NCP Delivery Plan English Review Version-V3 Taghreed · National Center for Privatization and PPP (NCP) Enablement: NCP will work on developing or proposing frameworks that will enable

Privatization Program

( Delivery Plan 2020 )

A Saudi Vision 2030 Realization Program

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ة تنفيذ برنامج ّ التخصيصخط

Table of Contents

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1 VRP Scope ........................................................................................................................................ 6

A. VRP Description .................................................................................................................................................... 8

B. Direct Level 3 Objectives .................................................................................................................................. 12

C. Indirect Level 3 Objectives ............................................................................................................................... 12

2 VRP Aspirations ............................................................................................................................ 14

A. 2020 Commitments ........................................................................................................................................... 16

B. VRP Metrics and Targets ................................................................................................................................... 17

3 Current situation .......................................................................................................................... 24

A. Main Challenges ................................................................................................................................................. 26

B. Current Efforts ..................................................................................................................................................... 28

4 VRP Strategy ................................................................................................................................. 30

A. Strategic Pillars .................................................................................................................................................... 32

B. Strategic Considerations ................................................................................................................................... 38

C. Cross pointswith other VRPs .................................................................................................................................. 39

5 Privatization Program Initiatives Portfolio and Timeline ................................................... 43

A. Initiatives Portfolio ............................................................................................................................................. 45

B. Selecting Game-Changers ....................................................................................................................................... 57

6 Risk Mitigation and Required Actions ...................................................................................... 60

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1 VRP Scope A. VRP Description

B. Level 3 Direct Objectives

C. Level 3 Indirect Objectives

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VRP Scope

A. VRP Description

The Privatization Program’s overarching objective is to strengthen the role of the private sector by unlocking

state-owned assets for investment. Privatizing selected government services will improve quality of services

and reduce government’s spending while taking into account citizens’ interest; it will also help the

government to refocus its efforts on its legislative and organizational roles. Moreover, the program will

attract foreign direct investments and improve the balance of payments. These objectives are in full

alignment with Vision 2030.

Privatization is the transfer of ownership of specified assets or services from the government to the private

sector. The transfer of ownership can be done in several forms, e.g. (not exhaustive) full/partial assets sale,

IPO, management buy-out, PPP (BOT), concessions or outsourcing.

The scope of the Privatization VRP encompasses the following three pillars:

1) Establishment of legal and regulatory basis, including:

Develop General Legislative Frameworks for Privatization & PPP:

To enable the execution of privatization transactions and to develop clear paths to these

transactions through which these transactions can be governed. This requires the establishment of

regulatory rules and procedures and addressing the obstacles and legislative gaps that exist in the

regulatory environment in general. In addition, this framework is intended to increase regulatory

fairness, transparency, and integrity in privatization transactions as well as to enhance the benefits

(whether economic or social) of privatization.

Develop the Legislative Frameworks of Targeted Sectors for Privatization:

This involves a comprehensive review of the entire regulatory environment in that sector, and then

identifying development areas that are compatible with the role of the government as regulator and

the role of the private sector as an operator (including a review of many aspects of the sector such

as pricing services, as well as identifying relationships between entities operating in the sector and

aspects of consumer protection and other technical aspects).

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2) Establishing institutional basis that contributes to the existence of capable entities to implement

privatization in the manner and mechanism that preserves the interests of the government and guarantees

the fairness of the process for participants from the private sector, including:

Developing the structural mechanism of the “Opportunity Explorer”: A regulatory approach will

be developed to explore potential projects for the public-private partnership and asset-sale.

This approach can be designed in such a way as to ensure that the preliminary survey study

replaces the initial feasibility study and this shall save time and efforts.

Optimizing the Privatization Supervisory Committees (PSCs) and Execution Teams (ETs) and

enabling them to attract the talent and manpower to assist the Privatization Supervisory Committees

and Execution Teams to prepare, steer and execute the privatization program. By operationalizing the

committees and their teams sufficiently, this will greatly enhance the success of the Privatization

Program according to the considerations of the interests of the government and the fairness of the

process and the sustainability of the privatization model. This will include proper assessment and

development of the targeted privatization sector so that it is more attractive to investors.

Define privatization strategies, metrics and incentive mechanisms: After operationalizing the

Supervisory Committee for the sector, each PSC works to develop the sector’s privatization strategy

according to the specific objectives and in accordance with the statutory procedures. Then, privatization

metrics and standards will be developed for that sector and the development of elements in the

environment surrounding privatization initiatives will stimulate privatization.

National Center for Privatization and PPP (NCP) Enablement: NCP will work on developing or

proposing frameworks that will enable and govern privatization transactions. NCP will also ensure that

the preparations and executions are carried out in accordance with the approved governance

frameworks and to increase efficiency of the Center.

Privatization/PPP Innovation Center: Privatization operations are complex and go through numerous

stages and processes. This may result in a loss of emphasis on the importance of the design of the

privatization initiative to achieve the desired benefits from it. Therefore, the establishment of this center

ensures that the benefits in the minds of privatization employees are not overlooked. The Privatization

Innovation Center will be established to develop solutions and initiatives that enhance the desired

benefits of privatization and PPP (such as, increasing the local content and enabling the participation of

Small and Medium-sized Enterprises).

3 (Steer privatization programs initiatives):

Participation in Privatization Supervisory Committees through NCP.

Review of sector-specific strategies and regulatory initiatives

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Monitoring of implementation progress and recommend the changes to the Council for Economic and

Development Affairs (CEDA) if needed.

The Privatization VRP is managed by NCP and has a robust governance structure. This structure has been

developed after studying various international models and is in alignment with the Council of Ministers

Resolution number (665) 08/11/1438H (which was issued to establish PSCs for each sector). The roles of

various entities involved in the governance are explained below:

1) Strategic Management Committee (SMC), part of Council for Economic and Development Affairs

(CEDA) are leading the achievement of Vision 2030. They direct all twelve VRPs, including the

Privatization Program and provide guidance on any strategic decision or issues resolution.

2) The VRP Committee is the direct oversight body of the Privatization Program. It approves

recommendations of the VRP Office and reports to SMO/CEDA. It decides whether program-related

issues need escalation or not.

3) The VRP Office is responsible to monitor and report progress of the Privatization program. It supports

PSCs with development and implementation of privatization strategy and initiatives, through the NCP,

and prepares or updates initiatives budget requests, and identifies any program-related issues. Having

a consolidated view of the program, the VRP Office helps ensure coherence and alignment across the

PSCs through NCP. The VRP Office directly reports to the VRP Committee and is in regular contact with

PSCs and ETs.

4) The PSCs and ETs are the sector-specific privatization supervisory and execution bodies; there

responsibilities include: Sector strategy development including forming the execution teams and

managing consultants, develop sector privatization strategy in-line with NCP guidelines and national

objectives and present them to CEDA for approval. Responsibilities also include readiness and

enablement (conduct readiness assessments (technical, financial and legal) and identify gaps, develop

readiness plans and ensure their implementation, identify and seek approvals for sector specific

regulatory changes); Initiatives execution (such as approve privatization models developed by the

execution teams and ensure their alignment with the national strategy, standards and regulations, reach

out to investors, conduct negotiations and sign contracts, manage the implementation of the

privatization opportunities, and periodically report to CEDA).

Initiatives execution will be carried out through the Execution Teams, which will assist the Supervisory

Committee to carry out all studies and prepare the necessary decisions to be taken through the

concerned Supervisory Committee. Each Supervisory Committee shall include an execution team

appointed by the concerned committee based on the powers granted to it to perform the tasks related

to privatization and shall be submitted to the members of the committee for decision-making.

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5) NCP is the enabler of privatization. It houses the VRP Office and supports PSCs and ETs in the

execution of their privatization efforts by providing privatization processes, legal and regulatory

expertise. Responsibilities include: Policy making (develop national privatization and PPP regulatory

framework, develop PSCs rules and procedures, review sector regulatory framework). Responsibilities

also include privatization frameworks (develop sector privatization standards and guidelines to fulfill

national privatization objectives), and monitoring /reporting (review sector privatization strategies and

ensure their alignment with the sector privatization standards and guidelines, review and validate

privatization opportunities, review readiness plans and follow up on their implementation; review

technical, financial and legal analyses during transaction execution; follow up on execution progress

and escalate to CEDA where necessary), and also what falls under NCP will also provide execution

support (when requested by PSCs, manage the execution of privatization opportunities including

definition of privatization and PPP models, reaching out to investors, developing the strategy of local

and external communication, marketing, strategic communication, and provide all contact information

for the privatization process for investors, and conducting analyses and negotiations/deal closure) and

prepare a strategic communication plan to ensure consistent communications between NCP and the

Supervisory Committees.

