Experts welcome Saudi Arabia’s transformational plan, but say more still to be done

King Khalid International Airport in Riyadh is among the assets planned to be transferred to the Public Investment Fund. (Shutterstock)
Updated 09 September 2017
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Experts welcome Saudi Arabia’s transformational plan, but say more still to be done

DUBAI: Global financial and economic experts have welcomed the transformational plan to privatize large parts of the Saudi economy, but believe there is more work to be done before the program can really get down to the business of selling state assets to domestic or global buyers.
The National Center for Privatization (NCP), which is helping coordinate the program, recognizes that the plan is at an early stage. “In this initial phase our priority is to support individual government agencies to create the right framework for privatization, and to guide potential investors through the beginning of this process and create a blueprint for the future transfer of assets to private ownership,” said Hani Alsaigh, director general of the NCP’s strategic communication and marketing.
But experts pointed out that there was still a lot to be done in setting up the appropriate legal, regulatory and accounting infrastructure for the $200 billion program.
Nasser Saidi, who was minister of economy in Lebanon when that country considered a privatization program in the early 2000s, said: “When you approach privatization you have to have a legal and regulatory framework. This is being worked on fast in Saudi Arabia, but it is not there yet.”
He said that a crucial stage was the setting up of a privatization body separate from the authority of ministries that has a mandate to see the program through, and with an appropriate regulatory structure.
One such model is being worked through the privatization of King Khalid International Airport in Riyadh, where the assets are planned to be transferred to the Public Investment Fund (PIF) and regulation in the hands of the General Authority of Civil Aviation.
A Saudi banker, who asked to remain anonymous because his bank was involved in the advisory process for some of the privatization plan, said: “We’re seeing the first stages in the process. It will be difficult to navigate given the bureaucracy involved. It might be complicated to put in place the preparatory infrastructure, but in the end it will be brought to a result because of the political power behind the privatization.”
On the question of the best form the sell-offs could take, the banker thought it was good to have a combination of options depending on the assets: “A straightforward sale to strategic investors might be preferable, but in other cases a local listing, or a dual listing would be good. The government has to have flexibility.”
Saidi said it was important for the local capital markets to be fully involved. “IPOs offer good value, and they also allow Saudi citizens to see the benefit of the sale, if they believe they have a stake in it, as happened in the UK. And of course it would be good for local markets too,” he said.
Ellen Wald, American expert on the Middle East and author of the forthcoming book “Saudi Inc.”, said: “It’s an ambitious plan, to be sure, but the Saudis have stacked the odds in their favor by focusing on areas of strength and on attracting foreign capital to invest through joint ventures.”


Etihad to loan pilots to competing UAE airline Emirates

Updated 24 June 2018
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Etihad to loan pilots to competing UAE airline Emirates

  • Etihad Airways has told its pilots they can join rival Emirates on a temporary basis for two years
  • The agreement is also likely to help Emirates, where a pilot shortage forced it to cancel some flights this summer

DUBAI: Etihad Airways has told its pilots they can join rival Emirates on a temporary basis for two years, according to an internal Etihad email seen by Reuters, as the downsizing of the Abu Dhabi carrier’s operations helps fill a pilot shortage for Dubai’s Emirates.
Etihad, which last week reported a $1.5 billion annual loss, has been overhauling its business since 2016, replacing its top executive, dropping unprofitable routes and shrinking its fleet.
The agreement is also likely to help Emirates, where a pilot shortage forced it to cancel some flights this summer. Management had said the shortage was a short-term issue.
In the email, Etihad said pilots who join Emirates on a two-year secondment would be placed on a leave of absence, retain seniority at Etihad, and receive their salary and full benefits from the Dubai airline.
Pilots were asked in the email to register a non-binding expression of interest and told that Emirates’ recruitment team would meet with pilots at Etihad’s offices.
Two sources separately told Reuters that Etihad had emailed staff announcing the agreement with Emirates.
An Etihad spokesman told Reuters secondment programs were common practice among airlines, enabling the effective management of pilot resources.
“This is something Etihad Airways has done for several years with partner airlines around the world,” the spokesman said.
An Emirates spokeswoman told Reuters the airline was “working with Etihad on a secondment program for some of their pilots.”
It was not immediately clear how many pilots would be offered temporary employment at Emirates and the email stated that any pilots applying for the secondment would need to complete Emirates’ training program.
Etihad employs 2,200 pilots, according to the airline spokesman. Reuters reported in January that Etihad had offered up to 18 months unpaid leave to pilots.
Emirates and Etihad have been exploring closer ties and signed a security pact in January, the first agreement between the United Arab Emirates (UAE) based airlines. Emirates has since said that a closer relationship was not about a merger.
Emirates and Etihad, backed by their state owners, have competed developing global networks from their respective hubs in Dubai and Abu Dhabi that are just 128 kilometers apart.
Emirates is owned by the government of Dubai, and Etihad is owned by the government of Abu Dhabi.