Saudi Arabia looks to raise $55bn from privatisation programme

Riyadh has identified a pipeline of 160 projects across 16 sectors, finance minister tells the Financial Times

Late evening sunlight is seen reflected off the Kingdom Tower in Riyadh, Saudi Arabia, on Thursday, Dec. 1, 2016. Saudi Arabia is working to reduce the Middle East’s biggest economy’s reliance on oil, which provides three-quarters of government revenue, as part of a plan for the biggest economic shakeup since the country’s founding. Photographer: Simon Dawson/Bloomberg
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Saudi Arabia, Opec's biggest oil producer, is looking to raise about $55 billion through privatisation over the next five years as it moves to boost revenue and narrow its fiscal deficit.

The kingdom has identified 160 projects in 16 sectors in which it will sell state assets and strike public-private partnerships through to 2025, Finance Minister Mohammed Al Jadaan told the Financial Times in an interview.

It intends to outsource the management and financing of its health infrastructure and services, city transport networks, school buildings, airport services and water desalination and sewage treatment plants.

The sale of state assets will include television broadcasting towers, government-owned hotels and utilities such as district cooling and desalination companies.

“It is not a choice any more but a requirement by the central government that these services or these utilities will no longer be run by the government,” said Mr Jadaan. “It is taking it [privatisation] to the next stage.”

The kingdom expects to raise $38bn from asset sales and $16.5bn through PPP deals. The goal is to narrow the budget deficit, which hit $79bn last year, about 12 per cent of its gross domestic product.

Mr Al Jadaan said in July that Saudi Arabia planned to raise $13.33bn in proceeds in proceeds from its privatisation and PPP programme.

The latest estimate over the five-year period is a significant increase in revenue expected from privatisation deals.

Privatisation is a crucial plank of Saudi Arabia’s Vision 2030 diversification agenda.

In 2019, state-owned oil company Saudi Aramco listed its shares on the kingdom's Tadawul stock exchange in the world’s largest public offering, raising an initial $25.6bn and later selling more shares to take total proceeds to $29.4bn.

The kingdom's privatisation programme does not include entities owned by the Public Investment Fund or further asset sales by Aramco, which has so far sold about 1.73 per cent of the company.

Saudi Arabia is in talks to sell an additional 1 per cent in Aramco to a leading global energy company, Crown Prince Mohammed bin Salman said in April.

Proceeds from the sale of Aramco shares will go to the PIF and will be used to further diversify the economy.

“There are two types of sales for Aramco. They can monetise their own assets such as pipelines and recycle that money into new investments. That is their business,” he said.

“When it comes to Aramco’s shares, we will monetise them, recycle them and create more activity in the economy by unlocking new sectors through the PIF.”

The kingdom, which unveiled its privatisation programme three years ago, has already sold several assets including sports clubs, flour mills and a water desalination plant.