The program scope does not encompass the following activities, as these are covered by other institutions:

• Development and regulation of traditional private sector projects with the public sector – this

includes legal and statutory regulations and procedures for working with the private sector outside

the umbrella of “privatization” and “private sector participation projects”

• Creating overall privatization strategies for industries and sectors as well as privatization models,

as this is done by the PSCs and ETs

• Dealing with assets which are owned by the Public Investment Fund, as they are covered by the

Public Investment Fund Program

• Dealing with residential real estate assets which are unlocked for private sector usage by

contractors and real estate developers, as they are covered by the Housing Program

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B. Direct Level 3 Objectives

The Privatization Program supports two main vision objectives:

3.1.2 - Unlocking state-owned assets for the private sector.

3.1.3 - Privatizing selected government services.

C. Indirect Level 3 Objectives

The Privatization Program also supports 11 indirect objectives. These indirect objectives were shortlisted

based on the Privatization Program initiatives scope, to include the ones that were impacted by the

Privatization Program initiatives:

2.1.1 Ease the access to healthcare services.

2.1.2 Improve value of healthcare services (quality of outcomes and experience, and cost).

2.3.1 Improve quality of services provided in Saudi cities.

3.1.4 Develop an advanced capital market.

3.1.6 Attract foreign direct investment.

3.5.1 Establish and improve the performance of logistics centers.

4.3.2 Grow SME contribution to the economy.

5.1.2 Diversify government revenues— maximize revenues from state-owned assets (e.g. Enterprises).

5.2.1 Design a leaner and more effective government structure.

5.2.2 Enhance performance of government entities.

5.2.5 Improve quality of services provided to citizens.

The exact indirect metrics by initiative will be designed, baselined and monitored by the PSCs and the

NCP.

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2 VRP Aspirations A. 2020 Commitments

B. VRP Metrics and Targets

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VRP Aspirations

A. 2020 Commitments

To achieve Vision 2030, the Privatization Program shall commit to the realization of a number of successes

by 2020, which will constitute the foundation needed to realize2030 ambitions.

The program will work to achieve an incremental GDP impact through increasing private sector investment

(both domestic and foreign). In addition, the program is expected to generate sales proceeds for the

government and net savings (including Capex and Opex) for government and generate new jobs

opportunities in the private sector by 2020.

A. 2020 Commitments

2020 Commitment Metrics

SAR ~13-14 Billion Contribution to GDP

SAR ~35- 40 Billion Total government proceeds from asset sales

(driven by PSCs)

SAR ~ 25-33 Billion Government net savings (Capex & Opex)

from privatization/PPP (driven by PSCs)

SAR ~ 1 – 1.2 Billion Government net saving (Opex) from

privatization (assets sale)1

10,000 – 12,000 New private sector jobs created

1 Does not include assets transferred to companies

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B. VRP Metrics and Targets

The Privatization VRP includes macro-economic metrics, program-level metrics, metrics on

game-changers as well as metrics linked to indirect objectives. In the following, these metrics

and targets which the program seeks to achieve will be laid out and explained in detail.

Metric Unit 2016 2020

Basis Target Note

Macro-

Economic

metrics

1) Contribution to GDP SAR M n/a 13.827

2) non-oil government revenues SAR M n/a 35,000-40,000

3) non-governmental investment SAR M n/a 60,993

4) Impact on balance of payments SAR M n/a 40,060 A

5) Creating new jobs at the private sector # jobs n/a 10,000 – 12, 000

6) Contribution to the local content SAR M n/a 4,800 B

7) Consumption rate SAR M n/a 8,337 B

8) Inflation rate % n/a 0.42% B

Program

metrics

1) Number of government assets privatized per

year/total assets to be privatized by 2020

number of

assets 0

5 D, E

2) Total government revenue from asset sales SAR M 35,000-40,000 F

3) Total number of PPP investments # of PPP

contracts 0 14 F,G

4) Total value of PPP investments SAR M 0 24,000-28,000 G

5) Govt. net savings (Capex & Opex) from

privatization/PPP SAR M 0 25,000-33,000 H

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Metric Unit 2016 2020

Basis Target Note

Game-

changer

initiatives

metrics

1) Ports corporatization: Dwell time Days 11 3-5

2) Privatize production sector of SWCC:

Privatization of Al-Khair Station

% of

private

ownership

of Ras Al

Khair

station

0% 100%

The development of the “Opportunity

Explorer” structural mechanism

Completion

rate 0% 100%

A. Negative impact on BoP primarily driven by National Renewable Energy program where majority of plant equipment /

machinery is expected to be imported. Improvement through Local Content Strategy expected.

B. Privatization program with insignificant impact on this metric (according to Center for Strategic Development (CSD).

C. The individual plans for each initiative will independently evaluate the number of new private sector jobs created. This will

also illustrate the realized cost savings (Capex & Opex) as well as additional private sector investment through PSCs as a result

of sectorial studies for each committee.

D. Note that once an asset sale happens (even if partial) the asset is considered as privatized and subsequent stake sales in the

same asset cannot be counted.

E. The PPP investments are part of the following initiatives: Attract private investments to finance the establishment of

educational buildings, Operate public schools under the name of an "independent school", PPP for new medical center of

Saudia Medical Services, PPP for public transport projects , National Renewable Energy Program, Primary care PPP, Hospital

commissioning and medical city PPP, Extended care (rehabilitation and long-term care) PPP, Radiology PPP, Laboratory PPP,

Parking PPP, Waste Recycling Plant PPP, MOMRA asset optimization PPP, Privatize services of 35+ rehabilitation centers.

F. Consisting capital expenditure savings and savings on operating expenses. (Excluding government revenues).

Indirect objective Proposed metrics (examples)

2.1.1 Ease the access to healthcare

services

• Waiting time for GP appointment in PHCs developed

through “Primary care PPP”

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Metrics

linked to

indirect

objectives

• Waiting time for admission in new hospitals created

through “Hospital commissioning & medical city PPP”

• Waiting time for rehabilitation/long-term care bed

developed through “Extended care PPP”

2.1.2 Improve value of healthcare

services (Quality of outcomes and

experience, and cost)

A. Number of “zero events” in primary care units and hospitals

concerned by healthcare-related privatization initiatives

• B. Patient satisfactions is measured via questionnaires

developed by King Faisal Specialized Hospital and Research

Center as one of the specialized initiatives

• C. Measuring patient satisfaction of services provided by

PHCs developed through “Primary care PPP”

• D Measuring patient satisfaction of the diagnostic

radioecology services developed through “Primary care

PPP”

• E Measuring patient satisfaction of the laboratory services

developed through “Primary care PPP”

2.3.1 Improve quality of services

provided in Saudi cities (utilities,

public transport, etc.)

• User satisfaction of parking services (measured by survey)

after roll-out of “Parking PPP” initiative

3.1.4 Ensure the formation of an

advanced capital market

• ECM activity (SAR M) generated from privatization

initiatives

* This includes the parallel financial market such asNomu market,

and other parallel markets that arise later.

• DCM activity (SAR M) generated from privatization

initiatives**

3.1.6 Attract foreign direct

investment

• FDI net inflows (SAR M) generated from privatization

initiatives.

3.5.1 Create and improve

performance of logistic hubs

• Ports’ dwell time for the nine corporatized ports.

4.3.2 Grow SME contribution to the

economy

• SME share of privatization transactions (by sector).

5.1.2 Diversify government

revenues – maximize revenues

from state-owned assets

• YoY revenue growth after privatization (by entity).

5.2.1 Design a leaner and more

effective government structure

• Capex & Opex savings from corporatization of 9 ports

• Capex & Opex savings from transportation sector initiatives

• Capex & Opex savings from corporatization of KFSH&RC

5.2.2 Enhance performance of

government entities

• Number of privatization milestones achieved (by entity)

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5.2.5 Improve quality of services

provided to citizens

• Already captured above

*ECM: sales processed issued in domestic capital markets through or primary or secondary equity issuance.

**DCM: debt raised through bonds and sukuk domestically.

Please note: The metrics linked to indirect objectives have to be further refined once the PSC’s have developed their sector-

specific strategies. Metrics will be updated at that time.

