RIYADH, 13 November 2002 — Economists and businessmen have welcomed Monday’s historic decision by the Cabinet to privatize 20 vital economic sectors, saying it will strengthen the economy and attract national funds invested abroad.

Analysts said the major sell-off plan would help the government generate tens of billions of dollars required to pay a staggering public debt. “It is a bold and calculated step in the history of Saudi economy,” stated Yaseen Al-Jefry, an economist based in Jeddah.

State utilities and public services, including certain health and social services as well as government stakes in banks and share-holding companies have been enlisted among sectors targeted for privatization.

It also opens up telecommunications, water desalination, air transport, airport services, construction and management of highways, seaport services and local oil refineries for the private sector. To be sold are government stakes in companies including petrochemical giant Saudi Basic Industries Corporation (SABIC) and Saudi Electricity Co., which together have a market capitalization of SR82.5 billion ($22 billion).

The plan calls for privatizing state-owned hotels, sports clubs, and certain municipal, educational, social, health and agricultural services.

“The participation of the private sector, extent of its involvement and timing will be based on the privatization strategy,” a statement by the Cabinet said.

“This privatization list is very encouraging,” said Ehsan Bouhaleeqa, an economist and member of the Shoura Council, expressing hope that the government would take further steps to make it a reality. Bouhaleeqa emphasized that there should be a time frame to implement the privatization program in accordance with the government’s economic needs.

Abdul Rahman Al-Jeraisy, chairman of the Council of Saudi Chambers of Commerce and Industry, said the move would open new horizons for investment and attract migrant funds.

The strategy, approved by the Supreme Economic Council (SEC) in June, outlines the procedures of privatization, sectors on offer to the domestic private sector and foreign investors and a timetable for transferring certain services to private businesses.

Privatization of services will be on the basis of either Build-Operate-Own or Build-Operate-Transfer (BOT).

According to Jefry, state-owned companies hold 32 percent of the Saudi stock exchange, which has a market capitalization of SR296 billion. The government owns 16 percent of the banking sector, 49 percent of the industrial sector, 19 percent of cement firms, 19 percent of services sector, 76 percent of the Electricity Company and nine percent of agriculture, he said.

“State investments in the above sectors are now managed by the private sector and privatization means their sell-off at the stock exchange,” Jefry said.

Referring to privatization of hotels, he said there are eight state-owned hotels in the Kingdom. They are Inter.Continental hotels in Riyadh, Taif, Makkah and Abha, Hyatt Regency in Riyadh, Marriott in Riyadh and Sheraton in Taif and Madinah.

Finance Minister Dr. Ibrahim Al-Assaf said in June that revenues from the sell-offs would be used to pay for the entirely domestic public debt, estimated at SR675 billion ($180 billion).

Al-Assaf also said that in some sectors such as ports, only services would be privatized. Privatization will be total in sectors such as railways.