Reviewing the Framework and Process of Privatization

The R&D Centre of Privatisation will conduct a cause-benefit analysis of each project to enhance positive outcomes. The selection of privatization method will depend on the size of the asset, its current state, and the desired outcome. The kingdom is primarily focusing on the sale of assets and stakes for various sectors. However, implementing other methods such as divestment, FDI, and FPI could help in developing the economy. The centre will also consider factors like employment, social impact, and environmental sustainability while making decisions.

1
Privatization of Public Sector: An Appraisal for Saudi Arabia
Particulars Page No
Abstract 2
Introduction 3-4
Background of the study 4-7
Experience of privatization in other parts of
the world
7-10
Need for Privatization in Saudi Arabia 10
Issues and Challenges in privatization 10-14
Solutions and Recommendations 14-19
Conclusion 20
References 20-21

2
Abstract
The kingdom of Saudi Arabia has recently witnessed a collapse of revenues due to significant
fall in oil prices over last few months. Since 2/3rd of the revenues come from this industry, the
fall in oil prices put Saudi’s economy under check. Majority of this petroleum entities are state-
owned which are remained blotted and unprofitable over these period. This is the reason why
pressure came in fiscal deficit of the nation because they rely on government supports.
Considering this as the serious threat to kingdom economy, the government is planning to have
a diverse economy through privatization process. In this report, we are going to discuss about
privatization, its features, methods and benefits. We will also discuss the privatization in other
parts of the world as learning experience and the need for Saudi Arabia. This will also include
issues and challenges in this regions and finally the roadmap to effective privatization.

3
Introduction
The Kingdom of Saudi Arabia is one of the largest region in the Golf Region and 5 th largest
country (geographical area wise) in Asia. [Coffman, J. (2015)] The kingdom is majorly known for
its culture and oil-based economy in today’s world. According to World Bank report, [Al Rajhi,
A.,et.al2012]the country possesses around 16% of total oil reserves (proven one) today and it is
the largest exporter of petroleum products among all OPEC (Organization of Petroleum
Exporting Countries) nations.
The economic report of Saudi Arabia says that its petroleum sector accounts 87% of budget
revenue. The contribution of petroleum sector in country’s GDP is near about 42% and 92% of
the export earning comes from selling of petroleum products. These statistical facts are quite
clear to make us understand that Saudi Arabia’s economy is highly dependent on petroleum
products. [Ouda, O. K.,et.al2014]
Petroleum products are non-biodegradable in nature. The formation of fossil fuel from the
marine dead organisms takes almost 10000 years but the consumption of fossil fuel is so high
(86.1 million barrel per day) that scientists already forecasted the extinction of oil reserves by
2037 to 2050 which is not too far. [El Mallakh, R. (2015)]
The consumption won’t get reduced because of increasing population and complexity of life
and full implementation of bio-degradable energy sources will take not less than 50 years from
now. So, this is an alarming situation for whole world but more specifically countries like Saudi
Arabia whose major dependency is on petroleum products.
This is the reason why over the period of times, the Sultanates of this kingdom have tried and
been trying to find an alternative way to manage the county’s economy. One of the options
that has been significantly emphasized and discussed over last 10-15 years is “Privatization of
public sector in Saudi Arabia Kingdom”. The Council of Saudi Arabia Ministries proposed 22
sectors that are to be taken under consideration for privatization which includes key sectors like
health, education, service, energy, mineral resources etc. [Niblock, T. (Ed.). (2015).]

4
The motive behind inclusion of public sector to have a Public-Private-Partnership (PPP) model
or fully privatization is to reduce the dependency on petroleum-based economy and to improve
the economic efficiency with other sectors through Foreign Direct Investments (FDI) and
Foreign Portfolio Investment (FPI).
The report is taking this as the focal point and will try to get answers to related aspects with
privatization of public sector in the kingdom.
Background of the study
Privatization
Privatization is a terminology in globalization era which refers to the act of giving ownership or
rights over a specified property, operation and industry that is right now with government of
the region or state or territory to a privately owned entities that may or may not belong to the
specific region or state or territory. [Biygautane, M.,et.al2018]
In economy and financial term, it is the sale of ownership (stakes) which is currently held by
state or regional or national government to a private concern for management of the business
enterprise.
A country goes for privatization for many reasons. Most importantly privatization takes place
when the government is unable to look after the organizations or sector in an efficient and
effective manner. In such cases, government hands some or major portion of stakes to a
privately owned enterprise to look after the business for achieving economic and social goal.
It may have political objectives such as to remove the conflict of interest of the government
over the sector or business. It may have market competitiveness objective where the
government is trying to bring competitions among entities in the industry to improve the
sectoral results.
It may be applied for covering the loss or deficit of government (budget or fiscal deficit). It may
be used as reduction of abusive power of public sector trade unions and other political
interference.

