|05 January, 2020

National Center for Privatization: Unlocking great value

The National Center for Privatization (NCP) was set up as the backbone of the privatization program in Saudi Arabia

An investor monitors a screen displaying stock information at the Saudi Stock Exchange (Tadawul) following the debut of Saudi Aramco's initial public offering (IPO) on the Riyadh's stock market, in Riyadh, Saudi Arabia, December 11, 2019.

An investor monitors a screen displaying stock information at the Saudi Stock Exchange (Tadawul) following the debut of Saudi Aramco's initial public offering (IPO) on the Riyadh's stock market, in Riyadh, Saudi Arabia, December 11, 2019.

REUTERS/Ahmed Yosri

Over the past three decades, the US, UK and other G20 governments have transferred ownership of state-owned businesses to the private sector in service-driven areas including airlines, railroads, postal services, electric utilities with the estimated value reaching approximately $4 trillion.

When talking about privatization, you always remember the impressive track record of the UK government. Margaret Thatcher came to power as prime minister determined to bring the sleepy British economy back to life with market-based reforms. It was privatization that became her most memorable economic legacy. The UK government sold many major businesses including British Airways, British Telecom, British Steel and British Gas and other household brands raising tens of billions of pounds.

Privatization is the transfer of ownership of specified assets or services from the government to the private sector. The transfer can be done in several forms — full or partial assets sale, such as the Saudi Aramco initial public offering, management buy-out, private public partnership, build operate and transfer, concessions or outsourcing.

The National Center for Privatization (NCP) was set up as the backbone of the privatization program in Saudi Arabia. It is one of the executive programs launched by the Council of Economic and Development Affairs to achieve the objectives of the Vision 2030 reform plan.

The NCP is responsible for developing an ecosystem and executing a framework for the privatization of government assets and services in different sectors ranging from energy to health care, education, transportation, airports, housing, municipalities, labor, technology, water and grain milling, among others.

It works closely with the privatization supervisory committees to identify, recommend, and oversee privatization opportunities across different sectors. The NCP’s mandate is to help create opportunities for national and international investors, providing employment opportunities for Saudi citizens and enhancing the quality of life for residents and visitors. The government is aiming to raise around $200 billion in the next several years through privatization programs.

In my opinion, for the privatization road map to be clearer, especially for foreign direct investors, two factors need to be identified. These are priorities in terms of sectors, and what type of regulations are to be applied. I am sure 2020 will witness a traffic of local and international investors approaching the NCP to prequalify and to explore how best to participate in future privatization transactions to unlock their great value.

Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.

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