Turki Al Hokail, CEO and Board Member, National Centre for Privatisation (NCP): Interview

Interview: Turki Al Hokail

What are the aims of the Kingdom’s privatisation programme, and how can it assist in diversification?

TURKI AL HOKAIL: The new privatisation programme differs from previous efforts as it targets more sectors. The plan includes 12 sectors: health; education; transportation; environment, water and agriculture; energy, industry and minerals; labour and social development; media; Hajj and Umrah (pilgrimage); municipalities and rural affairs; housing; sports; and communication. Overall, there are more than 100 initiatives in place among these sectors, with the aim of successfully completing these initiatives by 2030.

How can public-private partnerships (PPPs) bolster investor sentiment in the water industry?

AL HOKAIL: The water sector is divided into production, distribution and wastewater treatment. The majority of these services are managed by the public sector, aside from a few production units built or operated by the private sector. There are a range of PPP models that could be used, depending on the maturity of the sector, the strength of the regulatory framework and the interests of the market.

The types of agreements most likely to be adopted include build-operate-transfer contracts with fixed tariffs and a firm government off-take. Build-own-operate contracts are also used in the water sector. Under this model, the developer is not required to hand over assets, but rather they negotiate the extension of terms when the contract expires. These two agreement models are the most commonly used for water production and wastewater treatment plants.

How can the implementation of arbitration be ensured across the board?

AL HOKAIL: There is a governance process in place to ensure a level playing field for all parties involved. Supervisory committees must follow strict rules and are overseen by the minister responsible for the particular sector in question, as well as the minister of finance and the chairman of the NCP.

The new PPP law, which is in the approval process, further facilitates the privatisation process. The law will provide a clearer definition of the nature of the relationship between public and private sector, where issues such as arbitration; private financing; protection of private sector property; ownership rights; preservation; retention; and use of project assets are clearly defined. A PPP Manual, outlining these regulations, has also been issued and approved by the NCP Board.

To what extent are domestic companies capable of acquiring privatised assets?

AL HOKAIL: The domestic private sector will be able to contribute a considerable amount in some sectors, especially if alliances and partnerships are created. PPPs will strengthen the local economy, and the increased competition will improve quality and performance. Additionally, these partnerships will help to develop small and medium-sized enterprises as they can become part of a larger supply chain. There are also opportunities for public participation through initial public offerings and funds.

What role are foreign investors able to play in Saudi Arabia’s privatisation process?

AL HOKAIL: The privatisation programme has already started to attract international investors, particularly in the water, education, health, transport and agriculture sectors. Improvements made to the legal and technical framework, in the form of laws, regulations and manuals, have reassured investors that an attractive ecosystem for privatisation is being created in Saudi Arabia. It is also important to look at leveraging innovation in order to create value for the government, investors and end users. A key step in doing so is to make alliances with entities across the world that have the capacity to innovate and participate in the privatisation process.