Riyadh reinvigorates reforms

07 June 2002

The Supreme Economic Council on 4 June approved a string of proposals reinforcing the kingdom's programme of economic reform. The main developments are the authorisation of a new services company for the hydrocarbon industry, the endorsement of conditions and principles for the involvement of the private sector in desalination projects, and the approval of an executive programme for the kingdom's planned railway project. The council also approved proposals to restructure the postal system to prepare it for privatisation.

'The council meeting approved the privatisation strategy which is composed of the objectives and policies of privatisation as well as its methods and regulations,' said Abdulrahman al-Tuwaijri, the council's secretary-general. The council, which is chaired by Crown Prince Abdullah, was set up in 1998 to oversee the reform programme.

The hydrocarbon services company will serve the oil, gas and petrochemical industries and associated utilities, and establish necessary support industries. It is to be a joint stock holding company set up with the participation of the government and the private sector. Petroleum & Mineral Resources Minister Ali Naimi outlined the proposal in April, saying the company would cover engineering, seismic surveying, drilling and the manufacture of products. The company is expected to attract investment in providing services for the gas initiative (MEED 3:5:02, Oil & Gas).

Progress in the reform of the water sector has taken a fresh step forward with the council decisions. The endorsement of standards and conditions for the participation of the private sector in desalination projects removes another obstacle to the development of independent water and power projects (IWPPs) in the kingdom. Several proposed IWPPs are expected to be tendered in the next two years, some of which may fall within the gas initiative.

The role of the Saline Water Conversion Corporation (SWCC) in the restructured sector has not yet been defined. However, it is understood to have submitted a privatisation study, prepared by US consultant McKinsey & Company, to its board of governors for approval. SWCC is expected to form joint ventures with private investors to develop IWPPs in the kingdom.

The Supreme Economic Council decision to approve the executive programme for the kingdom's planned rail network will allow preparations for a detailed feasibility study to move onto a faster track. A World Bank study has already been prepared for the project, which will involve the laying of new lines from Riyadh to Jeddah and the far north within the context of privatising the Saudi Railways Organisation.

Several Western companies are understood to be interested in the proposals, although final decisions remain to be made on the extent of government participation in financing the network. The most profitable line is expected to be that running to the extensive phosphate reserves in the north of the kingdom being developed by Saudi Oger and Saudi Arabian Mining Company (Maaden).

The restructuring of the kingdom's postal services is to be carried out through the transformation of the Saudi Post Authority and its reconfiguration as a public authority. The council said the restructuring would pave the way for postal services to be privatised. Significantly, the restructured body will draw on both the private and public sectors for the composition of its board.

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