Market perception positive for Saudi privatization program

Investor appetite remains high for many assets currently under consideration for privatization by Saudi Arabia, Oliver Wyman, a consultancy firm, said in a new report on Monday.

While the investor appetite for Saudi Aramco is the highest, the report said the top candidates for privatization are Saudi Electricity Company (SEC), the Saline Water Conversion Corporation (SWCC), and Sadara, the semi-government chemical company.

"Each of these industries have relatively high investor appetite and are anticipated to provide a positive impact on the economy. Moreover, the market sees them as having a high ease of implementation compared to the other industries under consideration," it added.

“The rapid change in policies in Saudi Arabia suggests that the climate is ripe for privatization in the Kingdom,” Jeff Youssef, partner, public sector, Oliver Wyman, noted.

“The public in the Kingdom of Saudi Arabia are increasingly ready to embrace change and we were able to note the increase in appetite for investment across many sectors. Privatization can accomplish much good if executed well, and we believe that the market currently will pave way for the ease of implementation."

Saudi Arabia plans to raise $200 billion in the next decade by privatizing a wide range of state-owned enterprises across multiple industries and sector.

In order for privatization to succeed, the report said the Kingdom will have to focus on four key criteria: the right industry, the right model, a regulatory framework for monopolies and a well-equipped governance structure.

"The longer-term nature of such programs may discourage governments from embarking upon privatization. Despite this, and the other challenges highlighted, when done correctly, privatization should be seen as an important tool to enhance the fiscal, economic and social situation in Saudi Arabia," the report concluded.