Saudi's $300bn privatization plans, 'sale of the century', in shambles
About 1.5 years ago, Saudi Arabia unveiled plans of a $300bn privatization program which many billed the "sale of the century". Cut to December'17, and the plan seems indefinitely caught amid a number of hurdles including bureaucratic delays, inadequate legal framework and frequent changes of priority on the government's part. A couple of sales have already been postponed or called off. What's happening?
Crown Prince Mohammed bin Salman's "Vision 2030"
In April'16, the Saudi Cabinet approved Crown Prince Mohammed bin Salman's "Vision 2030" aimed at bringing in fresh revenue and diversifying the economy, which was facing recession and high unemployment. Last year, the government had posted a $79bn deficit. $100bn was expected to come in from the state's oil company Saudi Aramco alone. Another $200bn would have come from handing over parts of the economy to private players.
Many plans have now been delayed or cancelled
However, privatization of most sectors is moving drastically slow, including in grains and healthcare. Saudi Post Corp's privatization, initially scheduled to begin in 2017, has been shelved for now. The Health Ministry, which in April received bids for financial advisors for the privatization of 55 primary healthcare units, has put the tender on hold. Uncertainty has also hit the plan to privatize soccer clubs.
No adequate laws, no clarity on government's priorities and more
Stakeholders have blamed the absence of a framework to regulate large-scale PPP projects, or to decide shareholders' control, or to regulate bankruptcy. Investors are wary of the government's shifting priorities, which is anyway viewed as "not up to the rigors of privatization", a banker said. Others have adopted a wait-and-see approach after an anti-corruption drive in November landed many royals and ministers in trouble.
Many deadlines have been missed, but the government will persist
Of four sectors identified as priority for 2017, none except water provision has seen much development. A minister said the power sector's privatization could see some progress in 2018. Meanwhile, the Health Ministry has issued new tenders for a technical advisor on privatization costs and demand. In aviation, the "corporatization" deadline of mid-2018 is "reachable", officials said; privatization by 2019-20 is likely.
