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.”


Saudi oil refinery in Gwadar to help Islamabad save $3 billion a year

Updated 17 February 2019
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Saudi oil refinery in Gwadar to help Islamabad save $3 billion a year

  • The refinery would produce up to 300,000 barrels per day once completed
  • Saudi Arabia is also setting up reservoirs for liquified natural gas in Pakistan, says Petroleum Minister Ghulam Sarwar Khan

ISLAMABAD: Pakistan expects to agree a deal to build an oil refinery and petrochemical complex at the Balochistani deep-sea Port of Gwadar, during the first state-level visit by Saudi Arabia’s Crown Prince Mohammed bin Salman.

The deal will see Pakistan join with Saudi Aramco to build the facility, expected to cost $10 billion.

“We are working on feasibility studies for the establishment of the oil refinery and petrochemical complex in Gwadar, and will be ready to start by early 2020,” Pakistan’s Minister for Petroleum Ghulam Sarwar Khan told Arab News on Thursday.

Once established, the project will help the South Asian nation cut its annual crude oil imports by up to $3 billion annually, in addition to creating thousands of job opportunities in the impoverished western province.

The country spends more than $16 billion each year on importing 26 million tons of petroleum products, including 800 million cubic feet of liquified natural gas (LNG) from Saudi Arabia, the UAE and other Gulf countries.

Khan claimed the refinery would produce up to 300,000 barrels per day once completed.

“The Saudi authorities have asked us to complete all the initial work on the project on a fast track, as they want to set it up as early as possible,” he said.

A Saudi technical team, including Energy Minister Khalid Al-Falih, has visited Gwadar twice in recent months to examine the site for the refinery, getting briefings from Pakistani officials on security in the area near the border with Iran.

“We will ensure complete security for Saudi investments and people working on the project. A detailed security plan has already been chalked up with help of the security agencies,” Khan added.

Pakistan currently has five oil refineries, but they can only satisfy half of its annual demand. Islamabad and Riyadh have long maintained strong ties, with the latter repeatedly offering the former financial assistance. Last year, the Kingdom guaranteed Pakistan $3 billion in foreign currency support for a year, and a further loan worth up to $3 billion in deferred payments for oil imports, to help stave off an economic crisis. The Islamic Republic also received $3 billion from the UAE to protect its foreign reserves.

Khan added that the Pakistani-Arab Refinery Co. (PARCO) was also setting up an oil refinery at Khalifa Point, near the city of Hub in Balochistan. 

“The work on this project is at an advanced stage. Land for it has been acquired and other formalities are being fulfilled,” he said.

Khan hopes the world’s perception of Pakistan will change upon completion of these deals, after years of war in the surrounding region. Exxon Mobil returned to Pakistan last month after 27 years, and started offshore drilling with $75 million of initial investments. 

“All results of the drilling are positive so far, and we expect huge oil and gas reserves to be discovered soon,” he said.

“More foreign companies are contacting us to invest in offshore drilling and exploration. Saudi Arabia is also setting up reservoirs for LNG in Pakistan. More Saudi investment will come to Pakistan with the passage of time.”