Explanation of Metrics:

First: Contribution of the Privatization Program to the macro-economic metrics

The Privatization Program team has defined, in collaboration with relevant entities including Center for

Strategic Development (CSD), and the entity responsible for jobs creation. The information and data

supplied by the government agencies targeted for the privatization process were based on the following

details:

- Regarding the contribution of the program to GDP, the CSD calculated this based on the information

provided by entities. It should be noted that the key driver of the impact on GDP is non-governmental

investment.

- As for the contribution to non-oil revenues, it has been calculated based on the information provided by

owners of the privatization initiatives. The key driver on this scale is the expected revenues from the

privatization.

- The contribution of the program to non-governmental investments has been calculated based on the

information provided by owners of the privatization initiatives. The main driver of such impact is non-

governmental investment.

- With regard to the contribution of the program to the creation of jobs in the private sector, the contribution

of the program is derived from privatization projects (particularly PPP projects), where it is expected to

create jobs. The Job Creation Commission has calculated the percentage of participation based on

information and data received from the targeted parties of the privatization.

- Regarding the contribution of the program to local content, consumption rate and inflation rate, it was

calculated by the National Center for Strategic Development (CSD) and the responsible entity for job

localization.

Note that the 2016 baseline of all the above metrics is n/a (not applicable) as this is a new program and

because the initiatives that constitute the Privatization Program are incremental in nature. For example, the

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public-private-partnerships (PPPs) that will be created through the PPP-related initiatives do not exist at

present. Hence, their current impact on all metrics (such as GDP, job creation, etc.) cannot be determined. If

these initiatives will not be executed, there will be no impact either. For the initiatives that are related to

privatization of existing government entities, our impact calculation is equally incremental. In all metrics,

we only capture the difference achieved through the privatization. If these initiatives will not be executed,

there will be no impact.

Second: Program Metrics

Program metrics have been set to measure and guide the impact achieved as required. These metrics reflect

the program’s priorities from Vision 2030.

Due to the potential huge varieties at the markets conditions during privatization implementation phase,

the impact parameters was set with upper and lower limits, especially the assets sales revenue and net

investment.

Rationale for target/trajectory for program metrics (“1”) (Number of government assets which have been

privatized.): As per guidance from SMC in pulse-check meetings, the VRP selected 23 impact initiatives to

be tracked through this program in accordance with the governance model contained in this document. Out

of these, five are privatizations of existing government assets; through asset sales.

Note that during the coming period, a number of initiatives will be implemented, particularly of importance

(Ports corporatization, privatize some services at the transportation sector, Privatize KFSH&RC to a Not for

Profit). Since all of the processes do not involve private sector engagement as they are limited to transition

to companies or preparatory actions, they are not expected to be privatized in the strict sense before 2020,

which is why they are excluded from this metric.

Rationale for target/trajectory for program metric “2” (total government proceeds from assets sales): As

privatization comes in two forms: assets sale and PPPs. Since the sale of assets generates direct financial

proceeds to the government, it was necessary to set this metric to show the expected proceeds to the

government.

Rationale for target/trajectory for program metric “3” (total number of public-private partnership

investments): metric "2" shows targeted proceeds from asset sales (first privatization form), based on that,

there is a need to develop metrics for public-private partnership projects (second privatization form). This is

in line with the guidance from SMC in pulse-check meetings. The objective of this metric is to indicate the

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number of partnership projects expected by 2020. These initiatives are part of the 23 initiatives that the

Strategic Committee directed to be tracked through this program.

Rationale for target/trajectory for program metric “4” (total value of investments based on public private

partnership): metric (3) above shows the number of public-private partnership projects. It is therefore

necessary to indicate the total value of the investments resulting from the public-private partnership

projects as shown in metric 3.

Rationale for target/trajectory for program metric “5” (government net savings in capital expenditure and

operating expenses from privatization): Metric (4) shows the total investments resulting from the

partnerships. It is necessary to indicate the net savings that the government can achieve from these projects.

We recommend adding a metric to track: Percentage of services privatized per sector (through privatization

or PPP) as follows:

Each PSC identifies assets and services that are suitable to be privatized and includes it as part of its

sector privatization strategy.

Percentage of privatization is calculated from assets/services identified in the above step along with

continuous supervision from program.

Activation of PSCs are essential to this metric.

Example: After activating the PSC for sector ‘X’, the committee completes a sector strategy and identifies 100

privatization opportunities. If 10 of those opportunities are prioritized that year (after obtaining needed

approvals), the committee will have achieved 10% of the target. Opportunities that are excluded due to lack

of feasibility are excluded from the metric.

We will study adding a metric to track: Success of privatization operations (by sector) as follows:

The number of bids provided by the private sector for participation in privatization or PPP.

After receiving the bids from the private sector to participate in the privatization or PPP, there should be

a value for money assessment.

Enhance the level of service provided to users and allow it to larger numbers of beneficiaries

Third: Metrics of game-changer initiatives and other initiatives

There is a correlation between program metrics and game-changer initiatives metrics as well as other

initiatives. The reason for this, is that program metrics are based on game-changer initiatives metrics and

other initiatives. Therefore, it was necessary to present specific metrics for game-changer and individual

initiatives. Since game-changer initiatives have a special impact, its metrics have been identified. The

program initiatives are complex and cross-sectorial; thus, the other metrics will be laid out in detail by the

respective supervisory committee.

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Fourth: Privatization program contribution to realizing indirect objectives

As explained above, the program has a special nature because of its correlation with government sectors,

the program affects and is influenced by the initiatives in the sectors. Therefore, there is an opportunity for

the program to help achieve other indirect objectives, including raising the quality and efficiency associated

with the services of the targeted sectors. Hence, metrics examples linked to to measure the program’s

contribution in achieving these objectives. These metrics examples are defined from the Privatization

program initiatives and shortlisted based on their relevance for the indirect objective attributes. The final list

of metrics (along with targets) will be defined once the specific initiatives are further detailed by the PSCs

and ETs.

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3 Current situation

A. Main Challenges

B.Current Efforts

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A. Main Challenges

To ensure that the program strategy is effective and applicable, and will achieve the desired goals, the

current situation has been studied from two angles: first, major current challenges and second, current

transformative efforts that fall within the program scope and are consistent with its ambitions. This section

details both aspects.

To understand the main challenges, one must identify some important facts:

First: The KSA government has played a strong role by providing services, resulting in:

1. Government providing services that in other countries are provided by private sector companies.

2. Decrease in the share of the private sector within GDP (43 percent for KSA in 2016 compared to 58

percent top five European Union economies).

3. Perceived lower quality of services and/or higher costs of services.

4. Difficulty in the calculating cost centres within the government.

5. Government distancing itself from its legislative and regulatory role sometimes since it has been a

service provider. Therefore, there is no need to organize and monitor itself. In some cases, the

government plays a supervisory role in addition to its role as a service provider.

Second: Previous privatization efforts have been limited to certain sectors, though they have been focusing

on privatizing those sectors with sufficient expertise and knowledge to implement the privatization process.

Our current ambitions are that we need more effort to complete the privatization of more sectors.

Based on these two facts, the main challenges briefly are:

First: Limited experience of privatization within targeted sectors, as most of the experience are based on

pure technical background, The Kingdom of Saudi Arabia has gone through multiple efforts of privatization

and private sector engagement; however, these were limited to specific sectors that were mature enough

and professionally run. Hence, necessary expertise, knowledge and skills related to the privatization of state-

owned assets and activation of private sector engagement across the whole government are very low.

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Second: Lack of a sufficient number of domestic private sector companies with the adequate experience and

skills to take over privatized services, as they have not been involved in such services before since the

government was the only available service providers for many sectors. This has not provided sufficient

opportunity for private sector growth in these sectors. This is a challenge because there are fewer companies

available for privatization and ultimately less benefits due to privatization.

Third: Insufficient general legislative frameworks that enable privatization processes and enhance its

governance, vague procedures for obtaining approvals for the privatization process (in most sectors); and

vague procedures for the preparation and project processes. This is a major challenge because insufficient

preparation and execution of the privatization process will lead to reduced investor confidence and increase

the failure rates of the privatization process or implements these processes in the wrong way. On the other

hand, the privatization process intersects with many rules and regulations that may have obstacles or

legislative gaps that could hinder the privatization process or hinder the optimization of the privatization

process. These include corporate, bankruptcy, financing, competition and government procurement,

commercial mortgage. This is a challenging aspect as most of these systems were designed in light of the

role of the current government and the weakness of the private sector. For example, the government

competition and procurement system is the government's largest channel for contracting with the private

sector. In view of the nature of this system, the contracts that this system deals with contradict with the

essence of the privatization processes especially (public-private partnership).

