Saudi public-private partnerships worth billions

Qiddiya

• Kingdom reveals 200 projects seeking private investment
• Projects include airports, transit and water treatment and storage
• PPP involvement in health sector also on rise

Public-private partnerships in Saudi Arabia are driving the kingdom’s economic growth and diversification plans.

A pipeline of 200 projects spanning 17 sectors, involving more than $50 billion in investment, have been approved by Saudi Arabia’s National Center for Privatization and PPP (NCP).

Projects include four airports, seven desalination plants, six wastewater treatment plants, 10 strategic water reservoirs and a transit-oriented development project in Makkah.

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A further 300 projects are being evaluated.

Mohammed Al-Jadaan, Saudi minister of finance and chairman of the board of NCP, said previously that, over the last five years, the kingdom has privatised 30 projects.

Sarah Al-Shawwaf, senior vice president of Albright Stonebridge Group, described the latest list as a “major step forward for Saudi Arabia’s privatisation programme”. 

“Healthcare and education are especially high priority sectors for privatisation,” Al-Shawwaf added.

In October last year it was revealed by minister of health Fahad bin Abdulrahman Al-Jalajel that Saudi was to offer more than 100 projects over the next five years through PPPs.

These were worth almost SAR48 billion ($12.8 million), according to a report by Saudi Press Agency.

They included developing and operating two medical cities in the north and south of the country and setting up and operating a 900-bed hospital to provide medical rehabilitation and long term care services.

Phil Hanson, partner at professional services firm Herbert Smith Freehills in Dubai, said the Saudi health sector had traditionally been regulated and run by the goverment through funding and the provision of healthcare services. 

“With the privatisation initiative the government role will be limited to governance and regulation, while the private sector will be dedicated to investment and development of this critical sector,” he said.

2030 giga-projects

Saudi Arabia has launched a swathe of giga-projects as the kingdom accelerates activity towards achieving its Vision 2030 economic diversification goals.

The value of giga-project related contracts awarded in 2022 grew by 103 percent to $24.6 billion from $12 billion the previous year.

In September last year real estate consultancy firm Knight Frank described Saudi Arabia as the biggest construction site the world has ever seen on the back of the number of real estate and infrastructure projects under way since the launch of Saudi Arabia’s National Transformation Plan in 2016.

“The PPP model has become increasingly significant for many countries in achieving their infrastructure and development goals,” said Nico De Koning, Belgium-based construction group Besix’s head of PPP tenders and assets management.

Besix, which previously worked on Dubai’s Burj Khalifa tower, is involved in a number of PPP projects across the GCC.

NCP was established in 2017 as part of the kingdom’s Vision 2030 plans, to encourage investment in the country.

Total inward investment into the kingdom last year was $7.9 billion, data released by the Saudi Central Bank in late February shows, making it the second highest annual figure since 2016.

Amro Al-Ahmar, associate at Herbert Smith Freehills in Dubai, said: “The PPP framework is still relatively young – the Private Sector Participation Law only came into effect in the past year and a half – and it is yet to be seen how consistent its application will be across PPP projects. 

Al-Ahmar added that PPP needs the private sector to have “appropriate levels of control”, which has not always been the case in Saudi projects, as the public sector often had stringent oversight of projects.

PPP initiatives are becoming more commonplace across the Gulf. On Tuesday Dubai Municipality announced it had launched a new platform that showcases investment opportunities for the private sector valued at approximately AED576.3 million.

The platform will enable private sector investors to submit proposals for joint projects with Dubai Municipality or apply to take advantage of existing collaborative investment opportunities, the UAE’s state-owned news agency WAM reported.

Plenary Group, the Australia-based investor, developer and manager of public infrastructure with assets under management worth more than $45 billion, is expanding its Middle East operations and has projects in the UAE and Bahrain in its sights.

The company has opened its second office in the UAE, in Dubai, just months after launching in Abu Dhabi, and sees significant potential for PPPs in the region.