Times of Oman
Saudi to open health, education sectors to full foreign ownership
August 26, 2017 | 5:09 PM
by Reuters
The Saudi government, seeking to diversify the economy beyond oil exports amid a slump in oil prices, told Reuters in April that it was launching a privatisation programme that would raise more than $200 billion. - Bloomberg file picture
 
Sharelines

Jedda: Saudi Arabia will allow foreign investors to take 100 per cent ownership of companies in its health and education sectors, the head of the Kingdom's investment authority told Reuters.

It is the latest move by the country to gradually ease ownership restrictions on foreign firms, which have previously been required to set up a joint venture with a local partner.

"We are opening up education centres to have ownership 100 per cent, all types of education even from primary school. This is something new for Saudi," Ibrahim al-Omar, governor of the Saudi Arabian General Investment Authority (SAGIA), said.

In the health sector, the ministry will "just be a regulator and not a service provider anymore", said Omar. This will open up $180 billion of investment opportunities in that sector over the next five years, he said.

He did not say when the relaxation on foreign ownership would come into effect.

The Saudi government, seeking to diversify the economy beyond oil exports amid a slump in oil prices, told Reuters in April that it was launching a privatisation programme that would raise more than $200 billion.

However, it has not so far clarified foreign ownership and operating rules in many sectors. Many private equity firms and other potential foreign investors say majority or full control of projects is important to allow them to cut costs and improve efficiency.

The government is studying whether to sell off all public hospitals and 200,000 pharmacies, and has begun the process for the King Faisal Specialist Hospital, Vice Minister for Economy and Planning Mohammed Al Tuwaijri said in April.

Meanwhile, the education ministry has hired HSBC as financial adviser for its plans to privatise construction and management of school buildings.

SAGIA's efforts to ease ownership restrictions for foreign firms in recent years have included opening the wholesale and retail sectors in 2015. This month it announced it would allow full foreign ownership of engineering services companies.

Saudi Telecom

Saudi Telecom Company is in the lead to buy the 55 per cent of fixed-line operator Turk Telekom owned by Oger Telecom, sources said, adding that the Turkish government could acquire the $3.9 billion stake if those talks fail. The potential deal comes as Oger, Turk Telekom's biggest shareholder, faces increasing pressure from creditor banks after missing debt repayments of $290 million in both September and March on a $4.75 billion loan.

Three sources said that Saudi Telecom Company (STC) is seen as the most likely buyer, with two of the sources saying that the Turkish government could consider using a public institution to acquire the holding if the talks fail.

"Currently only STC shows a clear interest in the acquisition," one of the sources said, adding that there are several interested Gulf companies but only STC has entered negotiations.

"The government may play an active role as a buyer with a public institution, in the case that STC does not buy," the source said, asking not to be identified because the information has not been made public.

No one was available to comment at Oger's offices in Turkey. STC declined to comment, as did Turk Telekom, while Turkish government officials were not immediately available for comment.

Oger is a unit of Saudi Arabian construction giant Saudi Oger, which itself is facing a multibillion-dollar debt restructuring. STC already holds an indirect 35 percent stake in Oger's Turkish arm.

The government, which ultimately holds nearly 32 per cent of Turk Telekom, wants the operator of the national telecoms grid to be owned by a financially stable company.

"Turk Telekom is a strategic and important company. It will not be left to its fate for sure. Public institutions would intervene when needed and this option is still a matter of consideration," another source said.

Oger's creditors want the sale to be completed by September to retain the loan's classification as "performing" and avoid an increase in bad loan provisions, another source said.

"If the debt is no longer a performing loan, banks will have to raise provisions and their profitability will be put under pressure," the source said. "Banks are meeting with independent auditors to keep this credit as a performing loan until the end of the year."

As part of a 2013 debt refinancing, Oger took out a $4.75 billion syndicated loan, one of the biggest ever in Turkey. However, it has struggled to repay the debt as the Turkish lira has been hammered by security concerns and political worries.

Since 2013 the dollar has gained about 86 per cent against the lira, nearly doubling the cost of the debt in local currency terms.

Oger's roughly 30 creditor banks include Turkey's Akbank and Garanti, with $1.5 billion and $951 million of exposure respectively. Isbank, Turkey's largest listed lender, has 1.9 billion lira ($532 million) of exposure.

Though the Turkish government has the final word on changes in Turk Telekom's ownership, Oger's creditors also have a say in any potential sale because it pledged the Telekom shares as collateral for the 2013 loan.

Turkey's Treasury sent Oger a written demand earlier this year after Oger failed to meet the two debt payments and asked the company to meet its debt obligations, Reuters reported last month.


STAY UPDATED
Subscribe to our newsletter and be the first to know all the latest news