5
The reasons can be different for privatization that depend on circumstances. However, the
ultimate motive of privatization is to bring efficiency in national economy.
Privatization of Public Sectors
Privatization of public sectors in areas such as education, health, natural resources and minerals
etc. takes place for the following important reasons-
 For improving efficiency and profitability of the industry
 For bringing foreign currencies to build up For-ex reserves.
 Infrastructural, technological and human resource development within the industry and
nation as a whole.
 Bringing competitiveness in the industry for economic growth
 Zero political interferences
Talking from Saudi Arabia’s perspective, the willingness of privatization is majorly for shifting
the economic focus from oil-based economy to a diverse economy through privatization. This
they want to achieve by allowing foreign players and local private organizations to come
forward for investing in public sectors.
Diverse economy-
Diverse economy goes with the idiom we use quite often “don’t put all eggs in one basket”.
Diversification of economy means splitting the economy of the region into multiple sectoral
growth and development without depending on one sector. For ex- Saudi Arabia is a single
economy country (oil-based) which is looking for a diverse economy through privatization.
Why is diverse economy required? The answer to this question is “removing overdependence”.
If there is single economy then collapse of the major industry will put the nation in economic
crisis. But, if the nation is diversifying economy over more than one sectors, then collapse of
one sector can be compensated or at least minimised with other sectoral growth and
development.

6
Saudi-Arabia is highly dependent on petroleum industry growth and revenue which can affect
the nation if the resource scarcity begins or alternative resource demand rises. Thus, to avoid
that situation in future, Saudi Arabia needs a diverse economy which they are looking through
privatization. [Boubakri, N.,et.al2013]
Methods of privatization
Privatization can take place in the following six ways or in combination thereof. These are
discussed below- [Omran, M. (2015).]
1. Initial Public Offering (IPOs)- It is one of the most favoured and common practices in
privatization process. It is the method by which the stakes of Public Sector Units (PSUs) are
sold to private retail investors and institutions to look after the organization’s management
and operation. Such practices are quite popular in European and American region due to
well-developed and functioning diverse capital market. This method is advantageous from
the points such as inclusiveness of multiple retail investors, infrastructural, technological
and human resource development, raising forex reserves etc. However such methodology
goes with certain limitations such as resistance from the employees, outflow of revenues
into foreign lands, political manipulation and loss of employment among regional people.
2. Public auction- This is the method where private entities put price offering for buying assets
of the publically owned organizations which has been crisis or defunct already. This step is
normally taken by the government to revamp any organization or industry. The limitation it
has, is over the uncertainty of private buyers.
3. Public Tender-This takes place when the government calls out private entities to apply for
the projects or initiatives that can benefit economic and social development of the region.
This method is applied especially sectors like education, healthcare, natural resources
where the government offers land to the private entities for such sectors. The advantage of
this method is economic and social development through foreign or private investments.
The problem with such method is profit-seeking motive of the private sectors which comes
over and above economic and social development of the region.

7
4. Direct negotiation- It is the method where the government approaches to any giant private
entity to make investment in a sector under a negotiated price. This method is appropriate
if the negotiation takes place at a reasonable price (doesn’t increase public debt). However,
it suffers from the limitation of availability of prospected investor and coordination with
government.
5. Share transfer- It is the method where the government owned enterprise’s 51% stakes gets
transferred to any private entity to control management and operation. This method is
primarily applied to refinance the organization or for revamping. However, this can cause
resistance to change among the employees and management may go authoritative.
6. Lease method- This is another most popular method that is applied for sectors like oil and
other natural resources sector. Under this method, the government gives a piece of land or
mines or reserves on lease basis to privately owned farm for the sector development. The
method generates ample revenues from taxation and royalties but it also faces misuse of
the lease items.
Privatization can also takes place in any of the above and also in form of combination. For ex-
 The leased property to the private entity will be done as per PPP basis where 50% or less
will be share of the government on the stakes of the private entity.
 Public tender or direct negotiation at a time for a particular public entity property.
 Public tender with transfer of control of the public entity stakes.
Experience of Privatization in other parts of the world
The Kingdom of Saudi Arabia will have to look at other country’s experience before
implementing privatization. The learning experience of other countries will provide the
effective measures of privatization that can help Saudi Arabia to have a successful privatization
strategies.
Here are some of the key countries who adopted privatization-
India

