Reconstructing the Private Sector

27 November 2016

By Abdulrahman Al-Rashed

Oil incomes had severely increased over the past year, to an extent where many in Saudi Arabia are accepting the callings for abandoning total dependency on oil revenues which they had been addicted-to for decades.

The suggested remedy is bitter, but necessary to save the country, secure better future for the coming generations, and building a stronger state and a healthier economy.

The announcement of the new budget had awakened many: we are entering a new stage. The work has begun to decrease oil dependency and the role of the ''mother'' government.

Saudi Arabia is transporting into a new phase, in compliance with the Vision 2030, saying it will depend more on the private sector which it chose as a primary partner in providing services like education, medicine, transportation, and others.

A successful example is a one whose economy doesn't depend on the public sector.

Shifting a part to the private sector is a wise move, but I believe the problem lies in the fact that this sector is still weak and can't be relied upon to perform all the required tasks.

Only few companies can be considered, while the rest are shops that depend on the easy money of the oil.

If the government is looking forward to transform into a country of productive private sector, it should consider the economy of the large corporations.

With all due respect to those who speak about supporting the middle and small enterprises as a solution to employing thousands of the unemployed, I believe the better option for Saudi Arabia is otherwise.

Converting into large corporation market, will enhance services and productions and facilitate the processes of training and employing citizens, as well as protecting the Saudization program which for thirty years, the government failed to impose on the private sector.

Corporations of large capitals can introduce high technologies, spend on constructing large allocation networks, and expand all over the country. Maybe it is best for countries with large employment like Egypt or low investments like Pakistan to develop its small enterprises because it is the way to hire citizens with least cost possible.

The choice for Saudi Arabia is to transform into large corporations' economy in all sectors including technology, education, health services, engineering, and electricity.

By referring to international experiences and using latest technologies, Saudi Arabia can build a huge and organized market.

Large enterprises can, along with governmental organizations, serve the market by imposing its needs on the educational and training sector.

The role of the government hence becomes to generate large enterprises through programs and loans. We have few previous experiences in this area, like SABIC for instance.

SABIC has forty thousand employees, most of which are Saudis, who provide advanced services.

Other endeavors have failed, usually for lack of regulations and systems. The latest one was Panda's trial in residential areas and thousands of franchises similar to large U.S. corporations. This probably failed because of the chaos in the market and lack of regulations for permits through which companies can give its services in the neighborhoods.

Since the government is the source of life for the economy, it can rebuild the market from scratch. For instance, it can set a condition for its large contracts that a percentage of its work will be for local companies specialized in providing engineering services and employing thousands of Saudi technicians with minimum wages and long term contracts that ensure the safety of consumers for years to come.

Currently, Saudi Arabia's private sector is poor with specialized large corporations. Most companies in the market are franchises that can't be relied upon to form a real productive market.

Large enterprises are no no more than five and it is impossible to take in hundreds of thousands of graduates, especially after the government decided to let go of the role of the employer.

The government's philosophy is that it helps them learn, and promotes training, saying they have to work in simple markets.

Since the government had decided that the private sector is its partner, it should therefore shake it off and rebuild it.

The current market was built for other purposes and a different time.

I believe that the government should plan and encourage the establishment of similar companies for the advanced markets and of all sectors. It should also launch its subscription in the market as it did with SABIC, and the electric and transportation companies.

Through that, the government can rely on the private sector and its role becomes regulatory and monitory.

Al Rashed is the general manager of Al -Arabiya television. He is also the former editor-in-chief of Asharq Al- Awsat, and the leading Arabic weekly magazine, Al Majalla. He is also a senior Columnist in the daily newspapers of Al Madina and Al Bilad. He is a US post-graduate degree in mass communications. He has been a guest on many TV current affairs programs. He is currently based in Dubai. 

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