Saudi- Vision 2030: Privatization push to support fiscal consolidation

(MENAFN- Arab News) JEDDAH: Saudi Arabia's National Transformation Program (NTP) will focus on restructuring various government agencies to make them better aligned to deliver on Vision 2030 and other national priorities. Identification of innovative administrative and funding approaches and opportunities for partnering with private sector are part of the program according to economists.
'We believe that the Vision 2030 document is comprehensive and outlines proposals which are designed to wean the economy away from dependence on oil. The emphasis is on privatization of state assets which will result in improved transparency also supporting the fiscal arithmetic at the same time. We believe the large caps which have ability to be the first entrants in areas potentially opening up to opportunities will be key beneficiaries' Al-Rajhi Capital's research team said in a recent report.
'The new vision for the Kingdom will throw up a number of opportunities for the private sector. We believe large cap companies like STC SABIC and Maaden are likely to benefit from the thrust areas of Vision 2030 document. This would set the stage for the Kingdom to emerge as a major economic powerhouse' said the researchers.
'The thrust on privatization will achieve multiple objectives of the Vision 2030 document. Apart from improving transparency and governance the proceeds from privatization will also aid the Kingdom's fiscal consolidation efforts over the medium term in our view' said the research team.
'We believe this is an important step and can open up significant opportunities for businesses as well as improve the efficiencies of such services in the long term. Further backed by privatization push and also regulation reforms the private sector's contribution is targeted to reach 65 percent of GDP (from 40 percent at present)' said the researchers.
To aid the Vision 2030's focus on improving the private sector's contribution strong capital markets will be crucial. Toward this end the Vision document lays required emphasis on developing the capital markets (both equity and debt markets) to make them more liquid and possibly introduce derivatives. This will result in a strong capital market backbone which opens up a key source of funding for companies said the report.
Emphasis has been laid on expanding the coverage and capacity of high-speed broadband especially targeting increased penetration within and around cities. Ninety housing coverage in densely populated cities and 66 percent in other urban zones is targeted according to the report.
'We believe the leading telecom providers are well-placed to benefit from the broadband push' said the research team.
According to the report Saudi Arabia aims to increase the share of non-oil exports from 16 percent to 50 percent of non-oil GDP. Following are some key milestones targeted:
* Increase non-oil government revenue from SR163 billion to SR1 trillion.
* Raise the non-profit sector's contribution to 5 percent of GDP from less than 1 percent
* To increase the localization of oil and gas sectors from 40 percent to 75 percent