Saudi issues draft law for public-private projects worth billions

Saudi Arabia has published a draft law covering partnerships between the government and private sector in a step towards launching billions of dollars worth of infrastructure projects and attracting fresh foreign investment.

The draft, revealed late on Sunday, offers investors exemptions from labour laws, real state ownership restrictions and other regulations.

The government’s National Centre for Privatisation and Public-Private Partnerships said it would accept public comment on the draft for three weeks, before promulgation of the law on an unspecified future date.

Riyadh announced in April that it aimed to generate SAR35bn to SAR40bn ($9bn to $11bn) of non-oil state revenues from its privatisation programme by 2020.

Some of that money would come from asset sales, while the rest would come from public-private partnerships (PPPs) – deals in which private companies invest in infrastructure and are paid to operate it for a period, before eventually transferring it to the state.

Authorities have been talking about PPPs for two years as a key way to diversify the economy beyond oil exports. But so far, there has been little actual progress because of the lack of a legal framework covering such projects.

Riyadh hopes to use PPPs to jump-start investment in school facilities, water desalination plants, transport infrastructure and other projects.

The draft law acknowledges that state employees may need to be transferred out of projects and that some companies may be exempted from meeting minimum requirements for the ratio of Saudi citizens in their workforces – key concerns for potential investors keen on minimising their labour costs.

Meanwhile, rules may be relaxed to let foreigners own real estate, except for properties in the holy cities of Mecca and Medina, according to the draft. Within Mecca and Medina, companies may lease real estate for limited periods, it adds.

The draft also permits bidders for PPP contracts to appeal awards by the government, an effort to increase transparency and attract a wide range of bidders.

Also on Sunday, the Ministry of Energy, Industry and Mineral Resources announced it had modified regulations to facilitate private investment in Saudi Arabia’s mining industries, the official SPA news agency reported.