Market perception is positive towards privatisation in top industries across Saudi Arabia
Industries in Saudi Arabia are poised with high appetite for privatisation, as the Kingdom rigorously moves towards the implementation phase of Vision 2030, according to a new report by Oliver Wyman, titled Creating a Sustainable Provatisation Program – Realising Saudi Arabia’s Vision for the Future.
According to the report, Saudi Arabia is set to embark fully on its ambitious reform agenda aimed to transform its economy and society in the coming decade with the rallying of the oil prices since the start of 2018. It is pertinent for the Kingdom to act now to diversify its economy and increase reserves.
With the GCC countries increasingly considering regulation for privatised industries and the subsequent implementation, the case of Saudi Arabia stands out with the announcement of privatising five per cent of Saudi Aramco’s shares.
The general market perception suggests that the top candidates for privatisation are government entities within the power and water sectors such as Saudi Electric Company, the Saline Water Conversion Corporation and Sadara, the semi government chemical company. Each of these industries have relatively high investor appetite and are anticipated to provide a positive impact on the economy. Moreover, the market sees them as having a high ease of implementation compared to the other industries under consideration.
“The rapid change in policies in Saudi Arabia suggests that the climate is ripe for privatisation in the Kingdom. We conducted a market survey across significant government industries and we were able to conclude that a change in the perception of the privatisation regulation among the stakeholders was on the horizon. The public in the Kingdom of Saudi Arabia are increasingly ready to embrace change and we were able to note the increase in appetite for investment across many sectors. Privatisation can accomplish much good if executed well, and we believe that the market currently will pave way for the ease of implementation,” said Jeff Youssef, Partner, Public Sector, Oliver Wyman.
The report also highlighted that the smooth transition to privatisation has the potential to play an integral part in Saudi Arabia’s reform and diversification strategy. When executed properly, privatising state-owned industries can bring clear benefits to the economy, driving growth and employment and improving the fiscal balance. To ensure that privatisation is a long term, sustainable solution, the Kingdom will have four key criteria; the right industry, the right model, a regulatory framework for monopolies and a well-equipped governance structure.