Fourth: Insufficient regulatory base developed for target sectors. Since the government has historically been

operating the sectors, the need for frameworks and policies did not exist to govern relationships or regulate

pricing, competition, or consumer protection. The current situation is not attractive to the participation of

the private sector, as it is not interested in sectors where there’s no clear regulations or directory of

procedures that govern all the above-mentioned points, and that may stand in the way of reaping the full

benefits of privatization.

Identification of main challenges is a reoccurring exercise and this list will be updated regularly.

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B. Current Efforts

A number of initiatives have been put in place to help change and address key challenges. These initiatives

are as follows:

100+ privatization initiatives have been identified so far across 10 ministries.

Some initiatives are scheduled to be finalized by 2020 (e.g. sports clubs, grain silos, production sector

of SWCC). These initiatives include privatization of both governments owned assets sale and PPP.

Council of Ministers Resolution number (665) of 08/11/1438H, has been issued to establish PSCs for

each sector. The role of the PSC is to define the privatization strategy for the respective sector, to

identify the best suitable privatization model, and to drive the actual implementation. This resolution

will address a number of the major challenges mentioned above.

With the Resolution of the Council of Ministers No. 355 of07/06/1438H, the National Center for

Privatization has been established and designed as a Center of Excellence to enable and govern the

overall privatization process.

It can be said that there is a base of initiatives and projects on which the Privatization Program rely on in

addressing key challenges.

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4 VRP Strategy

A. Strategic Pillars

B.Strategic Considerations

C.Cross points with other VRPs

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A. Strategic Pillars

VRP Strategy

Achieving the Privatization Program’s ambitions requires three strategic pillars, which are establishing the

legal/regulatory basis, establishing the institutional basis, as well as steering the sector privatization

programs.

Pillar 1: Establishing the legal and regulatory basis; this includes:

Development of privatization general legislative frameworks:

The first aspect of this initiative is to enable privatization processes and its governance by setting clear and

specific procedures that increase the level of preparation and execution of privatization. This aspect will also

set standard and specific procedures for the process of offering privatization projects which will increase the

level of operational governance. It also includes rules of building working teams, appointing consultants

and communication with the private sector; and thus will help this aspect of solving a part of the main

challenges to ensure the achievement of the desired aspirations, and raise the level of transparency and

integrity in the privatization process. It is worth mentioning that the Council of Ministers Resolution No.

(665) dated 8/11/1438 H gave the Board of Directors of the National Center for Privatization the authority

to issue a number of rules, procedures, controls and standards that will form the core of this aspect.

As for the second part of this initiative, it includes reviewing the provisions of a number of regulations,

legislation and rules that intersect with privatization; and analyze them to identify the gaps and legislative

obstacles that may be contained within those regulations, legislations, and rules. Then, propose solutions

and work to address those obstacles which will enable the privatization process and ensure that it is

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attractive to investors, enhances the interests of the government and raises the level of achieving the

benefits of privatization. It is worth mentioning that the Council of Ministers has directed to exclude

privatization from government competition and procurement system for the above reasons. The Council of

Ministers also directed the National Center for Privatization (NCP) to draft a privatization project which

includes the necessary exceptions from the relevant regulations.

Develop legislative frameworks that govern the targeted sectors for privatization:

This involves a comprehensive review of the entire regulatory environment in that sector, and then

identifying development areas that are compatible with the role of the future government as regulator and

the role of the private sector as an operator (including a review of many aspects of the sector such as pricing

services, identifying relationships between entities operating in the sector and its structure, and consumer

protection and other technical aspects). The decision of the Council of Ministers No. (665) dated 8/11 /

1438 H indicated that every supervisory committee must conduct a comprehensive study that includes the

regulatory aspects. NCP will work with the supervisory committees and their execution teams to conduct

this comprehensive review and then identify the necessary steps to implement them.

Pillar 2: Establishing the institutional basis that would contribute to create entities that are able to drive

the execution of the privatization efforts in a controlled manner while maintaining government

benefits, guaranteeing fair contributions of the private sectors, and enhancing the quality of service

provided to citizens including:

The structural mechanism development of the “Opportunity Explorer”:

A regulatory approach will be developed to explore potential projects in the public-private partnership and asset-

sale projects. This approach can be designed in such a way as to ensure that the preliminary survey study replaces

the initial feasibility study and this will save efforts. This approach will also include specific initial steps in

collaboration with relevant government agencies to help strengthen the base of projects to be discovered .

Activation of the Privatization S upervisory Committees and Execution Teams:

As mentioned above, there is a scarcity of experience and skills in privatization. Thus, the activation of the

S upervisory C ommittees will enable them to attract manpower and talent to assist them in the process of designing,

preparing and executing the privatization process. This is an important element for the success of the privatization

according to the considerations of the government's interests, the fairness of the process , the sustainability of the

privatization model, and the achievement of desired benefits to citizens .

34


Identifying privatization strategies, indicators and incentive mechanisms for privatization:

Following the activation of the Supervisory Committee for the sector, it will work to develop the privatization

strategy based on specific targets of relevant sectors, in accordance with the regular procedures. Then, it will work

on developing indicators and criteria for privatization, and develop elements in the environment surrounding

privatization initiatives to stimulate privatization.

Enable the National Center for Privatization (NCP):

NCP will work on developing or proposing frameworks that will enable and manage privatizations. NCP will also

ensure that the designing, preparations and implementation are carried out in accordance with the approved

governance frameworks. It will ensure the level of efficiency of the system and ensure maximizing the benefit of the

system of expertise in privatization.

Privatization Innovation Center:

The privatization processes are complex and go through a relatively large number of stages and procedures. This

may result in a loss of focus on the importance of the design of the privatization initiative and will have an effect on

the desired benefits to achieve from the program. The establishment of this center is to ensure that the benefits i

the minds of employees are not forgotten. .The Privatization Innovation Center develops solutions and initiatives

that enhance the benefits of privatization (e. g, raising local content and raising SME participation opportunities ).

This platform is essential for achieving the program's aspirations and facing the challenges. It is very

important to design the program to suit the local environment and address the challenges; therefore, it is

designed according to the following considerations:

• There are institutions that focus on stimulating and monitoring privatization.

• The importance of providing a unified view of initiatives in all sectors.

• A decentralized model has been selected as the institutional basis to govern privatization

international benchmarks indicate the best options would be somewhere between the centralized

model and a more decentralized model. The reason for this is that there is a need for reforms in the

targeted sectors for privatization, and it is difficult to obtain data and information on assets and

services targeted for privatization. The technical advantage of our model is that the workers are

closer to the technical aspects of the entity. And, this model will speed the preparation of

privatization in all targeted sectors, and the centralized element will ensure that all processes are

organized and managed for transparency, integrity and fulfilment of the necessary requirements by

one entity.

35


Accordingly, a strong governance model has been designed, in line with the Council of Ministries

Resolutions number (665) dated 8/11/1438 H and number (355) dated 7/6/1438 H, as follows:

• Strategic Management Committee (SMC), part of Council for Economic and Development Affairs

(CEDA) is responsible along with CEDA for the achievement of Vision 2030. They direct all 12 VRPs,

including the Privatization VRP and provide guidance on any strategic decision or issues resolution. The

strategic committee also reviews the recommendations of the supervisory committees and ensures

their strategic relevance in preparation for submission to the Council for Economic and Developmental

Affairs for their economic review, as well as the Council of Ministers for final approval if this is a

statutory requirement, whether the privatization project is to sell assets or partnership between public

and private sectors. Each Supervisory Committee will propose the appropriate privatization method

which should include an analysis of how the project will be offered to the public through public offering.

The strategic committee will review the proposed privatization method to ascertain the appropriateness

of the public participation model and the public offering.

• The VRP Committee is the direct oversight body of the Privatization VRP. It approves recommendations

of the VRP Office and submits reports to SMO / CEDA. It decides whether program-related issues need

escalation or not. The program's initiatives are being continuously reviewed and submitted to the

Strategic Committee and the Council for Economic and Developmental Affairs.

• The VRP Office is an office in the National Center for Privatization and administratively follows the VRP

Committee. The VRP office is responsible to monitor and report progress of the Privatization VRP

program. It supports PSCs with development and implementation of privatization strategy and

initiatives, prepares or updates initiatives budget requests, and identifies any program-related issues.

