Saudi Privatization Strategy

The Privatization Strategy of the Kingdom of Saudi Arabia is one of the economic policies adopted by the Kingdom to develop economic performance and increase private-sector participation in the management and ownership of public-sector services and facilities in the Kingdom.

The inclination towards privatization or private sector participation surfaced as the tenth strategic basis emphasized the privatization of more public services, facilities, and activities. According to the Eighth Development Plan, the future vision for privatization goals and strategies is based on increasing private-sector participation in economic activities to enhance the operational efficiency of the national economy and create a competitive environment.

Development plans have committed to achieving privatization goals as a strategic choice for developing economic activities across various sectors. The Ninth Development Plan has given special attention to the process of identifying mechanisms that will lead to the achievement of its goals and implementation of its policies, programs, and projects by strengthening collaboration between the public and private sectors and expediting privatization processes.

The state has paid great attention to the Privatization Program, advancing it through the issuance of several related resolutions and regulations. This is exemplified in the resolution of the Council of Ministers in 1997 that outlined eight objectives for privatization in the Kingdom and the bases to be considered for the achievement of these objectives.

The program has continued to achieve its objectives by supporting various state agencies and institutions. To enhance its effectiveness, a decision was issued by the Council of Ministers in 2001, stipulating that the Supreme Economic Council (later abolished) would be responsible for overseeing the privatization program, monitoring its implementation, and coordinating with governmental entities, as well as determining the activities that could be privatized.

Privatization supports the role of the private sector in the development process, providing more opportunities for its expansion and effective contribution to overall economic growth. Therefore, the eighth objective of the general objectives and strategic bases of the Seventh Development Plan issued by the Council of Ministers’ resolution in 1999 stipulated the 'increase of the private sector's contribution to economic and social development processes.'

With the development of the economic ecosystem and the implementation of several structural reforms in the Saudi economy, the Privatization Program has become one of Saudi Vision 2030's realization programs (VRPs). These programs serve as an important source of support for the national economic development movement by working on enhancing the role of the private sector in service delivery and providing access to government assets. This improves the overall quality of provided services in general and contributes to reducing their costs.

The Privatization Program was launched in 2018. It sought to identify government services and assets that can be privatized in a number of sectors. Moreover, the program developed the privatization ecosystem and mechanisms, and defined frameworks for partnerships between the public and private sectors to enhance the quality and efficiency of public services and contribute to economic development.

The first phase of the Privatization Program involved several targeted entities, including ministries in specific activities, such as education, municipal and rural affairs and housing, health, transport, and various types of transportation. It also encompassed public services, such as water desalination, national water, sports clubs, the Saudi Grains Organization, Saudi Post, and King Faisal Specialist Hospital.

To provide a more institutionalized and focused approach to achieving its goals, the National Center for Privatization & PPP (NCP) was established by a resolution of the Council of Ministers in 2017 as part of Saudi Vision 2030. The NCP works to enable the privatization processes of targeted assets and services of government entities, a priority identified within the Kingdom's vision plan and as a global center of excellence. The center is tasked with developing an efficient privatization process to be implemented by the targeted entities, in addition to promoting opportunities at both the local and international levels.

The Privatization Program has also established a set of targets it aims to achieve by the end of 2025, including non-oil government revenues reaching SAR143 billion, a total investment value of SAR62 billion from partnership operations between the public and private sectors, and a total financial value of SAR14 billion for efficiency in government spending through partnership operations.

Since its launch, the program has achieved several milestones that bolster its developmental role and purpose. These include the completion of the first phase of privatizing the flour milling sector to strategic investors from the private sector, the signing of agreements for the Jubail-3 and Yanbu-4 projects for independent water production, as well as the contract signing and financial closure for the first batch of the initiative aimed at attracting private investments to fund the construction of educational facilities.

Because the Privatization Program intersects and integrates with the Financial Sector Development Program, it also outlines avenues for privatization aligned with the second strategic pillar of developing an advanced financial market. This emphasized the encouragement of privatizing state-owned entities through initial public offerings (IPOs) to strengthen the Saudi stock market by boosting market value, attracting foreign investment from foreign investors and institutions, and enhancing the efficiency and performance of privatized entities.

