Saudi Crown Prince Mohammed bin Salman launched “big sale” of the Kingdom’s assets. A sign of “sale” was placed on almost all economic sectors in the kingdom, a move that brought it back to the young prince’s desire to secure the throne for him.
But it faces five challenges that threaten its failure, including the lack of a clear vision of the privatization plan, its legal and regulatory framework, and its application to an economy stuck in the rent-earning mentality since the 1930s. the last century.
Privatization plans also face challenges such as the resistance of clerics in some aspects, the prevailing view in the kingdom that some sectors are an integral part of the country’s social and cultural fabric, and therefore are not privatized. Some Saudis consider the privatization plan to be a national legacy rather than an economic one .
The Guardian noted that “there is a huge economic transformation in the Kingdom.” It began to privatize the country’s assets, which went beyond the “Thatcher economic revolution” of the 1980s, and even competed with the value of the Soviet Union’s disintegrating assets in the 1990s in terms of size and importance.
Saudi Arabia has suspended a “for sale” sign on nearly all economic sectors, including oil, electricity, water, transportation, retail, schools and healthcare. Even football clubs in the kingdom offered to sell.
The sale of Saudi airports to the private sector has already begun. Goldman Sachs has been appointed to oversee the privatization of King Khalid International Airport in Riyadh.
While King Abdul Aziz Airport was already privatized in Jeddah after Changi Group of Singapore managed to operate the airport.
The privatization program is a central part of the economic transition plan embodied in the country’s 2030 strategic vision. Stability of oil prices around $ 50 a barrel has depleted and widened the Saudi budget deficit gap. While in order to reach the national financial parity point, the price of the barrel should reach $ 75.
But in 13 years, if things go according to plan, the kingdom will reach the point of financial stability, with a more dynamic economy and society, less dependent on oil and government spending.
The first challenge
The kingdom’s economy has been stuck in the rent-earning mentality since the 1930s when the country was ruled by the al-Saud and oil was discovered. This is the first challenge to the privatization process in Saudi Arabia.
The launch of Saudi Aramco, the national oil company and the source of most of the Kingdom’s wealth, is the main focus of the privatization plan.
If the sell-off proceeds in line with the value of the $ 20-billion Saudi Crown Prince and Bin Laden’s 2030 vision, the company’s global market value will rise by $ 100 billion, with London and New York competing to make the most profit from During the IPO of the company for public subscription, as well as the stock market in Riyadh «Tadawul».
It is a huge amount, four times the largest public offering in history. However, this amount represents only half of the estimated value of the rest of the privatization plan.
The second challenge
A second challenge was added by the Guardian to the accelerated privatization plan in the Kingdom. There is no clear picture of how the Kingdom will proceed.
There are always questions about the real motives of this plan, as well as the legal and regulatory frameworks that will govern this plan, in addition to the form in which the privatization process will take place; will it be a public offering, special transfer transactions or commercial sales to non-Saudis?
“When you go to privatization, you have to have a legal and regulatory plan of action,” says Nasser al-Saidi, Lebanon’s former economy minister, currently an economic adviser and a failed bid to privatize large economic sectors in his country early in the first decade of the new millennium not available in Saudi Arabia yet ».
However, there is a clear idea of the assets offered for sale; because almost everything will be public. The National Center for Privatization started its work in March this year, and has drawn up a list of the different sectors of the Saudi economy, including environment, water and agriculture, transportation, energy, industry and mineral resources, employment and community development, housing, education, health and development. Local, telecommunications, information technology, Hajj and Umrah services, and the Center’s website, all of these sectors are announced within the privatization program.
There are some top sectors in this list. The Saudi banker says that because of the country’s young population, investment in the health and education sectors is likely to be one of the most profitable investments.
The third challenge
But as far as privatization is concerned, there are also some serious problems associated with the sale of assets as long as they are seen as an integral part of the country’s social and cultural fabric, the third challenge to the privatization plan in the kingdom.
“The private sector’s control over education, especially if it is foreign education, will be revolutionary in the kingdom,” Saidi said. Will education investors be able to control curriculum development? This would be very contrary to the cultural and civilizational heritage of the Kingdom. ”
To overcome such sensitive issues, other more secular assets, not linked to religious or cultural heritage such as power plants, water purification plants, and road and transport infrastructure, are more suitable for the privatization program.
a The fourth challenge is that there are other obstacles that must be overcome. Some Saudis, not just conservatives, have criticized the privatization plan as abandoning a national heritage rather than an economic deal, or asking them to sell something they already own.
That is the fourth challenge. In return for the motives of the privatization process in the Kingdom, the Guardian pointed out that over the past three years, while the new Saudi heir was planning to secure his succession, he surrounded himself with public symbols and his own advisers, all of which concluded the same conclusion: that the Kingdom would be at risk if Its people change what it is. The “Al-Saud” faces conflicts – which they fail to overcome –
at all levels to tighten their grip on the country that is heading towards collapse. At the cultural, social and economic level, the kingdom needed reform. Bin Salman commented on his remarkable rise and legacy as a result of the broader reform attempt in the Kingdom. Factors such as absolute ownership, an oversized public sector, huge government payrolls, and intransigence for any attempt at change will not be easy targets at all. In addition, the mentality of entitlement among many Saudi youths is their low productivity, and seemingly intractable challenges.
The young prince’s plan is to distribute wealth and give the citizens of the kingdom the right to buy. Like al-Hilawi, the prince also made some cultural reforms, such as opening cinemas, promoting concerts and other social improvements that many Saudis yearn for, according to the Guardian. “This is a cultural revolution disguised in the form of economic reform,” a senior Saudi minister told The Observer newspaper earlier this year. “Everything is up to it.”
The fifth challenge is to reform the way Saudis live while changing the way they work. Despite the enthusiasm among many sectors of society, there is widespread dissatisfaction among other communities on the scale of plans and visions. “The leadership is much less conservative than al Qaeda,” the senior minister said. “None of this will be easy at all.” “They hope that a whole shift in value will happen across a generation. To do so, they will have to take care of theologians at the same time as they build a new economy. “This is the fifth challenge; religious scholars face privatization schemes that liberalize sectors in a country that has always adopted highly conservative values. The Guardian concluded by saying that “the privatization program may be great, but the risks of failure may discourage it.” “The challenges are beginning to emerge, and the young prince is devoting his kingdom to confronting them,” the Guardian concluded.