Having a consolidated view of the program, the VRP Office helps ensuring coherence and alignment

across the PSCs.

• The PSCs and ETs

Supervisory committees will be responsible for designing, preparing and implementing privatization

processes, including the development of the objectives of the privatization strategy for relevant sector,

appointing working teams and consultants, and working to raise the sector's readiness in all aspects

(technical, organizational, etc.). The committee will define the most appropriate model for privatization

in the sector, and conduct negotiations and conclude contracts necessary to implement the privatization

process according to the procedures followed, and the decision of the NCP. The revenues and savings

of the privatization will benefit the Treasury in general and this in accordance with the state revenues

system issued by Royal Decree No. (M / 6) and the date of 18/11/1431 H in line with the procedures,

rules, and instructions issued under the Royal Decrees and the relevant decisions of the Council of

Ministers.

36


• NCP houses the VRP Office and supports PSCs and ETs in the execution of their privatization efforts by

providing privatization processes, legal and regulatory expertise. Responsibilities: Policy making

(develop national regulatory framework, develop PSCs rules and procedures, review sector regulatory

framework). Privatization framework (develop sector privatization standards and guidelines to fulfill

national privatization objectives). Monitoring/ reporting (review sector privatization strategies and

ensure their alignment with the sector privatization standards and guidelines, review and validate

privatization opportunities, review readiness plans and follow up on their implementation; review

technical, financial and legal analyses during transaction execution; follow up on execution progress

and escalate to Council for Economic and Developmental Affairs (CEDA) where necessary). Execution

support (when requested by PSCs, manage the execution of privatization opportunities including

definition of privatization models, reaching out to investors, conducting analyses and negotiations/deal

closure). This is in addition to the role of NCP in the Supervisory Committees and its Execution Teams,

which in turn will ensure a center of expertise, which supports the privatization in general.

From the mentioned above, it can be said that the approval process of privatization projects (sale of

assets or partnership between the public and private sectors) is governed by the decision of the Council

of Ministers to approve the establishment of Supervisory Committees for the sectors targeted by

privatization. Each Supervisory Committee will be responsible for studying the privatization projects

and then propose the optimal model and method for the privatization process. After that, the

Supervisory Committee will submit a proposal for CEDA to get approval. The proposal of the

Supervisory Committee will be studied in several aspects, the most important of which is the strategic

aspect of the Strategic Committee in CEDA, which will consider the model of public participation

proposed by the Supervisory Committee. The proposal will be reviewed from an economic aspect by

CEDA, and after that it will be raised to the Council of Ministers if it is legally required. Then, the

Supervisory Committee will execute the initiative after issuing the necessary approvals under CEDA

supervision.

The achievements of this pillar can be divided into three main pillars: First, the PSCs and ETs must be

established and operationalized. Second, each sector needs to define its privatization strategy, taking

into account international best practices as well as sector- and kingdom-specific circumstances. In

addition to this, sector-specific privatization incentive mechanisms and metrics should be developed to

steer the execution. Third, existing supporting entities should be enhanced and further supporting

measures should be implemented. Specifically, the recently enacted Privatization Supervisory

Committees and Execution Teams have to become operational as soon as possible. In addition, the role

of the NCP should be further strengthened to provide required services as a true center of excellence

for privatization and to serve as a dedicated unit responsible to act as Privatization champion especially

37


for foreign investors to showcase current privatization efforts, recent successful privatization

transactions in addition to participating in relevant international forums. Also, the establishment of

additional capabilities such as an innovation center could act as further catalysts for the accelerating

privatization efforts.

Pillar 3: Steering the sector privatization program will ensure that the program initiatives are executed

on time. While there are 100+ privatization initiatives supported by NCP, the Privatization VRP will

focus on core sector-specific initiatives (23) which are regarded as important from an overall

transformation point of view for KSA. Note that PSCs are responsible to develop sector privatization

strategy in-line with NCP guidelines and framework. For each initiative, the business case/approach for

privatization will be detailed once the PSCs are operational. It should be noted that all sector strategies

are reviewed by NCP. This will ensure that sector strategies are aligned with the guidelines, there is

transparency and fairness in the privatization process followed and that any cross-sector trade-offs

and/or dependencies etc. are highlighted and resolved appropriately

38


B. Strategic Considerations

There are several strategic considerations, the main ones:

Consideration Description Decision taken and its consequences

Execution responsibility

The responsibility of developing

the privatization strategy for each

sector and the best privatization

model for each entity will be

developed by the respective

Privatization Supervisory

Committee in alignment with

NCP’s rules and regulations

International benchmarks indicate options between a

centralized model and a more decentralized model.

Given the fact that privatization is not only about

selling assets, but also PPP, market reforms, and

transformation, Thus, a model has been designed

which sets between centralized and decentralized

models. The Privatization Supervisory Committees

(PSCs) are mandated to evaluate optimal privatization

models and execute it based on official legal rules and

procedures. The NCP acts as a center of excellence that

enables privatization and PPP initiatives and enhance

governance through regulations, policy, procedures,

and advisory. Also, VRP Office will be responsible for

overseeing and steering the various privatization

initiatives to ensure adequate progress is achieved as

per the plan.

Privatization of PIF assets The responsibility of privatizing

PIF assets lies with the PIF.

The SMC has taken the decision to leave the

responsibility of the privatization of PIF assets with

the PIF

Making public residential

real estate assets available

for private sector use

The government owns

considerable land which can be

used for housing purposes.

The SMC has taken the decision to allocate the

responsibility of the usage of government real estate

for housing purposes to the Housing Program

Appropriate privatization

method

Private sector can participate in

governmental services and assets

in two methods: PPP and asset

sales

NCP will develop rules, regulations, and guidelines for

different types of privatization models. The PSC’s

have to choose the appropriate method in line with

the sector-specific privatization strategy.

39


C. Cross-points with other VRPs

Potential trade-offs and interdependencies with other VRPs has been identified and addressed

as follow:

Trade-offs/ Interdependencies Relevant Programs Strategic Decisions

Increase local organizations’

participation in privatization

• National Companies

Promotion Program

• Privatization is equally open to both foreign and

domestic investors, However, supporting SMEs

participation in the privatization process has been

discussed (e.g. supporting SMEs and local content)

while taking into consideration the importance of

assessing regulatory requirements and potential impact

in light of international treaties and trade agreements.

There is no scope overlap or

interdependencies identified with the

Strategic Partnerships Program

• Strategic Partnerships

Program

• Possible trade-offs and interdependencies should be

reassessed as both programs progress.

Participation in the capital markets

development initiative

• Financial Sector

Development

Program

• Once the privatization method has been defined by

the PSCs, there will be opportunities for private sector

participation that will help in the development of the

financial sector.

•

Capital market

• Financial Sector

Development

Program

• There are opportunities to list financial securities in

the stock market after the PSCs perform full evaluation

of the privatization projects. There are also

opportunities to increase IPOs.

Implementation of privatization

program aligned with government’s

fiscal plans.

• Fiscal Balance

Program

• Fiscal balance Program will continuously get updates

on sectors and entities strategies and align on level and

timing of fiscal support (if needed) should be reflected

in the fiscal plans.

• Financial contribution from the Program will help in

achieving the goals of the Fiscal Balance Program

40



Support the Program through

introducing reforms to selected

industrial and logistic sectors

• National Industrial

Development and

Logistics Program

(NIDLP)

• Importance of alignment between privatization VRP

and NIDLP.

Privatization of some assets

• PIF Program


Promotion Program


Development and

Logistics Program

(NIDLP)

• Continues alignment between PSCs and other VRPs

Set of assets for privatization


Promotion


Development and

Logistics Program

• PIF

• Ongoing alignment between these VRPs and the PSCs

via relevant initiatives.

Some Housing initiatives enabled

through PPP might be relevant for

both Privatization and Housing

Program

• The Housing Program

• initiatives whose main objective is to build affordable

housing on government residential real estates, fall

under the Housing Program and execution

mechanism of the Privatization will be utilized.

Interdependencies: improve the

effectiveness and efficiency of

municipal and social services through

the privatization of some government

services

• National

Transformation

Program

• Add municipal and social services within the priorities

of the privatization program (via relevant initiatives).

Potential interdependencies may exist

for the following shared strategic

objectives:

• 2.1.1 Ease the access to

healthcare services (e.g.

