The Privatization Program of Saudi Arabia’s Vision 2030 sets forth objectives for privatizing assets in economic infrastructure and social infrastructure. One of the key drivers for privatization at the national level is a targeted improvement in service quality and reduction in government spending while improving quality of life for citizens. The government is open to various forms of private sector investment such as full/partial assets sale, IPOs, management buyouts, public private partnerships (PPPs) and outsourcing.
As part of this vision, the development of the Kingdom’s water and wastewater sector through private sector participation builds on water policies, notably the National Water Strategy 2030 and the latest long-term supply demand forecast of the Ministry of Environment, Water and Agriculture (MEWA).
The private sector will play a key role in ensuring that the Kingdom can meet the increasing demand for potable water and wastewater infrastructure. Already, contracts worth millions of dollars have been awarded through various water and wastewater schemes, and more awards and tenders are expected to be released over the period of next five years (2021-2025).
The Saudi Water Partnership Company (SWPC), an entity fully owned by the Ministry of Finance and charged with overseeing the PPP development of desalination and wastewater projects, has emerged as one of the leaders among PPP grantors in the GCC region. SWPC’s privatization model is uniquely suited for infrastructure sectors as evidenced by its successful application in the Kingdom. The success in tendering independent water project (IWP) and independent sewages treatment plant (ISTP) assets demonstrates that the model attracted local and international investors interest with the necessary levers in place, including public sector capacity for tendering, risk mitigation mechanisms and the appropriate incentives.
The Vision 2030 privatization targets would require similar or larger investment volumes in other sectors including economic and social infrastructure sectors of the Kingdom. The lessons learnt from SWPC’s experience can provide important insights into incentivizing private investment in traditionally government-operated services. Effective procurement governance and contract frameworks appropriate for assets or asset bundles will deliver low-cost capital, affordability, efficiency, availability and service quality.
This report covers the key success factors and the role played by SWPC in the success of PPPs in Saudi Arabia’s water and waste water sector.
