Layan Damanhouri
JEDDAH – As oil prices are likely to continue to remain low in the coming years, Saudi Arabia seeks to diversify the economy through public-private partnerships (PPPs) as a way to promote economic growth under the National Transformation Plan. This was disclosed at the ongoing Jeddah Economic Forum when discussing the global economic slowdown and future prospects for the Saudi economy, particularly in its role in public private partnerships.
“Saudi Arabia needs to be vigilant in the development of the private sector,” said Ibrahim Al-Ghelaiqah, senior economist of the macroeconomic and fiscal management at the World Bank.
In order for PPPs to be viable, he said, a public investment management system is needed through diversification, privatization, and promoting small and medium enterprises.
Oil prices are expected to range at a low rate between $30 and $50 a barrel in the next 5 years.
“A huge amount of investment is needed,” he further said. “We need PPPs because the fiscal policy framework won’t work anymore. The government transformation program cannot really produce any meaningful aspects unless we have economic fundamentals on solid ground.”
Experts further discussed the need for having an attractive market for investors. Chairman of PPP Experts Anthony Smith said the market needs to be attractive where investors look for profitability and a secure model. Only 49 economies are currently doing business with Saudi Arabia.
There is a high level of mistrust from the private sector toward the public sector, he further said, indicating it’s a major obstacle to achieving successful partnerships between the two parties. Institutional and legal frameworks are crucial to solve this issue and allowing the private sector to grow.
Shifting Saudi nationals toward working in the private sector is crucial to have a more sustainable model, he added, where “unlike most countries, Saudi Arabia has a majority of nationals working in government jobs.”
Speaking to Saudi Gazette on the sidelines of the forum, CCO of King Abdullah Economic City Fahad Humaideen said the level of mistrust is evident. “In the evolution of PPPs, you need to learn how to establish true partnerships by offering trust, being trustworthy, being transparent, communicating and willing to receive feedback.”
KAEC, considered the only publicly-listed city in the world has the largest infrastructural projects by the private sector. Where it is common for private sector players to be suspicious of government bodies in arbitration, equal rights in a judicial system is needed, he added.
Entrepreneurs and SMEs need to be further promoted and included in partnerships for an achievable PPP environment, said Gilberto Crombe, global chairman of Entrepreneur Organization, who urged the creation of a committee composed of policymakers, government, management of government, entrepreneurs, and big company leaders in agreeing on “a clear strategy and work together in accountability.”
Factors that have hindered partnership between the public and private sectors include delay in payment for projects, lack of skills in the workforce, an inefficient regulatory system, and ineffective communication between the government and the private sector.