• National

Transformation

Program

• Once the privatization sector strategies and initiatives

are detailed by PSCs and the NTP initiatives are

detailed, then potential interdependencies should be

assessed.

41



geographical locations,

availability, financial cost)

• 2.1.2 Improve the value obtained

from healthcare services (quality

of outcomes, experiences, and

cost)

• 2.3.1 Improve the quality of

services provided in Saudi cities

(utilities, public transports, etc.)

• 2.3.4 Enhance traffic safety

• 2.4.1 Reduce all types of pollution

(e.g. air, noise, water and soil

contamination)

• 3.1.1 Ease of doing business

(mainly regulatory aspects)

• 3.1.6 Attract FDI (foreign direct

investment)

• 4.3.2 Maximize SMEs

contribution to the economy

• 5.2.3 Improve productivity of

government employees

• 5.2.5 Improve quality of services

provided to citizens

• 5.4.2 Ensure sustainable use of

water resources

Public sector employees affected by

the transition to the public sector.

• National

Transformation

Program

• Privatization Program will inform the National

Transformation Program (MLSD, HRDF, MOE) on

expected unemployment/transition impacts on public

employees to the private sector

42



Published information about

initiatives can be a key enabler for

attracting foreign capital required for

privatization

• National

Transformation

Program

• Privatization initiatives to be published on the atlas

portal in Q4 2017 to allow increased access to FDI.

There are no interdependencies nor

trade-offs identified with the Quality

of Life Program. However, the

Privatization VRP will create synergies

for this VRP through the initiatives

“Privatize Saudi Sports Clubs” and

“MOMRA asset optimization PPP”

• Quality of Life

Program • Continues updates of interdependencies and trade-offs

As of now, there is no scope overlap or

interdependencies identified with the

Saudi Character Enrichment Program

• Saudi Character

Enrichment Program

• Once the initiatives of the Saudi Character Enrichment

program are further detailed, possible trade-offs and

interdependencies should be reassessed.

There is no scope overlap identified

with the Dhuyuf Ar Rahman VRP.

However, the program does have

some initiatives with privatization

elements, which may require support

from NCP

• Dhuyuf Ar Rahman

Program

• Once the initiatives of this VRP are further detailed,

possible trade-offs and interdependencies should be

reassessed.

43


A. Initiatives Portfolio

B. Selecting Game-Changers

5 Privatization Program Initiatives

Portfolio and Timeline

44


45


Privatization Program Initiatives Portfolio and Timeline

A. Initiatives Portfolio

The Privatization Program’s ambitions, commitments, strategic pillars and strategic considerations have

been translated into a number of initiatives aiming to achieve the program commitments. These initiatives

also constitute a base on which the aspirations of Vision 2030 shall be achieved.

The current initiatives that have relevance to the program commitments have been reviewed and linked to

the strategic pillars. 100+ privatization initiatives were reviewed on criteria such as maturity of the initiative,

potential impact and transformational character as well as likelihood of immediate success, to create

momentum and visibility of action. As a result, 30 key initiatives were identified:

For Pillar I (Establishing the legal/regulatory basis), 2 key initiatives have been identified.

For Pillar II (Establishing the institutional basis), a total of 5 key initiatives have been identified.

For Pillar III (Steering the sector privatization program), a total of 23 key initiatives have been

identified.

As expected, adding new initiatives will require further study and analysis before they can be included in

the Privatization Program.

.

46


Initiative

No.

Strategic

pillar

Initiative

name Sector

Leading

entity Description

Expected impact by

2020

Program metrics

impacted by the

initiative

1

Pillar I

Develop

ment of

the

general

legislative

framewor

ks for

privatizati

on

All

sectors NCP

Issuance of rules,

procedures and

controls/frameworks to

enable the privatization

process and develop its

governance by the Council

of Ministers’ decision No.

(665).

Develop a draft law on

privatization to address the

obstacles and gaps facing

the privatization process.

Conduct a study to identify

the most regulatory

barriers contained in the

relevant laws and

regulations. This initiative

forms part of the first

strategic pillar

(“establishment of legal

and regulatory

basis/framework”)

Enabling the

privatization processes

and its governance,

thereby enhancing

opportunities of

implementation,

attractiveness of

opportunities to the

local and international

private sector and just

transactions. This is a

pull factor of new

investments to the

privatization targeted

sectors.

All - due to the

pre-requisite

and enabling

character of the

initiative

2 Pillar I

Develop

ment of

the

legislative

framewor

ks in the

targeted

sectors

for

privatizati

on

All

sectors PSCs

PSCs will review the

legislative frameworks

which regulates the sector

(sector’s processes,

relations with other

working entities, sector’s

structuring) therefore,

assessing these

frameworks in the light of

the situation of the


sector after the processes

of privatization and

working on developing

them in accordance with

the established regular

Increased

attractiveness of

investment to the


sectors through clarity

and justice of

regulatory

environment that will

regulate the

operational processes

in the privatization

targeted sectors after

the privatization

process (this includes

the clarity of the

market structure,

pricing, competition

All - due to the

pre-requisite

and enabling

character of the

initiative

47


procedures (law proposal,

executive regulations

amendments).

This initiative forms part of

the first strategic pillar

(“establishment of legal

and regulatory basis”)

and consumer

protection).

3

Pillar II

The

develop

ment of

the

“Opport

unity

Explorer”

structural

mechanis

m

All

sectors NCP

This initiative aims to

facilitate the process of

identifying opportunities

for PPP and sale of assets

(SOA) projects. A Structural

mechanism development

and opportunities

identification of potential

projects of PPP and SOA.

This mechanism can be

designed in such a way that

ensures through it that the

initial survey study

replaces the pre-feasibility

study. This will reduce the

burdens (costs) resulting

from pre-feasibility studies.

This mechanism, also, will

include specific initial steps

in cooperation with

governmental respective

bodies which will help

enhancing the business

base that will be

discovered.

Enhancing the

expected benefits from

the privatization

program and that’s

through detecting new

opportunities to help in

the achievement of the

program’s

requirements and

ambitions.

All - due to the

pre-requisite

and enabling

character of the

initiative

4

Pillar II

Privatizati

on

Innovatio

n Center

All

sectors NCP


developing models and

ideas that will help in

elevating the anticipated

benefits from privatization

processes, where the

options of structuring the

privatization process will

be examined while taking

into consideration of

adopting new structures to

Examining the

contribution of

maximizing the

anticipated benefits of

the privatization

targeted sectors

through innovative

models

in opening the doors to

SMEs and reinforcing

of local content.

All - due to the

enabling

character of the

initiative

48


the local applications in

case proven to be feasible

in achieving additional

benefits as compared to

others.

5

Pillar II

Operatio

nalize

PSCs and

ETs

(working

teams)

All

sectors PSCs


operationalize the

governance and operating

model related to the

Privatization program,

particularly, PSCs and ETs

(working teams) that is

required to steer the

privatization program and

execute it in different

sectors. This initiative

forms part of the second

strategic pillar

(“establishment of

institutional basis”)

Identifying the

operating and

governance model

required to activate/

operationalize the SCs,

working teams and

other actors/parties for

distributed and clear

roles regarding the

privatization processes

to elevate the

implementation of the

operational level and

studies necessary for

the privatization

processes.

All - due to the

enabling

character of the

initiative

6

Pillar II

Developi

ng

privatizati

on

strategies

for the

targeted

sectors

All

sectors PSCs


define clear sector-specific

privatization strategy and

privatization incentive

mechanisms to accelerate

privatization. This initiative

forms

part of the second strategic

pillar (“establishment of

institutional basis”)

Due to identifying clear

sector-specific

privatization strategy,

each of the committees

(PSCs) will be able to

complete the

privatization process in

its sector more

effectively.

Consequently, the

economic and social

value resulted from the

privatization initiatives

in various sectors will

be maximized.

All - due to the

enabling

character of the

initiative

7 Pillar II

Empower

ing NCP /

NCP

enableme

nt

All

sectors NCP


enable NCP to

effectively steer the

privatization efforts

across the overall

ecosystem (Ministries,

PSCs and Execution

Maximize NCP’s efforts

through identifying

specific strategy and

operating model to

streamline

stakeholders’

interactions and

All - due to the

enabling

character of the

initiative

49


Teams) by updating

NCP's strategy and

operating model and

develop the required

capabilities

benefit from NCP’s

expertise.

