Mideast privatisations must pick up pace, experts warn

National oil companies urged to divest some of their assets to give economies a lift

The privatisation of government entities in the region needs to pick up pace to boost revenues and help to further diversify economies, experts said in Abu Dhabi yesterday.

“Privatisation is definitely good but much more could have been done. The pace at which it is progressing I think there should be much more urgency to it,” Anita Yadav, senior director for Global Markets and Treasury and head of Fixed Income Research at Emirates NBD, said at the Institute of International Finance (IIF) Mena Financial Summit.

“The governments have realised [this] and this is the beginning. Oman electricity is privatising four of its grid and utility companies. I think it will be good for the economy to diversify and for markets to deepen and for the relation between government and private sectors to improve,” she said, adding that economic growth in the region has fallen in the last three years because of government ownership and reliance on oil.

Mazin Sa’ad Al Nahedh, group chief executive officer, Kuwait Finance House stressed that the privatisation of national oil companies (NOCs) would benefit regional economies and increase transparency.

“We live in a hydrocarbon economy in GCC [countries], there is significant reliance on hydrocarbons. As such, international investors would like to get a piece of that and NOCs are not liberal enough to give that piece to investors,” he said.

“I think by privatising these particular niche businesses, [it] is going to be extremely valuable for international investors as well as local investors,” Al Nahedh said.

“Even Kuwait’s national oil company, the Kuwait Petroleum Corporation, is shy to tap the market to raise funds.”

In recent times, the Abu Dhabi National Oil Company (Adnoc) offered a partial sale of its shares in one of its subsidiary firms, Adnoc Distribution, through a listing on the Abu Dhabi bourse. Saudi Aramco is considering an initial public offering (IPO) in the next two years.

Mubadala, which was planning an IPO for its firm Cepsa, postponed the move following a weak response from investors.

Alex Coelho, chief executive officer of Al Hilal Bank also said all stake holders would benefit from privatisation.

“The economies and the landscape and even the government benefits from this,” he said.