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Saudi Arabia Privatization Push Slows

King Khaled International AirportKing Khaled International Airport

Saudi Aramco may have grabbed the biggest headlines, but the oil giant’s delayed initial public offering is just the latest sign of Saudi Arabia’s further slowing privatization push.

The program is part of crown prince, Mohammed bin Salman’s, Vision 2030 to transform the economy and envisages the sale of stakes in ports, railways, utilities and airports, AMEinfo reported.

When the government began to consider the plans almost three years ago, Brent crude traded at less than $40 a barrel. With oil prices now twice as high, there seems to be less urgency, even though the International Monetary Fund in July recommended privatization be accelerated.

News in August that the sale of shares in Saudi Arabian Oil Co. was on hold was the most dramatic suggestion that officials were taking their feet off the pedal.

“It is undeniable that the privatization schedule is running behind what was initially assumed,” said Jean-Paul Pigat, head of research at Dubai-based Lighthouse Research.

“I’m not sure there yet exists a coherent long-term strategy that actually finds the proper balance between the roles for the public and private sector in the economy, and until this is formulated, delaying the privatization program might actually be in their best interests.”

Saudi Arabia wants to boost non-oil revenues by selling stakes in state assets, including Aramco, the stock exchange and soccer clubs. It set up the National Center for Privatization in 2017.

Privatizations could exceed $350 billion in about five years, Mitsubishi UFJ Financial Group’s Middle East and North Africa co-head Elyas Algaseer said in August last year. In April, authorities put forward a target of as much as 40 billion riyals by 2020 ($11 billion).

Among proposed transactions yet to be completed are plans to sell a stake in King Khaled International Airport, which are on hold, according to two people familiar with the process. The sale of the $7.2 billion Ras Al Khair power plant is also yet to be done. BNP Paribas was hired to advice on the deal in September last year.

While the delays aren’t likely to hurt the economy in the short-term, they raise questions about the government’s commitment to reform and whether its targets were realistic.

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