Saudi Arabia PPP Update – Vision 2030 and the National Transformation Programme, Malaysian Economic Cooperation, and the New Saudi PPP Unit

King & Spalding
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King Salman Abdulaziz Al-Saud’s recently concluded 31-day trip to Asia saw Saudi Arabia and Malaysia sign a series of four memoranda of understanding (MOUs) relating to economic cooperation, trade, investment and human resources at a ceremony held in Kuala Lumpur on 27 February 2017. The MOUs are aimed at enhancing economic ties between the two countries.

Reports suggest that the key areas of investment include oil and gas, healthcare, construction and education. A new Malaysia-Saudi Joint Commission has been established to identify and improve understanding on trade and investment issues.

The agreements followed the flagship announcement by the Malaysian Prime Minister Najib Razak that Saudi Arabia’s state owned oil company, Saudi Aramco, would be investing US$7 billion into the Refinery and Petrochemical Integrated Development scheme being prepared by Malaysian oil conglomerate Petronas in the state of Johar, Malaysia.

The trading relationship between Saudi Arabia and Malaysia historically has been dominated by the import of palm-based produce and electrical goods into Saudi Arabia, and the export of chemicals, petroleum-based products, metals and plastics. The two nations hope that the recent accords will signal a new era in Saudi-Malaysian relations, and a move towards greater investment in strategic infrastructure projects in their respective states.

The King’s Asian tour and the efforts to enhance economic ties should be seen in the context of recent moves towards reducing Saudi Arabia's dependence on revenues generated by the sale of hydrocarbons and to proactively diversifying the Saudi economy.   The current economic and strategic objectives of the Saudi government are detailed in the “National Transformation Plan” and the “Vision 2030” strategy document released in April 2016. The organisation likely to shoulder much of the responsibility for delivering on the targets set out in the aforementioned publications is the recently established “National Centre for Privatisation” (NCP). The NCP is to act as the country’s public-private-partnership (PPP) “unit,” acting as the driving force behind the planning and oversight of PPPs in the Kingdom.

It has not gone unnoticed that the key policy areas addressed in the MOU with Malaysia correlate with those sectors identified in the National Transformation Plan and the Vision 2030 document as requiring increased investment and, in particular, as being prime targets for the expansion of PPPs.

Notably, the National Transformation Plan targeted the development of 9.5 gigawatts of renewable energy by 2030, with the interim target of 3.45GW of renewable energy power capacity by 2020. To achieve this aim, alongside modernisation of other sectors of the Kingdom’s infrastructure, the Saudi government is currently in the midst of procuring a range of infrastructure projects across multiple sectors including:

·       at least 8 Independent Water Projects (IWP) or Independent Water and Power Projects (IWPP) including a 1.5 million m3/day IWPP in Jubail, a planned 450,000 m3/day Yanbu IWP facility, a 380,000 m3/day IWP project at Shuqaiq, and the 600,000 m3/day Rabigh 3 plant;

·       two large sewage treatment plants, a 500,000 m3 Jeddah project and 270,000 m3 plant in Taif;

·       a 5,400 MW Independent Power Producer project procured by the Saudi Electricity Company;

·       a 300 MW solar photovoltaic plant in Sakaka at the An Nafud desert;

·       a 400 MW wind farm close to the site of the Midyan Saudi Aramco gas plant;

·       the privatisation of all 27 airports in the Kingdom by the General Authority of Civil Aviation;

·       a waste management PPP programme;

·       a healthcare PPP programme, including the privatization initially of up to 9 hospitals; and

·       an education PPP programme to encompass over 300 schools.

This strong project procurement pipeline, the country’s grand strategic plans, and the Saudi administration’s willingness to improve ties with strategic international markets indicate that Saudi Arabia will provide a range of exciting infrastructure and PPP opportunities for international investors in the coming years.

 

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