Saudi: SR200 Million Is Minimum Limit For Public-private Partnership Project
The minimum limit for a public-private partnership project shall be SR 200 million, according to the amended executive regulations of the Privatization Law. The regulations set the minimum value for the transfer of asset ownership projects at SR 50 million.
Saudi Arabia’s official gazette Umm Al-Qura published details of the amended regulations of the Privatization Law on Friday, after endorsing the amendments by the Board of Directors of the National Center for Privatization & PPP (NCP) on Dec. 31, 2023. The regulations consist of 169 articles, including the principles of privatization, the minimum value of the privatization project, and the criteria for applying the system to privatization projects.
While adopting the executive regulations of the Privatization Law, the Council stated that it was developed by taking advantage of international practices and local experiences in implementing privatization projects.
Article three of the regulations specifies the minimum value of the privatization project. It sets the minimum value for the transfer of asset ownership project at SR 50 million, based on the estimated value determined by the executive entity for the target assets.
It also stipulates that the minimum limit for a public-private partnership project stands at SR200 million. The limit is set based on the total nominal value expected throughout the project period, as estimated by the competent executive entity after considering each of the following elements, and ensuring that the minimum is met in any of them:
1- The capital and operational expenditures, including government-owned assets for which the private sector is granted any rights including ownership transfer, if applicable. 2– The potential financial obligations arising for the state treasury. 3 – The expected financial revenues that the government will receive.
According to Article three, the executive entity may combine multiple projects of similar nature in their scope and contractual structure to meet the specified minimum required under this article. If the minimum is not met, and the relevant authority sees the need to continue with the project related to infrastructure or public service, the regulations and rules related to that project will apply.
The provisions and regulations of the law shall apply to privatization projects offered or contracted by companies established or owned by the government, with a direct or indirect ownership of more than 50 percent of their capital. The purpose of establishing or owning such companies is to offer privatization projects.
As per the amended regulations, a company is deemed established or owned by the government for the purpose of privatization if it meets any of the following criteria:
1. The company is established with the approval of the relevant authority based on the privatization project document for the purpose of implementing the asset ownership transfer process.
2. The establishment or ownership of the company by the government is for the purpose of offering a project related to infrastructure or public services through privatization.
3. Companies wholly owned by the government whose establishment included the transfer of asset ownership related to public infrastructure by the government.
Article 5 of the regulations states that the privatization plan determines the list of assets and services proposed for privatization in the sector. It specifies the entity responsible for each privatization project. The competent entity shall identify public facilities and assets it manages or supervises, the public services it provides, the activities it engages in, and the capital and operational expenditures and their items in its budget.
This also includes its current and future capital projects. The entity evaluates each activity individually to determine the feasibility of assigning it to the private sector through privatization. The evaluation is based on various criteria, including the nature of the activity, sector targets, capital expenditures, quality and efficiency, cost, management efficiency, operations, funding feasibility, and previous experience.
According to the decision of the Board of Directors of the National Center for Privatization, the executive regulations of the Privatization Law will replace the Manual of Privatization Projects and the rules governing the work of the supervisory committees, their work teams, and their advisors, and a major part of the components of the overall regulatory framework for privatization, which includes the Privatization Law, the rules governing privatization, and the organization of the NCP.
The regulations specified the principles that must be taken into account in implementing projects, which are fairness, transparency, contract enforcement, planning and feasibility.
Saudi Arabia launched the privatization program in 2018 to focus on supporting the growth of the national economy, enhancing the role of the private sector, and identifying government assets, services and resources that can be allocated in a number of sectors. This is aimed to improve the quality and efficiency of the services provided, and reduce their cost to individuals and companies, as it targets developing many sectors such as transportation, health, education, municipalities, and others by enhancing the role of the private sector in providing services. The program encourages innovation and transformation, contributes to the development and diversification of the Saudi economy, and provides many opportunities for citizens.