8
Privatization entered into Indian economy during globalization period (1991). The new
industrial policies in 1991 brought several changes in public sector units. The main reason
behind privatization entry into Indian market was “inefficiency and instability” of public sector
firms during the period. The privatization started with selling of loss making public units to
private entities, inviting private organizations to participate in PSEs (public sector enterprise)
and strategic sale.
Degree of privatization in India-
Following the year of 1991, Government of India (then) started adopting disinvestment,
strategic sale of minority shares private partners and sale of defunct public units to private
sectors. Some of the public units were compensated with money if that couldn’t be revived.
Some of the public sectors witnessed 100% privatization in coming years such as banking and
insurance. Some of the sectors were allowed to have 51% stakes maximum for private
investment so that it would make the market competitive. [Ramady, M. A. (2010)]
USA
Privatization in United States of America started around 1987. One of the reason USA, despite
having a powerful nation status, took privatization much later is “USA free economy.” The
government has not been owner of industries in USA not like some other countries. This is the
reason why USA never had to distribute assets as frequently as other nations. Another reason
that limited privatization in USA was federal regulations that concerned infrastructural assets.
This was limited because the local and state government had to pay fully for the sale of assets
to private entities to federal government. This law was challenged by an act “Federal Aid
The new industrial policy reformation included:
 Disinvestment of public sector units
 Allowing private entities to the industry which was reserved for public sector only.
 Reforming licensing system where private entities are included to have trade license of the
sectors like healthcare, education and energy.
 Invitation for foreign entities for FDI and FPI.
 Abolition of MRTP or Monopoly and Restricted Trade Practice Act.

9
Facility Privatization Act 1995” which allowed no reimbursement of local and state government
to federal government as long as the assets continue to be used for its original purpose.
USA privatization is more prevalent in service sector. Government started outsourcing of
services. The services outsourced initially included- airport operation, data processing, vehicle
repair and maintenance, healthcare centres, public safety, waste collections etc.
An example of US electricity privatization- The state of Illinois receives domestic electricity from
8 investor owned public utilities which are under regulation of Illinois Commerce Commission.
(ICC) Apart from the 8 companies, there are some other service providers which are under
municipal system and electronic cooperatives. These local service providers doesn’t come
under ICC regulations. These additional service providers are privatised. The commission
allowed customers by the end of 2000 to choose their own electric service provider. These
small utilities were become an alternative option to publically owned firms. [AlRuthia, Y.,
et.al2018]
USA went for privatization for many reasons such as- cost reduction through outsourcing, risk
sharing, revenue generation, improvement in service, flexibility in services and quality of
service.
United Kingdom (UK)
UK is probably among those few countries which took privatization at early years. It started in
1979 when then Government of UK started extensive privatization program by selling
government-owned housing to private entities. From 1979 to 1995, around £50 billion state
assets had been sold to private sectors. The share of employment fell from 7.2 to 2% in
publically owned industry. [Surrey, J. (2013).]
In the initial years of privatization, government sold public sector enterprises which were small
and largely operated in competitive market. Sale of publically owned property was in trend
than sale of shares which fetched £15 billion under ‘right to buy’ scheme.

10
The second phase of privatization started with extension of denationalization into public sector
utility. It was introduced for eliminating monopolies of public sector companies. Sale of British
Telecom and private investment and FDI in railway are the two examples of denationalization.
The third phase of privatization started through contracting out, imposition of user charges and
consumer-driven initiatives to reduce excessive control of state-owned bodies.
There are many other countries who accepted privatization over these years including some of
the Gulf countries like Iraq, Iran, Israel, Jordan and Kuwait.
Saudi- Arabia Ministry of Council is aiming at full implementation of privatization program by
2030. The vision is to make the Kingdom of Saudi-Arabia as the investment powerhouse which
connects 3 continents.
Need of Privatization in Saudi-Arabia
Like other countries around the world, Saudi-Arabia realised the importance of collaborative
partnership of government and private sector for a better economic, social and technological
development. The government realised the risk of single economy system in near future which
is why to adopt a diverse economic environment, it has started promoting privatization. The
needs can be highlighted as below-
 Efficiency of the Saudi-economy
 Boosting local capital market
 Diversifying or sharing of risk
 Effective utilization of available resources
 Bringing globalization into practice
Issues and Challenges in roads of Privatization for Saudi-Arabia
Here are some of the key issues that Saudi Arabia can face for full implementation of
privatization- [Alhogail, T. A. (2017).]