8 Pillar III

Attract

private

investme

nts to

finance

the

establish

ment of

education

al

buildings

Educatio

n

The

Compet

ent

Committ

ee

(special

operatio

nal/

executiv

e

committ

ee or

SC)

This strategy aims to

reduce the financial burden

on the government by

introducing alternative PPP

financing models for public

schools. This initiative

forms

part of the third strategic

pillar (“

Steering the main

initiatives of the

privatization program”)

and falls under the

education sector.

-

This initiative will lead

to follow the

partnership system

with the private sector

in construction,

maintenance and

transfer the property of

government schools.

- The investments of

the private sector in

capital expenditure will

reach billions of riyals.

-Total number

of PPP

investments

- Total value of

PPP investments

- Government

savings from

privatization

9 Pillar III

Operate

public

schools

under the

name of

“indepen

dent

schools”

Educatio

n

PSCs


enhance learning

outcomes at selected

public schools through

independency (thus, it is

called “independent

schools”); This initiative

forms


pillar (“

Steering the main

initiatives of the


and falls under the

education sector.


transfer a small

number of public

schools to enhance

learning outcomes

create more jobs ,

lower the

government’s

expenditures while

retaining MOE role.

-Total number

of PPP

investments

-Total value of

PPP investment;

- Government

savings from

privatization

- New jobs

created

10 Pillar III

Ports

corporisat

ion

(Game-

changer)

Transpo

rtation

PSCs


refresh the governance and

the strategy masterplan of

the Ports sector to prepare

it for corporatization and

privatization. This initiative

forms

-Cumulative

government savings;

Raising the value of

these ports

significantly by 2030.

-Total number

of government

entities

privatized

- Total

government

proceeds from

assets sales

50



pillar (“

Steering the main

initiatives of the


and falls under the

transportation sector.

- New private

sector jobs

created

11 Pillar III

Enhance

transport

ation

system

Transpo

rtation PSCs

. Detailed study to identify

specific elements of this

initiative which will

contribute to the

transportation sector in

general.

This initiative forms


pillar (“

Steering the main

initiatives of the


and falls under the


- government savings

in capital and

operational

expenditures.

-

- Government

savings from

privatization

- New private

sector jobs

created

12 Pillar III

PPP for

new

medical

center of

Saudi

Medical

Services

(SMS)

Transpo

rtation PSCs

The initiative is PPP to

create a new medical

center in Jeddah and that’s

part of the larger

privatization program of

Saudi Medical Services.



pillar (“

Steering the main

initiatives of the


and falls under the


Creation of new jobs,

reduction of Saudi

Group healthcare cost

and achievement of

attractive financial

proceeds/revenues

-Total number

of PPP

investments

-Total value of

PPP investments

- Government

net savings from

privatization

- New private

sector jobs

created

51


13 Pillar III

Enhance

transport

ation

system

Transpo

rtation

PSCs

. Detailed study to identify



contribute to the


general This initiative

forms


pillar (“

Steering the main

initiatives of the


and falls under the


-Reduce the burdens of

the government’s

expenditures

-Engage the private

sector to bear

operational and capital

expenditures

- increase the

efficiency and improve

the level of services

provided to the public

–

Total number of

PPP investments

- Total value of

PPP investments

14

Pillar III

Enhance

transport

ation

system

Transpo

rtation PSCs

Detailed study to identify



contribute to the


general. This initiative

forms


pillar (“

Steering the main

initiatives of the


and falls under the

transportation sector

The initiative is

expected to contribute

in achieving the

accumulated

government’s proceeds

by 2020

- Total

government

proceeds from

assets sales

- New private

sector jobs

created

15

Pillar III

Enhance

transport

ation

system

Transpo

rtation

PSCs

Detailed study to identify



contribute to the


general. This initiative

forms


pillar (“

Steering the main

initiatives of the


and falls under the

transportation sector

The initiative is


in achieving the

accumulated


by 2020

-Total govt.

proceeds from

assets sales

- New private

sector jobs

created

- Government

net savings from

privatization

52


16 Pillar III

National

Renewabl

e Energy

Program

Energy

industry

and

minerals

PSCs

This initiative represents

PPP and aims to enable

production of energy from

renewable sources through

PPP programs. This

initiative forms


pillar (“

Steering the main

initiatives of the


and falls under the power

sector.

The initiative is


in achieving

cumulative savings in

energy costs by 2020

and creating jobs from

developing and

operating power

plants.

-Total number

of PPP

investments

-Total value of

PPP investments

- Government

net savings from

privatization

- New private

sector jobs

created

17 Pillar III

Privatize

productio

n sector

of SWCC

(Game

Changer)

Environ

ment,

Water

and

Agricult

ure

PSCs

This initiative aims to the

privatization of Saline

Water Conversion

Corporation (SWCC)

production sector through

sales of existing assets in

Ras Al-Khair and

establishment of new

entities through the

partnership with the

private sector. By the year

2020, the first step will be

the sales of assets in Ras Al-

Khair. This initiative forms


pillar (“

Steering the main

initiatives of the


and falls under the water,

environment and

agriculture sector.

By 2020, the Ras Al-

Khair Desalination

Plant will be privatized

and the assets of other

productions will be

studied for

privatization to achieve

capital and operating

savings for the

government.

-Total number

of govt. entities

privatized

- Total govt.

proceeds from

asset sales

- Government

net savings from

privatization

-New private

sector jobs

created

18 Pillar III

Privatize

KFSH&R

C to a

non-

profit

organizati

on

Health

PSCs

, KFSH & RC will start

aiming to be transformed

to a company owned fully

by the General Org. in

preparation to be a non-

profit organization. The

aim is to

Achieving government

savings and progress

in specialized

healthcare and medical

research, as well as

improving the patient

experience

Government net

savings from

privatization

53


corporatize KFSH&RC in

order to prepare for

privatization, become

financially independent

and a role model in the

health sector and help in

achieving its leadership

position through focusing

on innovation. This

initiative forms


pillar (“

Steering the main

initiatives of the


and falls under the health

sector.

19 Pillar III Primary

care PPP Health

PSCs

Update and expand

primary care across KSA in

partnership with the

private sector to establish

new centers specialized in

primary care by the year

2020. This initiative forms


pillar (“

Steering the main

initiatives of the



sector.

Achieving capital and

operating savings for

the government;

creating new jobs and

improving the patients’

experiences by the year

2020.

-Total number

of PPP

investments

-Total value of

PPP

investments

-Government

net savings from

privatization

- New private

sector jobs

created

20 Pillar III

Hospital

commissi

oning and

medical

city PPP

Health PSCs

Number of beds will be

operated in the hospitals

assigned to the private

sector; medical cities will

be established by 2020.



pillar (“

Steering the main

initiatives of the



sector.



the government;


improving the patients

experience by the year

2020.

-Total number

of PPP

investments

-Total value of

PPP

investments

-Government

net savings from

privatization

- New private

sector jobs

created

54


21 Pillar III

Extended

care

(Rehabilit

ation and

Long-

term

care) PPP

Health PSCs

PPP will help in providing

rehabilitation beds, as well

as beds for long- term care

across the Kingdom by



pillar (“

Steering the main

initiatives of the



sector.



the government;


improving the patients’

experiences by the year

2020.

-Total number

of PPP

investments

-Total value of

PPP

investments

-Government

net savings from

privatization

-New private

sector jobs

created

22 Pillar III

Radiology

PPP

Health

PSCs

Update and expand

Radiology across the

country in partnership with

the private sector in order

to respond to higher

requests by the year 2020.



pillar (“

Steering the main

initiatives of the



sector.



the government;




2020.

- Total number

of PPP

investments

- Total value of

PPP

investments

-Government

net savings from

privatization

-New private

sector jobs

created

23 Pillar III Laborator

y PPP Health

PSCs

Update and expand

Laboratory across the

country in partnership with

the private to respond to

more requests by the year



pillar (“

Steering the main

initiatives of the



sector.



the government;




2020.

- Total number

of PPP

investments

-Total value of

PPP investments

-Government

net savings from

privatization

- New private

sector jobs

created

24 Pillar III

Privatize

services

of 35+

Labor

and

Social

PSCs

This initiative is all about

PPP /Operate and manage

35+ selected rehabilitation

centers to provide world

This project is to

improve services: and

provide better care,

serve a greater number

-Total number

of PPP

investments

55


rehabilita

tion

centers

Develop

ment

class diagnosis, treatment

and care services. The

initiative forms


pillar (“

Steering the main

initiatives of the


and falls under the social

development sector.

of patients and expand

services to home-care.

