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.”


Indonesia’s Go-Jek close to profits in all segments

Updated 18 August 2018
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Indonesia’s Go-Jek close to profits in all segments

  • Go-Jek is Indonesia's first billio-dollar startup
  • Ride haling app evolves into online payment platform

JAKARTA: Go-Jek, Indonesia’s first billion-dollar startup, is “extremely close” to achieving profitability in all its segments, except transportation, its founder and CEO Nadiem Makarim told Reuters.

Launched in 2011 in Jakarta, Go-Jek — a play on the local word for motorbike taxis — has evolved from a ride-hailing service to a one-stop app allowing clients in Southeast Asia’s largest economy to make online payments and order everything from food, groceries to massages.

“We’re seeing enormous online to offline traction for all of our businesses and are close to being profitable, outside of transportation,” said the 34-year old CEO.
The startup is expected to be fully profitable “probably” within the next few years, Makarim added.

Already a market leader in Indonesia, where it processes more than 100 million transactions for its 20-25 million monthly users, Go-Jek is now looking to expand in Southeast Asia.

Ride hailing services in Southeast Asia are expected to surge to $20.1 billion in gross merchandise value by 2025 from $5.1 billion in 2017, according to a Google-Temasek report.

Go-Jek said in May it would invest $500 million to enter Vietnam, Singapore, Thailand and the Philippines, after Uber struck a deal to sell its Southeast Asian operations to Grab — the bigger player in the region.

Go-Jek is seeing strong funding interest from its backers as it targets an aggressive expansion, Makarim said.

“Since its Aug. 1 launch, the app has already grabbed 15 percent of market share in Ho Chi Minh,” Makarim said. The firm this week opened recruitment for motorcycle drivers in Thailand.

The startup expects anti-monopoly concerns swirling around the Grab-Uber deal, which Singapore said had substantially hurt competition, to help clear a path for its expansion.

“We’re bringing back choice. The Singapore government is particularly eager to bring back competition,” Makarim said, adding that the order of overseas rollouts had not been set.

Go-Jek’s offshore push comes at a time when Singapore-based Grab is stepping up funding to expand in Indonesia and transform itself into a consumer technology company, starting with a partnership with online grocer HappyFresh.

“Mimicking Go-Jek’s strategy is the highest form of flattery,” laughed Makarim.

Grab told Reuters in a statement, “The super app strategy has been around for a while now and no Southeast Asian player can claim to have pioneered it.” The company also said Grab has not lost market share in Ho Chi Minh since August, but declined to provide market share data.

Makarim believes Go-Jek’s understanding of food merchants will give it an edge over Grab, which counts investors such as Chinese ride-hailing firm Didi Chuxing and Japan’s SoftBank Group Corp. among its backers.

Makarim, who sees food delivery as Go-Jek’s core business, said he was not concerned about funding, without giving details.

Go-Jek was reported in June as being in talks to raise $1.5 billion in a new funding round and was valued at about $5 billion in a prior fundraising, sources have told Reuters. The firm had said in March it was considering a domestic IPO.

Makarim noted Go-Jek’s backers were sharing both capital and expertise. The company is collaborating with Alphabet Inc’s Google on platform mobility, Tencent on payments strategy, JD.com on logistics operations, and Meituan Dianping on merchant transactions and deliveries.

Go-Jek has set up a venture capital arm, Go-Ventures, to invest in startups in Southeast Asia “with strategic importance to our business,” the CEO said.