11
Capital market and valuation of assets problem
The primary requirement of privatization is having a competitive and efficient capital market
where monopoly doesn’t exist. The capital market of Saudi Arabia is having issues over flow of
information for investors from the existing capital market. There is hardly national level
auditing and accounting standards and procedures that can assure provision of accurate
material information at right point of time. Moreover, it is not possible to check inside trading
and malpractice in such capital markets. This also doesn’t provide fair value of securities to
investors.
Saudi capital market is an imperfect capital market thus assets and liabilities of Government
owned entities is valued more than one approaches. This puts investors in confusion regarding
the value. Until the collusion between accounting firm and potential buyer (private investors) is
resolved with a valuation report, privatization won’t be possible. [Hodge, G. (2018)]
Public employees
Employees in public entities may resist any such decisions to privatize public entities. There can
be many reasons for such resistance such as job security, compensation, work method, working
environment, organizational structural change etc.
For ex- The employees under current system may feel “job loss” after privatization of the entity
if the new owner starts outsourcing human resources. The public employees are feeling of
“lower compensation” if the entity goes into privatization or may feel change of work method
which they are not comfortable at. [Al Rajhi, A.et.al2012]
In Saudi-Arabia, this can be a biggest issue with privatization as the local people are belonging
to Muslim culture whereas if any western entity acquires any public entity, the people will face
difficulty to work under new culture thus they will resist.
Debt Issue
One of the major challenge in privatization implementation is dealing with long term debt of
public entities. Till date no provision has established for such things in this Kingdom. In that

12
case, the buyer will have to assume short and long term liabilities. If the value of assets is more
than liabilities, the buyer will have to pay more in cash instantly or within 1 year with a
premium rate. In any way if assumption goes wrong, it will be a huge loss for the private firm as
renegotiation is not possible. [Schuster, P. B. (2013).]
If the buyer is not paying in cash and issuing bank guarantee then the issuer must gave a sound
credibility and asset quality. If the buyer approaches stated owned bank, then it is the state
that is taking responsibility of buyer. If defaults take place, the debt will fall on public
ultimately. In first case, it is a matter of trust from the seller side which can’t be guaranteed.
Thus, Saudi needs a disciplined banking and non-banking financial system otherwise chances of
default and burden on state will be more.
Transparency
Many people perceive that when it services are provided by private sector enterprises, the
transparency over the service reduces. People agencies are regulated under some open
regulations which ensures the public that they have some ability to oversee the operations of
public assets, but when it comes to private sector, the accessibility is almost nil. Until
mandatory reporting of asset utilization doesn’t take place, the problem of perception won’t be
solved.
Ownership
There can be ownership issue problem with privatised assets in later years. In many instances,
the asset or service is supported by various public groups. For ex- a reservoir may be supported
by funding from local, state and central government thus while selling the property, the
problem will arise on distribution of proceeds and lease royalty.
Another dilemma can arise on utilisation of proceeds. For ex- suppose a toll road is given on
lease to a private entity at a certain percentage. Now, on receiving amount of proceeds, there
will be confusion among the 3 level of governance of the state to use where? Should it be
utilised in nearby areas or should be taken by state for any other area development?

