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Foreign investment allowed in Saudi airport privatisation

Foreign companies will be allowed to invest in the privatisation of Saudi Arabia's airports without the need for local partners, and local investment will be capped to encourage overseas investment, Reuters said07 Jan 2016

Aviation regulator Faisal Al Sugair, vice-chairman of the General Authority of Civil Aviation (GACA) told reporters in Riyadh that "all international companies, operators, who are qualified, can participate... there is no requirement for a local partner, that's up to the companies", Reuters said.

Local investment in some airports will be capped at 25% to make sure that foreign investors have a majority holding, Al Sugair said, according to Reuters.

The country's international and domestic airports will be privatised by 2020, and some will be 'corporatised', or restructured to operate like a private company, in advance of the privatisation process, Reuters said.

Riyadh's King Khaled international airport will be changed to a corporate structure in the first quarter of this year, Al Sugair. The airport's newest terminal, Terminal 5, will be run as a concession by the Dublin Airport Authority until the rest of the airport is ready for privatisation, Reuters said.

Dammam's King Fahd international airport will be corporatised in the third quarter of 2017, before being privatised, while Saudi Arabia's biggest airport, the King Abdulaziz international airport in Jeddah, will be run as a concession by a, international operator, the news agency said.

The airport privatisation plans were announced in November. The Saudi Arabian government is also believed to be considering significant cuts to its capital spending plans for 2016, as it reacts to the impact of low oil prices.

Saudi Arabia is likely to post a budget deficit of almost 20% of gross domestic product this year, according to the International Monetary Fund (IMF).

The fiscal and current account balances in the Gulf Cooperation Council region are "deteriorating sharply, with the fiscal balance projected by the IMF to be in a deficit of 12.7% of GDP in 2015," IMF managing director Christine Lagarde said recently.

"This is very tangible evidence that the Saudi Government is serious about ensuring the private sector and the international community have a very real opportunity to inject their expertise and capital into the development of the Saudi economy," said infrastructure expert Sachin Kerur of Pinsent Masons, the law firm behind Out-Law.com. "The motives are clear and this is a sign of the government taking some bold and important steps."