Leveraging volume of contribution by private sector to the gross domestic product (GDP) of Saudi Arabia has been an imminent goal of the Kingdom. Infrastructure necessary for achievement of this goal has been implanted all over the newly adopted policies and measurements, in the recently enacted laws and regulations and in the majority of the modernization and reform initiatives recently done to several existing laws and regulations. The law reform has been effectively used as a tool towards leveraging of private sector contributions to the local GDP.
As one of the direct reflections of the Saudi targeting of increase of private sector contribution, privatization of public utilities operation burdens to be done through private sector channels is a plan that can not be missed. The tendency is not a matter of improvisation, the Saudi attitude towards more demand on private-public-partnership patters was a result of numerous studies and planning that altogether have recently materialized into a strategic end. The strategy was clearly engraved into the second part of the Saudi 2030 Vision literature ‘A Booming Economy’, with privatization has been named as one of the Vision’s achievement programmes.
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What has been previously written is not a matter of scattering words onto some sheet, but rather a fact that is witnessed in several privatization initiatives today, with many other projects are already in action, and several other projects are to be introduced in the foreseen future.
The opportunity offered to local and foreign investors is really huge, and for those interested -whether a public or private sector player- this article is focal as it sheds light on the main law references having essential connection with the privatization regime of the Saudi Arabia.
By scanning the relevant legal framework components, laws that are relevant to privatization can be generally categorized into two groups of inherent characteristics. Matters listed under the first group are the laws that deal with the idea of ‘privatization in an abstract sense, without regard to nature, inherent sector and scope of the involved projects, while the second group focuses on the particular merits of nature, sector and scope of each privatization initiative.
Laws under this category address privatization generally without regard to the specific characteristics of each individual project. The main purpose of these laws is to control privatization projects -whether in form of a ‘private public partnership’ model or ‘transfer of publicly owned assets’ model- from a substantive and procedural point of view. It is noteworthy to mention that the term ‘laws’ and ‘framework’ do not solely refer to the first tier class of laws only as they also include sub-laws of second tier class (regulations and bylaws).
The prominent general laws under this category are the following:
The Privatization Law (PL) is the general law for privatization in the Kingdom. The PL is complicated and comprises of several aspects of substantive and procedural nature and function such as, inter alia, aspects having the function of giving, stating or illustrating the following:
The Privatization Rules give details on the various competencies and powers generally highlighted by the PL. The details include a subtle determination for the competences that have been generally addressed in the PL by specifying -following a clear-cut criterion- the official bodies having jurisdiction over the various duties assigned by the PL to the ‘Competent Authority’ and the ‘Executive Authority’ in respect of each privatization situation. The PR are therefore highly connected with the provisions of the PL in an integrative sense, and both should therefore be read together for a better understanding of the entire picture. The following is a practical example for the PL – PR inherent integrative relation.
Article 24 of the PL reads as follows: "The Private partner may -subject to attaining approval of the Competent Authority- be granted rights as to:
Hence, the PL’s Article 24 stipulates the substantive principle in clear terms, but the authority competent with the power to admitting such transactions remains missing and unmentioned. The PR fills up the gap left behind by the PL as it explicitly addresses this matter in Article 8 thereof by giving competence in this respect to the Ministry of Finance. The intersection between PL and PR is proactively noticeable and covers almost all the jurisdictional matters not explicitly indicated in the PL.
This category includes laws that are applicable to certain privatization projects of specific purpose or character; laws under this category do not a priori apply to all privatization projects but only to those falling within their radius. Factors of application are variable but normally include merits such as the nature of the related sector of the project, nature of the project itself, the public aims attached with the project, in addition to other merits of jurisdiction-attraction stipulated in each of these ad hoc laws.
For instance, in a privatization project for operating an inland public transport utility, the following ad hoc laws may be relevant and applicable:
Additional ad ho laws may fall under the ambit of this category pursuant to factors other than the factors of the project’s nature and inherent sector. Accordingly, the laws having relevance to expropriation of privately owned lands, duties and powers of municipalities, and constructions within territories of special regime (such as Mecca and Madinah Cities) may apply depending on the geographical location of the projects and nature of their land needs. Likewise, the laws of protection and relocation of public utility infrastructure would also be considered to encounter relocation of utility installations/fixations hindering development works on the project’s site.
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