13
Land usage restrictions
Currently the Kingdom hasn’t stipulated any terms and conditions on land usage for industrial
purpose. Any restrictions for the usage of land for industrial, commercial or any other purpose
deters buyer from buying from the public enterprise for its land value. Bundling the use will
reduce the selling price of the enterprise. Unbundling surrounding property and then selling at
the market price will generate higher revenue in privatization. Unbundling creates new set of
industrial estates with a good market price. The limitation of unbundling adjacent properties
will restrict the scope for future expansion.
Quality of service
Introducing privatization may result decline in quality of service that can be resulted from profit
motive of the private sectors. This problem will arise in lease contract situations which are
given for 75-99 years. When the government hands over the public assets for such period, the
government doesn’t normally enforce any legal condition of service normally. Even the
government shows reluctant attitude to cancel the lease and give it to other within a short
span. This all can affect quality of service provided by private sector. Until any mandatory
standard comes for such lease agreement, there will be suspicion over quality of service.
[Bazoobandi, S. (2012).]
Monopoly situation
Privatization can also lead to monopoly situation in this Kingdom if the government allows
100% or at least 75% FDI in sectors like electricity, water supply, transportation etc. When the
privatization takes place, it attracts private entities not only within the region but also from
outside region. If any giant organization invests in any sector, it will try to hold maximum
market and once it succeeds, it will try to squeeze profit as much as possible which will cost the
regional people and government. The cost of the service or product will be much higher than
government regulated price. [Büthe, T.et.al2011]
Outflow of revenues

14
Privatization opens the door for foreign companies to invest in the region. The private entities
which show more interest in FDI are normally big organizations who will outpace small regional
private entities in competitions. When they get the position, they will generate more revenue
and that will flow outside the region to the host country after mere deduction of taxes. Instead,
if the local private entities are promoted, then it will keep the revenues within the country.
Loss of job
Saudi Arabia’s unemployment rate is now at 12.9% in 2018 which increased by 7% over the last
year. One of the key reason behind increased unemployment among the local people is
“increase in outsourced people from different parts of the world.” According to a report around
11 million employees in this regions are non-Saudi Arabia people. [Gomez-Ibanez, J.,et.al2012]
If the privatization comes more in public sectors then more outsourcing of people will take
place and local unemployment will rise. Until, the private sectors give training and development
programs to local people, the problem of unemployment will rise.
Solutions to Privatisation in Saudi Arabia
Privatisation process framework will follow the following steps-
1. Administrative responsibility setup
2. Legal considerations and approval
3. Regulation and competition
4. Employment condition
5. Post privatisation control
Administrative Responsibility
Government needs to find an administrative unit which will set rules, regulations, procedures
and that can be trusted upon. High standard accountability and transparency must be ensured
and it should safeguard objectives of privatisation process. There will be an established
privatisation agency who will recommend volume of privatisation to justify cost and benefit. If
no such agency can be established then work with Public-Private Partnership mode.

15
Legal considerations and approvals
The legal framework will be established by the privatisation committee or government which
will do periodic assessment to review companies that is appropriately operated under public or
private ownership. The legal framework includes degree of disclosure, name of authorities to
take privatisation decision and under what circumstances such decisions can be taken. As Saudi
government is going for large scale privatisation, it should be established by fiscal committee.
The next thing will be discussed is the power and authority of committee and its member
regarding sale of public ownership so that transparency can be established.
Regulation and Competitions
Government needs to privatise all those sectors or organizations where feasibility of
competition can be identified. If a fair competition exists, then privatisation implementation will
be effective otherwise monopoly situation will come. This will include anti-trust regulations.
Existing privatisation laws can be applied (takeover rules and disclosure) for this new program.
There needs to be separation of privatisation unit and state ownership unit to bring
transparency and remove conflict of interest. There needs to be enlisting companies or
organizations before the program starts so that confusion of ownership will be removed. One of
the good practice of privatisation of state-owned company is to ‘break the company” i.e. divide
the ownership and sell in competitive parts and make regulation for the rest.
Condition of Employment
Privatisation must include employment opportunity to the local communities. This also includes
job security, wages and employment benefits in both monetary and nonmonetary forms. Prior
to privatisation process, the government, privatisation committee and the concerned sector
companies will sit and decide employment conditions that will ensure maximum usage of own
human resources than outsourcing. While considering the employment, existing employee
resistance must be considered. To avoid conflict of works, settlement must be done either in
terms of renewal of existing employees’ employment condition or monetary compensation.
Whatever be the privatisation employment condition, national employment rights, ILO and any
other employment laws must go side by side.

