish all of the megaprojects.”