Saudi Arabia seeks input on draft private sector participation law

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Saudi Arabia seeks input on draft private sector participation law

ANALYSIS: Businesses should welcome plans outlined by the Kingdom of Saudi Arabia to boost private sector involvement in major projects.01 Aug 2018

On 8 July, The National Center for Privatization & Public Private Partnership (NCP) published a draft 'Private Sector Participation Law' and issued a call for public comment. The consultation is open until 29 July. 

The draft law offers the promises of new project opportunities for businesses in the Kingdom, building on a number of recent developments in the traditional utility space – last year, for example, saw the launch of the 9.5GW REPDO renewable energy program, and this year has already seen the launch of a series of water and wastewater projects by the Water and Electricity Company (WEC). 

This is, however, just the start for the Kingdom with the stated desire, in line with the Saudi Vision 2030 plan, to increase private sector participation in 10 key sectors, those being: 

  • education
  • energy, industry, and mineral resources
  • environment, water, and agriculture
  • Hajj and Umrah
  • health
  • housing
  • labour and social development
  • municipalities
  • communication and information technology
  • transportation

Schools, hospital and transport public private partnerships (PPPs) are already under preparation for tender.

The proposed new law is aimed at supporting the development of PPP projects as well as the privatisation of state owned assets, such as the planned privatisation of Saline Water Conversion Corporation's (SWCC) assets. This is jointly defined in the draft law as Private Sector Participation (PSP) projects.

The proposed new law is a framework to be supported by more detailed regulations to be issued and working side by side with the Rules of Conduct of the Supervisory Committees, the Privatisation Projects Manual and the Rules Governing the Work of the Supervisory Committees, all which were issued earlier this year. 

The proposals include many of the typical provisions you would expect to see in a PPP law. These include a definition of the scope of projects which will fall within the remit of the law, the role of the government bodies responsible for implementing PSPs, tender procedures – with a clear requirement for transparency and avoiding monopolies – and, the main contract terms and dispute resolution procedures for PSP tenders. 

Supervisory committees comprised of relevant ministers and senior government representatives shall be established for each of the sectors. They have a central role in the implementation of PSPs, both forming work teams to prepare and tender projects, and also acting as principal body approving each stage of project implementation, with oversight from The Council of Economic and Development Affairs (CEDA). The NCP's role is principally one of enabler, providing assistance in formulating regulations, creating privatisation frameworks, and preparing government assets and services identified for privatization to ensure quality outcomes.

Importantly, the law as drafted would exempt PSP projects from the scope of the Government Tenders and Procurement Law, provides for the provision of government support, including guarantees, clarifies that PSPs shall not be considered administrative contracts, makes provision for unsolicited proposals, and enshrines the principle that foreign legal entities shall be entitled to the same treatment as national entities for the purposes of the Law and PSP contracts.

It expressly allows for the use of arbitration and exempts PSP contracts from the application of the provisions of paragraphs b, c, d and f of Article (13) of The Law of the Board of Grievances.  These provisions will be welcomed by private sector participants looking at the Kingdom. 

According to the draft law, the supervisory committees would be empowered to transfer employees and third party contracts, which is presumably aimed more at privatisation rather than PPPs, and have the power to amend and terminate PSP contracts, which will no doubt be subject to comment. We expect the law, when issued, to be welcomed by the private sector community.

Tim Armsby, Peter Blackmore of Pinsent Masons, the law firm behind Out-Law.com, and Ibrahim Al Ajaji of Alsabhan & Alajaji are finance and projects experts.