16
Post Privatisation control
After privatisation takes place, the concerned organisation will follow the rules, regulations and
guidelines that are issued by the privatisation committee and it will adhere to Corporate
Governance Principles. The ownership rights of minority stakeholders must be kept in light of
Saudi Company Law. Full disclosure of voting rights and stakeholder’s engagement should be
presented to the committee. This will bring transparency.
How the Privatisation will take place?
The privatisation will take place in the following way-
1. Preparing Organisation for Privatisation
2. Role of External Advisors
3. Choosing an appropriate privatisation method
4. Timing and sequencing
5. Role of CG in privatisation
6. Auditing and Accountability
Preparing organisations for privatisation
The section of organisation in privatisation sectors will depend on cost and benefit analysis
result if it goes for the privatisation. It is the standing committee who will carry the analysis. As
privatisation is taking place, the state role will limit to the advantageous area for the
prospective buyers. For ex- If Saudi government decides to sell a state-owned oil company, then
it will only consider the exchange considerations while restructuring of structure will be with
potential buyers where state won’t interfere unless it violates privatisation guidelines. Next, the
committee (fiscal committee) will decide the valuation amount for the potential buyers. Even
the buyer selection will be done by the committee. For the resistance of employees or in case,
employee compulsory leave takes place, then employment condition law under privatisation
will be applied.
External advisor roles

17
Privatisation supervisory committee- As there is scarcity in skill and experience in privatisation
in the region, the committee will design, prepare and execute privatisation process. It will
develop indicators and criteria for privatisation.
The Standing Committee of Privatisation will work on developing and proposing regulations and
legal framework for privatisation. They will also engage in cause and benefit analysis of
proposed privatised organisations and negotiation for privatisation. Overall, they will review the
framework and process of privatisation.
Privatisation innovation centre will be an R&D centre of privatisation that will conduct cause-
benefit analysis of each projects so that privatisation outcomes will be enhanced positively. It
will be a part of Council of Economic Development who will look after program-related issues.
Privatisation method selection
The choice of the method will be based on the size of firm to be sold, market condition and
objective of the privatisation process. For ex- If the government decides to privatise airports ,
then PPP mode will be a better option because it will bring foreign companies and country to
start import-export relationship with Saudi-Arabia. Tarde sales must be done with auction and
buyout situations for corporate bidder of defunct or losing units. While selecting method, two
things must be kept in mind-
1. Appropriate selection of buyers under “qualification” criteria set by the council.
2. Full disclosure of potential shareholders (financial and corporate governance status)
Timing and sequencing
It is the decision on timing and ranking of organisations or sectors under privatisation process.
Timing is basically the expected date and duration by when a particular organisation’s
privatisation process will complete. For ex-privatisation of State-owned oil companies will take
place within 2022. Sequencing on the other hand, talks about the listing of organisation which
will go for privatisation. For ex- oil companies will first be privatised, then healthcare and then
education sector and so on.

18
The choice of sequencing should be based on contribution of the sector to the economy (both
existing and potential). Sectors like defence and IT must be kept lower in the list because of
threat involvement to national security.
Corporate Governance in Privatisation
The Corporate Governance under privatisation plan is intended to protect the interest of
minority shareholders. The Corporate Governance principles will be similar to what it has been
followed globally however, the board (company’s board) must act independently in order to
keep the political influence (which is now under state-ownership) away. Apart from that the
principles must not clash with the individual board member’s interest prior to privatisation or
post privatisation.
When the privatisation is taking place, the board members require to be loyal to government if
their position is not certain to fulfil general objectives. For that they will get rewards and if
deviates then punishment.
Auditing and Accountability
The following actions will be taken for auditing and accountability-
1. The organisations under privatisation will conduct annual auditing as per Saudi Accounting
Standard and will report to government and general public with a public announcement.
2. The auditing organisation and the privatisation body for the organisation will be
accountable to the government including their legislative power.
3. The auditor will identify all resources and key transactions before the privatisation takes
place to maintain transparency.
4. If all such transactions can’t be located then auditor will seek permission from the
government to take reasonable assumption to carry privatisation process.
5. Auditing in privatisation includes pre-sale restructuring, valuation of assets and liabilities,
sales objectives, timing of privatisation, and methods of privatisation, stakeholder
engagement and integrity in sales process. (it is also the accountability of auditors)

19
6. The auditor will provide independence status report for the work done throughout
privatisation stages.
The below table is indicating an example of phase of privatisation-
Stages/issues Recommendations Responsible
Stakeholders
Time Scale
Pre-Privatisation Social assessment of
privatisation program
Government Prior to launch
privatisation projects
Socio-economic
analysis of
privatisation projects
Concerned sector (oil
sector more
specifically)
At the time of
investment decision
Objective setting NCP committee Prior to project
selection
Legal and regulatory
framework
Government and civil
society
Prior to program
launch and during
program execution
and also after
execution where
necessary
Implementation Knowledge and Skill
training to local
people
Government,
sectoral institutions
Prior to launch and
during the program
Community
empowerment
Government and
NGOs and Civic
societies
Start to end of
implementation
Support from
employees, public
Government and Start to end of