The Financial Sector Development Program complements the efforts of the Privatization Program by closely collaborating with relevant entities to add value to the overall economy. Moreover, privatization is expected to yield multiple gains for the Saudi capital market, including a unique opportunity to expand the scope and scale of the capital market, attract foreign investors and institutional investments, and improve the governance, performance, and efficiency of privatized entities.

The impact of this privatization was evident in one of the largest privatization processes through the official listing of Saudi Arabian Oil Company 'Saudi Aramco' on the Saudi Exchange 'Tadawul' on December 11, 2019. The IPO was valued at SAR96 billion, equivalent to USD25.6 billion (assuming no exercise of the purchase option). This made it the largest IPO in the world at that time.

The Private Sector Participation Law has evolved significantly to align with the requirements of the economic phase that saw the Saudi economy achieve more competitive growth rates, supported by the realization of Saudi Vision 2030 objectives. Consequently, in March 2021, the Council of Ministers issued its resolution approving the Private Sector Participation Law, aiming to enable the private sector's involvement in approximately sixteen government sectors. This aims to elevate the private sector's contribution to the gross domestic product (GDP) from 40 percent to 65 percent.

The Private Sector Participation Law was issued in 2021 by a royal decree and a resolution issued by the Council of Ministers in the same year. It seeks to enhance privatization efforts and increase the private sector's flexibility to participate in the management of public assets. The law's first article defines privatization as a partnership between the public and private sectors or the transfer of ownership of assets.

As an enabler of the Private Sector Participation Law and its program derived from Saudi Vision 2030, the National Center for Privatization & PPP intensifies its efforts to secure the Kingdom's economic future by creating opportunities for both national and international investors, providing employment opportunities for citizens, and enhancing and improving citizens' quality of life.

The implementation of the Privatization Program involves specific sectors. However, the Council of Economic and Development Affairs may add sectors or entities to the program. These sectors include education in the Ministry of Education, the Technical and Vocational Training Corporation, and government universities; and the industry and mineral wealth sector: the Ministry of Industry and Mineral Resources, the Royal Commission for Jubail and Yanbu, King Abdulaziz City for Science and Technology, King Abdullah City for Atomic and Renewable Energy, the Saudi Authority for Industrial Cities and Technology Zones (MODON), and the National Industrial Development Center (formerly known as the National Industrial Clusters Development Program).

Other sectors include the environment, water, and agriculture sector: the Ministry of Environment, Water and Agriculture, the Saline Water Conversion Corporation, the National Center for Environmental Compliance (formerly the General Authority of Meteorology and Environmental Protection), and the National Water Company; the Hajj and Umrah sector: the Ministry of Hajj and Umrah; the health sector: the Ministry of Health, Saudi Health Council, and King Faisal Specialist Hospital and Research Center; the housing sector: the Ministry of Municipal and Rural Affairs and Housing; and the labor and social development sector: the Ministry of Human Resources and Social Development.

This comes in addition to the municipal sector: The Ministry of Municipal and Rural Affairs and Housing, and municipalities; the public transport sector: Saudi Arabian Airlines Corporation and Saudi Railways Organization (which was revoked and replaced by Saudi Arabia Railways 'SAR'); the transport sector: the Ministry of Transport and Logistic Services, General Authority of Civil Aviation, Transport General Authority, Saudi Ports Authority, Saudi Arabian Airlines Corporation, and Saudi Railways Organization (currently Saudi Arabia Railways 'SAR'); the information and communications technology sector: Ministry of Information and Communications Technology and Saudi Post; the energy sector: Ministry of Energy and King Abdullah City for Atomic and Renewable Energy; sports sector: Ministry of Sport; media Sector: Ministry of Media, Saudi Broadcasting Authority, General Commission for Audiovisual Media, Saudi Press Agency; interior sector: Ministry of Interior; and the financial sector: financial ecosystem.