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With Saudi Arabia announcing plans to raise $ 55 billion through its privatization program, other Gulf countries are also stepping up efforts to boost private investment in public assets and projects, with a view to strengthening finances. state, stimulate diversification and stimulate their respective recoveries from Covid-19.
In March of this year, Saudi Arabia’s Council of Ministers approved the long-awaited Private Sector Participation Law, which aims to increase both the privatization of public sector assets and private sector participation in projects. infrastructure.
The law will come into force in July. Targeting 16 sectors, it will advance one of the main objectives of the Kingdom’s Vision 2030 economic development plan, namely an increase in the contribution of the private sector to GDP, from 40% to 65%.
The new law addresses various areas that have traditionally generated some apprehension among potential investors, especially foreign entities.
For example, among the principles it enshrines, there is that of a level playing field between foreign and national investors; the freedom of private sector entities to collect revenue; and a more streamlined process for obtaining permits and approvals. The law also exempts privatization projects from respecting Saudation quotas.
This willingness to respond to the concerns of foreign investors can be read as a reflection of the post-Covid-19 panorama, in which the Gulf countries are in a more limited budgetary position and therefore likely to be more accommodating than they are. may not have been in the past.
Along with the approval of the law, Saudi Arabia’s National Privatization Center – founded in 2017 – announced the launch of a Privatization Project Register, a central database of information on targeted projects for the privatization.
Hopes are high that the new law will give a significant boost to privatization.
At the end of May, Mohammed Al Jadaan, the finance minister, told the Financial Times that Saudi Arabia expects to raise $ 38 billion through the sale of assets and an additional $ 16.5 billion through partnerships. public-private by 2025.
Acceleration across the Gulf
The Saudi government is among those in the region that are expanding their respective privatization strategies.
As OBG has explored in depth, the Covid-19 crisis has prompted many Gulf States to step up their ongoing diversification attempts, with increased private sector involvement being a key element in many such projects.
In Oman, for example, local media recently reported that the government was considering selling its 54% stake in Oman Cement Company.
The country has a pre-coronavirus history of advocating for privatization. Its first major sale was for a 49% stake in Oman Electricity Transmission to the State Grid Corporation of China at the end of 2019.
On a related note, it was recently reported that Abu Dhabi is planning to sell a 10%, $ 4 billion stake in the Abu Dhabi National Energy Company, known as Taqa, which is the most large public service of the emirate.
It is believed that Taqa’s ongoing transition to renewable energy – it plans to increase the contribution of solar and wind to 30% of generation over the next decade – could increase its appeal to international investors.
Last year, the company announced that foreign investors, who were previously banned, would be allowed to buy shares in future sales.
Any potential sale of the company’s assets would represent the latest step in an ongoing privatization drive by the emirate, which in recent years has attracted more than $ 20 billion in foreign investment into the operations of the state-owned oil company Adnoc. .
Meanwhile, in March, Bahrain hosted the Bahrain Metro Market Consultation, an initiative to find private companies with which to form a public-private partnership to develop its metro system. The launch of the international tender for the project is expected later this year.
It is estimated that the project will cost more than $ 1 billion, and potentially up to $ 2 billion.
Bahrain has long been a regional leader in seeking private sector investment. For example, in the MENA region, Bahrain was ranked second behind the United Arab Emirates in the World Bank’s most recent Ease of Doing Business Index, and 43rd overall.
As Gulf governments seek to strengthen the resilience of their economies and public finances in the aftermath of the pandemic, there are concrete reasons to anticipate that privatization will play an important role both in their immediate recovery strategies. of Covid-19 and in their longer-term diversification. efforts.