One of the secondary

effects anticipated is

improving operational

efficiency since these

centers will be

managed and operated

by service providers

from the private sector.

-Total value of

PPP investments

-Government

net savings from

privatization

- New private

sector jobs

created

25 Pillar III

Parking

PPP/

Privatizati

on

Municip

ality

PSCs

Privatize parking to tackle

the economic and social

detriments caused by

growth in car ownership

while achieving

operational net result. The

initiative forms


pillar (“

Steering the main

initiatives of the


and falls under the

municipality sector.

The program is

expected to generate

government

proceeds/revenues and

savings; jobs. The

indirect effects include

decrease of traffic jam,

promotion the safety of

passengers, reduce the

percentage of pollution

-Total number

of government

entities

privatized

- Total

government

proceeds from

asset sales

-Government

net savings from

privatization

-New private

sector jobs

created

26 Pillar III

Waste

Recycling

Plant PPP

Other

PSCs

PPP model for the

construction of a waste

management plant (Pilot).

The initiative forms


pillar (“

Steering the main

initiatives of the


and falls under the


Achieving the

government’s savings

and creating jobs. The

other effects include

reinforcement of

people’s satisfaction

about the cleanliness

of the city and

reduction of the

percentage of

consumed natural

resources.

-Total number

of PPP

investments

-Total value of

PPP

investments

-Government

net savings from

privatization

- New private

sector jobs

created

27 Pillar III

MOMRA

asset

optimizati

on PPP

Municip

ality

PSCs

The initiative aims to

establish PPP deals on

prime vacant land owned

by MOMRA in order to

maximize land value added

for the ministry. The

initiative forms part of the

third strategic pillar (“

Achieving the

government’s savings

and creating jobs.

-Total number

of PPP

investments

-Total value of

PPP

investments

56


Steering the main

initiatives of the


and falls under the


-Government

net savings from

privatization

-New private

sector jobs

created

28 Pillar III

Privatize

four flour

mills

Environ

ment,

Water

and

Agricult

ure

The

specializ

ed

committ

ee

Sell the milling assets to

four private sector players

to improve product quality,

operational efficiency,

operational technology,

and raise human capital

level

Achieve the


and savings of the

operational

expenditures; elevate

operational efficiency.

-Total number

of government

entities

privatized

- Total

government

proceeds from

asset sales

- Government

net savings from

privatization

- New private

sector jobs

created

29

Privatise/

PPP Saudi

Post

services

Commu

nication

and

Informat

ion

Technol

ogy

PSCs

The initiative aims to

privatize the Saudi post

services in order to reduce

the financial burden on the

government. The

privatization takes place at

the same time in various

working units. This



Steering the main

initiatives of the


The model is under

study

Total number of

govt. entities

privatized

- Total

government

proceeds from

asset sales

- Government

net savings from

privatization

- New private

sector jobs

created

30

Pillar III

Privatize

Saudi

Sports

Clubs

Sports

The

supervis

ory

committ

ee of the

sports

sector

Privatize the Saudi

Professional League This



Steering the main

initiatives of the


and falls under the sports

sector.

Achieving


and operational

savings.

-Total number

of govt. entities

privatized

-Total govt.

proceeds from

asset sales

- Government

net savings from

privatization

- New private

sector jobs

created

57


B. Selecting Game-Changers

Notes:

Pillar I

Establish legal/regulatory basis. Pillar II Establishing the institutional basis Pillar III Steering the sector privatization program

Please note: The metrics linked to indirect objectives will be refined once the PSC’s have developed their sector-

specific strategies. Metrics will be updated at that time. The quantitative impact will be reviewed by the PSC’s in

line with the sector strategy and implementation roadmap.

A number of initiatives have been identified as game-changers based on their expected impact. All relevant

entities will seek to implement all the above-mentioned initiatives; however, the game-changers will receive

special attention from the leadership to ensure their successful completion.

Selection of game-changers is based on two aspects: Impact and ease of implementation, with priority given

to the expected impact on the program – both direct and indirect. The evaluation results are detailed in the

appendix. Below is the list of game-changers and their expected impact. Additionally, the details of the game

changers will be discussed in the section that follows.

Initiative name Description Reason for selection Expected impact

Pilla

r III

Ports

corporatization

Refresh the governance and the

strategy masterplan of the Ports

sector to prepare it for

corporatization

Strategic importance for KSA

(also in connection with VRP

"Position KSA as a global logistic

hub"); Potential impact of later

privatization

Savings and government

revenues and upgrading

services.

Privatize

production sector

of SWCC

Privatization of Saline Water

Conversion Corporation

(SWCC) production sector

through privatizing Ras Al-

Khair

Crucial step in rearranging the

water industry and increase

efficiency; Privatization will

result in important proceeds for

government

Savings and government

revenues and upgrading

services.

58


Initiative name Description Reason for selection Expected impact

The development

of the

“Opportunity

Explorer”

structural

mechanism

This initiative aims to facilitate

the partnership opportunities

between the two sectors, a

systematic approach will be

created for potential cooperated

projects between the public and

private sectors, this approach

could be designed to maintain

the initial survey and replace the

feasibility study, cooperating

with the related government

bodies.

Opportunity detector is chosen

to develop the suggested

projects and determine the best

partnership initiative

opportunities between the

public and private sector.

Enhancing the expected

outcomes and increasing the

potential objective

achievements opportunities

Note: The privatization initiatives are now based on the National Transformation Program 2020. Privatization projects have been

allocated in cooperation with relevant authorities according to specific criteria. The pivotal initiatives have been identified due to their

high impact and specific criteria such as readiness and sector needs. On the other hand, a mechanism will be put in place to list a complete

list of all assets and to clarify the initial identification mechanism in coordination with the relevant authorities, including non-target

sectors.

59


60


6 Risk Mitigation and Required Actions

61


62


Risk Mitigation and Required Actions

The execution of the VRP may be interrupted due to several risks, which should be mitigated going forward. To effectively mitigate

these risks, Privatization VRP program will require active support from SMO/CEDA in terms of quick resolution of escalations and

enforcing decisions taken regarding respective entities (e.g. PSCs, other VRPs).

Risk #1 • Limited liquidity in KSA financial ecosystem that are ready to participate in PSP projects

Potential impact • High

Description • Privatization and PPP initiatives’ success depends on the ability and willingness of the private

sector to invest in them. Since KSA offers many investment opportunities, privatization initiatives

might suffer from liquidity shortage

Type • General: since the liquidity scarcity issue is structural in the KSA ecosystem, the risk can impact

transversally the VRPs requiring private investments

Risk mitigation measures

• Maintain privatization initiatives open to the international markets, to diversify capital inflows

whenever sensible. Privatization investment attractiveness may be relatively higher in the

international market. International equity and debt capital markets can therefore be leveraged to

fund KSA privatization initiatives (if required, define additional financial de-risking measures -)

• Consider phasing privatization efforts to avoid liquidity scarcity

• Ensure implementation according to international best practice (i.e. bankable transactions) to

increase international funds participation (i.e. debt and equity)

Entity responsible for the

measures

• PSCs and ETs for taking the right strategic decisions to ensure attractiveness for the private sector.

NCP and FSD VRP supporting by sharing best practices and advice

• Timeframe to implement

these measures

• Privatization-specific measures: to be implemented case-by-case, depending on initiative-specific

timeline and context

63


Risk #2 • Changes in market conditions

Potential impact • Critical

Description • The current estimations on privatization impact are based on informed assumptions. The market

conditions at the time of transaction might be very different and, as such, impact the outcomes of

privatization.

Type • General: the risk can impact transversally all VRPs

Risk mitigation measures

• Plan the process well in advance and produce detailed studies in order to identify hedging

strategies and reduce uncertainty

• Identify ranges of expected valuations / proceeds based on best case and worst-case scenarios

• Report timely to NPC and CEDA key market trends and their impact on current initiatives

underway

• Ensure implementation according to international best practice (i.e. bankable transactions) to

increase international funds participation (i.e. debt and equity)

Entity responsible for the

measures

• PSCs for planning and studies definition

• PSCs and ETs for impact sensibility analysis

• PSCs for market trends reporting

Timeframe to implement

these measures • Measures to be implemented case-by-case, depending on initiative-specific timeline and context

64

Documents

NCP Delivery Plan English Review Version-V3 Taghreed · National Center for Privatization and PPP (NCP) Enablement: NCP will work on developing or proposing frameworks that will enable