20
and other
stakeholders
sector entities implementation
Post-Implementation Integrate social
values
Government and
concerned sector
entities
Throughout life cycle
Managing
community relation
Government and
sectoral entities
Throughout lifecycle
Social impact
assessment
Government,
sectoral entities, civic
societies and NGOs
Throughout lifecycles
Conclusion
Saudi Arabia Government knows that so much dependence on oil-based economy will trouble
the nation later which is why they are diversifying economy through privatization process. From
the above, we identified the key benefits privatization can provide, we also discussed the issues
and challenges and finally we discussed the way Saudi Arabia is going to have an effective
privatization.
One thing is clear that the kingdom is majorly going with sale of assets and stakes for
privatization process for various sectors. However, if some other methods like divestment, FDI,
FPI etc. can be implemented through new projects and plans, then it would help in developing
its economy.
References
1. Staff, R. (2017, December 1). www.reuters.com. Retrieved from
https://www.reuters.com/article/us-saudi-privatisation/factbox-saudi-arabias-privatization-
plans-idUSKBN1DV45V

21
2. Biygautane, M., Hodge, G., & Gerber, P. (2018). The Prospect of Infrastructure Public Private‐
Partnerships in Kuwait, Saudi Arabia, and Qatar: Transforming Challenges into
Opportunities. Thunderbird International Business Review, 60(3), 329-346.
3. AlRuthia, Y., Alsenaidy, M. A., Alrabiah, H. K., AlMuhaisen, A., & Alshehri, M. (2018). The status
of licensed pharmacy workforce in Saudi Arabia: a 2030 economic vision perspective. Human
resources for health, 16(1), 28.
4. El Mallakh, R. (2015). Saudi Arabia: Rush to Development (RLE Economy of Middle East): Profile
of an energy economy and investment. Routledge.
5. Ramady, M. A. (2010). The Saudi Arabian economy: Policies, achievements, and challenges.
Springer Science & Business Media.
6. Niblock, T. (Ed.). (2015). State, Society and Economy in Saudi Arabia (RLE Saudi Arabia).
Routledge.
7. Al Rajhi, A., Al Salamah, A., Malik, M., & Wilson, R. (2012). Economic Development in Saudi
Arabia. Routledge.
8. Bazoobandi, S. (2012). Political Economy of the Gulf Sovereign Wealth Funds: A Case Study of
Iran, Kuwait, Saudi Arabia and the United Arab Emirates. Routledge.
9. Hodge, G. (2018). Privatization: An international review of performance. Routledge.
10. Büthe, T., & Mattli, W. (2011). The new global rulers: The privatization of regulation in the world
economy. Princeton University Press.
11. Gomez-Ibanez, J., & Meyer, J. R. (2011). Going private: The international experience with
transport privatization. Brookings Institution Press.
12. Alhogail, T. A. (2017). Privatization In Saudi Arabia.
13. Ouda, O. K., Al-Waked, R. F., & Alshehri, A. A. (2014). Privatization of water-supply services in
Saudi Arabia: A unique experience. Utilities Policy, 31, 107-113.
14. Al Rajhi, A., Al Salamah, A., Malik, M., & Wilson, R. (2012). Economic Development in Saudi
Arabia. Routledge.
15. Coffman, J. (2015). The Gulf: Privatization and Americanization. International Higher Education,
(33).
16. Surrey, J. (2013). The British electricity experiment: privatization: the record, the issues, the
lessons. Routledge.
17. Giersch, H. (Ed.). (2012). Privatization at the End of the Century. Springer Science & Business
Media.

22
18. Omran, M. (2015). Performance consequences of privatizing Egyptian state-owned enterprises:
The effect of post-privatization ownership structure on firm performance.
19. Boubakri, N., Cosset, J. C., & Saffar, W. (2013). The role of state and foreign owners in corporate
risk-taking: Evidence from privatization. Journal of Financial Economics, 108(3), 641-658.
20. Schuster, P. B. (2013). One for all and all for one: privatization and Universal Service provision in
the postal sector. Applied Economics, 45(26), 3667-3682.