Privatization Strategy

Saudi Arabia’s National Center for Privatization (NCP) recently released a four-year plan outlining major asset sales and public-private partnerships (PPP) totaling SAR207 billion ($55 billion) in a variety of sectors including water, power, health, and transportation.

NCP’s plan includes 160 projects in 16 sectors identified for asset sales or PPP, of which 96 projects have been approved. NCP expects SAR29 billion ($8 billion) in deals with private investors in 2021 followed by SAR44 billion ($12 billion) in 2022 and SAR57 billion ($15 billion) in 2023.

Participation of Saudi citizens in sports rose from 13 percent to 20 percent since the launch of Vision 2030’s Quality of Life program, which was created in 2018 to increase participation in cultural, environmental, and sporting activities. The government aims to raise this figure to 40 percent by 2030 through investment in sporting facilities, expansion of women and children’s sports education and training, and raising the national profile of Saudi Arabia as a sporting destination.

Sector Strategy

Since 2016, Saudi Arabia has actively bid to host major international sporting events and sought to attract international investment by developing venues for sports that are popular with Saudi audiences and take advantage of its dynamic topography.

Major business reforms affecting foreign ownership, procurement, and competition have been implemented since the launch of Vision 2030 in 2016 to boost private investor confidence in the business potential of sectors where the public sector has historically dominated.

These regulatory changes have culminated in a major new Private Sector Participation Law (PSP law), which will enter into effect in July 2021. The PSP law will introduce several changes that seek to level the playing field for foreign investors, allow direct collection of public fees and revenues, and permit some exemptions to Saudization employment policies at the discretion of NCP and the Ministry of Human Resources & Social Development (MHRSD).

The government’s asset sale of its flour-milling sector to a consortium of local and international investors represents the most lucrative asset sale made during 2020. NCP confirmed the industry is now fully divested and that the government netted SAR5.8 billion ($1.5 billion) from the total sales.

The water services sector, which encompasses desalination, wastewater treatment, and power generation, has also been a strong focus due to its dominance in the Saudi economy. Independent Water Plant (IWP) projects continue to be signed with the private sector and recently, Independent Sewage Treatment Plants (ISTP) are now being pursued for PPP by the National Water Company as well.

The health sector also saw the first privatization of a government-owned healthcare entity following the majority stake acquisition of Saudia Medical Services Company by Dr. Soliman Abdel Kader Fakeeh Hospital Company. Healthcare privatization is expected to be a leading sector of the government’s four-year plan, which has been subject to less privatization opportunities relative to the water sector.

Government entities have approved 68 projects in ‘Water & Agriculture,’ several of which are currently accepting bids. The Ras Al Khair Independent Water Project, one of the key privatization goals of the government’s delivery plan, is currently in the RFP phase along with ISTPs in Madinah, Tabuk, and Buraidah.

The Ministry of Environment, Water, and Agriculture (MEWA) also established a new water transmission company, the Water Transmission and Technologies Company (WTTCO), that will manage 8,400 kilometers of Saudi water pipeline infrastructure. The state-owned transmission company will seek SAR60 billion ($16 billion) in private investments including PPP before a planned IPO on the Tadawul.

The health sector has 9 privatization projects that have received government approval and 23 projects that are under consideration. Healthcare in Saudi Arabia is a key target for long-term privatization including dialysis care, radiology services, and operation of primary care clinics. Government healthcare spending currently accounts for SAR175 billion ($47 billion), or 18 percent of the total budget.

Several contracts relating to the operation of Saudi marine ports, dry ports, and bus transportation are expected to be awarded over the next four years. These projects include the operation of the Obhur Suspension Bridge in Jeddah and operation of the bus transportation systems in Jeddah and Madinah.

Saudi Arabia plans to corporatize the Saudi Professional Club and other football clubs. The Kingdom sees the business framework of corporatization as a benefit to nurturing talent, attracting short-term private capital, and adopting best practices in club management.

All 27 Saudi airports are intended to eventually be either privatized or corporatized, but progress has been limited to select services and terminals thus far. Saudi Arabia’s domestic and international airports will be corporatized, or restructured to operate like a private company, in advance in full privatization. Regulatory changes have been made to allow foreign firms to own at least 75 percent shares in some airports, according to the General Authority of Civil Aviation (GACA).