SAUDI ARABIA is a key driver for infrastructure development using PPP modalitiy in the Middle East region. The country has seen interest from local & foreign investors alike, and a new PPP project pipeline by the National Centre for Privatization (NCP) has envisaged projects across sectors - transport, energy, WASH and urban infra - to be procured as PPPs.
This article provides a disgnostic review of PPPs in the Kingdom of Saudi Arabia, along with a timeline of the regulatory & policy framework, key institutions and the way ahead.
With the launch of Vision 2030, Kingdom of Saudi Arabia (KSA) has outlined goals, objectives, and strategies to diversify its economy away from oil and transform KSA into a leading nation. The kingdom is considering privatization and Public–Private Partnership (PPP) programs as a part of its policy response to declining oil prices and envisions to increase efficiency, productivity, and job opportunities for nationals in the private sector.
In reference to the regulatory framework of KSA , PPP stands for a contractual agreement (for a period of 5 years or more) between the government and a private party related to infrastructure or public service wherein the asset can be owned by the government or the private party or both and there is allocation of qualitative and quantitative risks between both the parties. The private party is responsible for designing, construction, management, operation, maintenance, or financing of the assets and all the payments owed by or to the private party under the PPP agreement is primarily based on the performance of its obligations. The following government sectors (Figure 1) have been initially targeted to develop an ecosystem and framework to identify, recommend and oversee privatization opportunities and there are provisions to add other sectors or authorities in an existing sector.
Policy & Regulatory Framework - A Timeline
Privatization Strategy was approved in the year 1997 to ensure a continued increase in the share of private sector and to expand its participation in the kingdom’s economy. The privatization strategy was bought together by reforms aimed at building the institutional and legal infrastructure for selected twenty sectors. Successful implementation of this strategy required dedicated regulatory frameworks and institutional set ups.
KSA has a history of implementing public-private partnership projects with the first true PPP project, Prince Mohammad bin Abdulaziz Airport (PMAA) expansion in Madinah in 2011, between General Authority for Civil Aviation (GACA) and a consortium comprising of TAV Airports, Al Rajhi and Saudi Oger.
Fast forwarding to year 2017 following the launch of Vision 2030, The Council of Economic and Development Affairs (CEDA) established the National Centre for Privatization and PPP (NCP) and officially launched the Privatization Program in 2018.
NCP was created to unlock state owned assets for the private sector, to privatize selected government services and targets to achieve a total of around USD 16.5 Billion as privatized investments by the year 2025.
In July 2018, NCP had initially prepared a draft private sector participation law (PSP) with the motion to establish a standardised regulatory framework for PPP and this draft formed the basis of the Privatisation Law which came into full force and effect in July 2021.
The timeline for evolution of PPP framework in KSA has been illustrated below in Figure 2.
The PSP Law along with The Implementing Regulations of the Private Sector Participation Law and The Private Sector Participation Governing Rules provides a dedicated bespoke framework for realizing PPP initiatives in the kingdom. The laws clearly identify all the stakeholders (elaborated in Section 3) to be involved in a PPP and details the whole process associated with it ranging from:
PSP project prioritisation
limiting value thresholds
PSP procurement routes (public competition, limited competition, direct contracting and unsolicited proposals)
designing business case documents
PSP project tendering plan including Expression of Interest, Request for Proposal, Proposal Evaluation
PSP Awarding plan
Marketing Plan of PSP projects
Institutional Framework - KSA's PPP Ecosystem
The Kingdom has come up with a hybrid arrangement to implement privatization plans and boost the private sector’s role in KSA’s socio economic development. The tasks and responsibilities of each of the stakeholders involved in PPP ecosystem of the country are as below in Figure 3.
Financing & Investment Support
The National Investment Strategy (NIS) was launched in 2021 with a vision to empower investors, provide investment opportunities, financing solutions, improve competitiveness, and clarify the partnership between the public and private players for various sectors including manufacturing, renewable energy, transport and logistics, tourism, digital infrastructure, and healthcare. NIS lists both the national investment institutions - Public Investment Fund (PIF) and National Development Fund (NDF) as engines for capital deployment and economic development.
The sectors of health, environment, education, utility, and municipal services saw increase in the number and value of PPP procurements after the initial release of PSP Law. Over the last five years the kingdom has privatised 30 projects and according to NCP, currently there are around 22 live PPP projects in the kingdom mostly in the environment, water and agricultural sector (9 projects) and health sector (4 projects).
The newly established PSP Law has surely attracted foreign investments in the Kingdom. In April 2023, NCP launched a PPP project pipeline wherein it has approved 200 development projects in 17 sectors. In addition, details of about 140 projects have been made available to international and local investors with the aim to provide opportunities for PPP investment.
Such strides in PPP projects will not only allow the government to focus on its legislative and regulatory framework but also will promote the economic development of the kingdom. Despite being in its nascent stages of privatization plan, Kingdom of Saudi Arabia appears to be going steadily forward in grabbing all the limelight in present and in the future coming years.
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