RIYADH, 14 November 2002 — Saudi Arabia’s plan to privatize 20 vital sectors will help reduce pressure on the state budget and pay off the government’s huge public debt, Minister of Finance and National Economy Dr. Ibrahim Al-Assaf said yesterday.
"It will reduce pressure on the government. The private sector will provide services previously offered by the state. This will (positively) affect public spending," Al-Assaf said.
The minister’s comments followed Monday’s Cabinet announcement that the Kingdom will open up 20 vital economic sectors for privatization, a step expected to generate tens of billions of dollars.
The Saudi budget is faced with a chronic deficit. In the past two decades it has only once finished in the black: in 2000 due to high oil prices.
The minister said that revenues generated from the sell-off plan will be used to pay for the entirely domestic debt, which reached a staggering SR675 billion at the end of last year.
According to the plan, state utilities and public services, including certain health, municipal and social services will be privatized. Government stakes in Saudi shareholding companies, including Saudi Basic Industries Corp. (SABIC), Saudi Electricity Co. and banks will also be sold off. It opens up telecommunications, water desalination, air transport, airport services, construction and management of highways, seaport services and local oil refineries to the private sector.
Al-Assaf stressed that the door was open for foreign investors in all sectors not included in the "negative list", which contains activities closed to foreign investments.
Al-Assaf said no timetable has been set for the privatization process. However, he said SEC’s privatization panel will study the priorities and set out the timeframe for privatization.
He said the list of 20 sectors targeted for privatization was not the last one. "In the future new sectors will be added."
The government holds some 32 percent of the Saudi stock exchange, which has a market capitalization of SR296 billion. It also owns 16 percent of the banking sector.
Al-Assaf said the impact of selling state shares in joint stock companies and banks on the stock market has been taken into consideration. "Suitable methods and timings are necessary before floating the shares for public subscription, so that it will not affect the stock market."
Asked whether privatization would increase the burden on citizens, in terms of service charges, Al-Assaf said: "The privatization strategy insists that its burden should not fall on citizens." He said regulatory bodies will be set up to monitor prices and quality of services.
On privatization of oil refineries set up with the support foreign companies, he said it needs approval of those firms.
Meanwhile, Health Minister Dr. Osama Shubokshi told Okaz newspaper that serious studies are under way to privatize some hospitals.
