* Fahad Al-talal from Riyadh
The revenues of a limited number of Saudi privatizations during five years (2003-2008) were amounted to more than $ 21 billion, equivalent to 1.1 percent of GDP during the same period.
According to a report issued by the Capital Market Authority (CMA), the privatization revenues in this period are high against a few privatizations. This is contrary to the trend in the region, which has low returns for large operations.
The report pointed out that the market capitalization of the allocated companies now accounts for more than 40 per cent of the total value of the Saudi market.
For nearly 30 years, 10 government agencies were allocated between 1984 and 2015. The start was with the petrochemicals giant Saudi Basic Industries Corporation (SABIC), as it was the first major model for the privatization of some government assets, with 30% of the company's shares being offered for public subscription. The most recent public-private privatization is the Saudi Ground Services Company's 30 per cent public offering by 2015.
According to the International Monetary Fund, there is a presence of a large sector of state-owned companies in Saudi Arabia and other Gulf countries, which is a great opportunity for privatization programs focused on government companies as a first stage. This is what has been started now through the privatization program launched in 2017 as one of the programs to achieve the "vision of the Kingdom 2030".
It stressed that the privatization of successful and profitable government companies only according to the philosophy of the previous allocation contributed to the government companies offered higher price returns (250 per cent on the first day of trading), compared to the rest of the private sector companies that are higher (176% on the first day of trading and the offer is a public offering).
The report, citing the International Monetary Fund, argued that the privatization program in Saudi Arabia was limited and focused mostly on profitable and successful business ventures such as SABIC, STC and others, while privatization in economic reform programs in other countries' experiments has focused on failing projects to improve their performance and make them profitable.
The report said that the pricing of government assets below their fair value is a global phenomenon followed by many countries and is more applied in the Kingdom and the Gulf countries. This reflects the desire of governments that privatization be a source of equitable distribution of income and the sharing of oil wealth with citizens.
According to the report, the volume of revenues from allocations worldwide were amounted to about $ 300 billion for the year 2016. However, privatizations have seen tremendous growth worldwide, e.g., Britain experienced a high wave of privatization in the 1980s and another wave in the 1990s in Brazil and a subsequent wave in China after 2000.
According to World Bank data, the most privatized sectors are in the infrastructure and financial sectors, followed by the energy sector and then the rest of the sectors. It is clear that the financial sector has a higher percentage in the privatization process because of the nature of large capital in this sector.
Privatization has contributed nearly 11 times the total capitalization of the world's securities markets.
Privatization played an important role in increasing global liquidity in equity markets. As a result of each privatization process, the stock market turnover increased by 3.2 per cent in the first year and 7.1 per cent in the following year.
The Council for Economic Affairs and Development confirmed that the privatization program was based on a list of 12 programs to achieve the 2030 vision.
It aims to strengthen the role of the private sector in providing services and making government access to it, improving the quality of services in general and reducing their costs to the government.
The program contributes to enhancing the attractiveness of direct foreign investors, improving balance of payments.
It attracted ten sectors, including environment, water and agriculture, transport, energy, industry and mineral wealth, labor and social development, housing, education, health, municipalities, communications and information technology.
