Saudi Arabia set for series of privatizations

Economy Minister Mohammed Al-Tuwaijri with Kirill Dmitriev, Bassem Awadallah and Darren Davis at Thursday’s panel discussion moderated by Frank Kane. (AN photo by Ziyad Alarfaj)
Updated 26 October 2018

Saudi Arabia set for series of privatizations

  • Minister addresses FII panel moderated by Arab News columnist
  • Saudi Arabia plans to sell a stake in oil firm Saudi Aramco, which could raise around $100 billion, plus a number of other privatizations worth as much as $200 billion

RIYADH: Saudi Arabia plans a raft of privatizations across four key sectors by early next year, a panel at the Future Investment Initiative (FII) forum heard on Thursday.

Economy Minister Mohammed Al-Tuwaijri said the state sell-off would span four sectors: Silos and grains, schools, health care and desalination.

The minister was speaking on the final day of the Riyadh conference, in a panel session about the economic models for privatization. 

Saudi Arabia plans to sell a stake in oil firm Saudi Aramco, which could raise around $100 billion, plus a number of other privatizations worth as much as $200 billion.

“Some sectors … are more ready than others,” Al-Tuwaijri told the FII discussion, which was moderated by Arab News business columnist Frank Kane. 

Watch the video of the session:

“Between now and first quarter of 2019, we are going to introduce … opportunities in silos and grains … We’re also going to introduce some assets for education (and) a couple of assets in health care … and also some desalination plants.”

He added that there are several challenges to the pace of the privatization drive, including labor market policies and ”massive HR challenges.”

Saudi oil giant Aramco is “absolutely ready” for its long-awaited IPO but several regulatory procedures remain, he added.

Darren Davis, the acting CEO of Saudi Arabia’s largest mining company Ma’aden, said that privatizations can come in different forms. 

His own company, for example, is partly government-owned, and partly owned by private shareholders.

“The Ma’aden case is an interesting example of the fact that privatization doesn’t come in one size, you need to be flexible in how you apply privatization,” he said.

Fellow panelist Bassem Awadallah, CEO of consultancy Tomoh Advisory, agreed that there were different models to pursue when it comes to selling off state assets. 

“It is very healthy to have different models of privatization because countries need to develop their tailor-made solutions based on individual countries and sectors,” he said. “There is no model that fits all.”

Awadallah pointed out that privatization programs had been partly tainted by perceptions of a lack of transparency and corruption in some other markets.

“I think it is very important to explain to people what privatization is all about … People need to understand that this is not just another transfer of capital from the public sector to the private sector,” he said. 

“The more open, and the more transparent the governments are in terms of addressing these issues, and in explaining to people why we need to privatize … is really something that needs to be addressed.”

Kirill Dmitriev, CEO of the Russian Direct Investment Fund, pointed to the sell-off of Russian assets. 

“We went through this painful privatization experience which we believe in the end was a success because now most of the successful private businesses emerged from those privatized entities,” he said.

Oil prices pressured by economic slowdown, but OPEC cuts support

Updated 5 min 56 sec ago

Oil prices pressured by economic slowdown, but OPEC cuts support

  • Analysts said an economic slowdown could soon dent fuel consumption
  • OPEC has pledged to withhold around 1.2 million barrels per day of crude supply

SINGAPORE: Oil prices were on Wednesday weighed down by economic growth concerns that dampened the outlook for fuel consumption, but supported by voluntary supply cuts led by producer club OPEC and by US sanctions against Iran and Venezuela.
International Brent crude oil futures were at $67.55 a barrel at 0432 GMT, down 6 cents, or 0.1 percent, from their last close. Brent on Tuesday touched its highest since Nov. 16 at $68.20 a barrel.
US West Texas Intermediate (WTI) crude futures were at $58.92 per barrel, down 11 cents, or 0.2 percent, from their previous settlement. WTI on Tuesday reached its strongest level since Nov. 12 at $59.57 a barrel.
Analysts said an economic slowdown could soon dent fuel consumption.
“Global growth concerns and ongoing oversupply fears (are) creating headwinds for the commodity,” said Lukman Otunuga, analyst at futures brokerage FXTM.
Asian business confidence held near three-year lows in the first quarter as a US-China trade dispute dragged on, pulling down a global economy that is already on a downward path, a Thomson Reuters/INSEAD survey found on Wednesday.
The dips come after crude prices rose by more than a quarter this year, pushed up by a pledge led by the Organization of the Petroleum Exporting Countries (OPEC) to withhold around 1.2 million barrels per day (bpd) of supply as well as by US sanctions against oil exporters Iran and Venezuela.
“The shaky supply outlook with regard to Venezuela and Iran, as well as the petro-nations’ output restrictions are top of mind in the oil market,” said Norbert Ruecker, head of economics at Swiss bank Julius Baer.
Ruecker said oil prices were likely capped around $70 per barrel as fuel price inflation, as seen last year, would hit demand at that level.
At the same time, he said oil prices were supported above $50 per barrel as investment into US shale output growth would cease below that price.
Between those price levels, Ruecker said “the US shale boom almost fully meets global oil demand growth mirrored by the strongly expanding crude oil exports,” which hit a record 3.6 million bpd in February.
“We see ... roughly 1.2 million bpd of US shale oil growth over the coming year,” Ruecker said, which is in line with most global oil demand growth forecasts of 1 million to 1.3 million barrels per day for 2019.
The US Energy Information Administration is due to publish its weekly crude production and storage level report around 1700 GMT on Wednesday.