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Mon 21 Nov 2016 09:03 AM

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GCC 'could privatise 25 percent of its assets'

Gulf states missing substantial benefits by not speeding up on privatisation, says Oliver Wyman research

GCC 'could privatise 25 percent of its assets'

A quarter of government entities in the Gulf could be privatised to save the public purse, new research concludes.

Selling off 25 percent of state-owned assets over the next 15 years is an “achievable target” for GCC countries and would boost the region’s aggregate gross domestic product (GDP) by approximately $100 billion, according to a report by Oliver Wyman.

The management consultancy said privatisation would also boost the private sector workforce by shifting an estimated 300,000 public sector jobs to private employment.

The report notes that since the 1980s, there has been a worldwide trend toward privatisation, however, GCC countries have remained largely absent from this trend. As a result, state ownership of the economy remains high in the region.

Oliver Wyman partner Jeff Youssef, author of the report, said: “Privatisation, when well executed, can bring clear benefits to the economy in terms of economic growth, higher employment and an improved fiscal balance for the government.

“Shifting assets to the private sector can reduce government costs by removing inefficient and unprofitable companies from a state’s balance sheet. And, while often viewed purely in fiscal terms, privatisation can also provide important economic and social improvements.”

Youssef said: “Our analysis suggests that the privatisation of 25 percent of government-owned assets, or equivalent to a quarter of government entities, is an achievable target for GCC governments over a 15 year period.

“Selling assets has the potential to raise the aggregate GCC GDP by US$100 billion, and would shift 300,000 public sector jobs of GCC nationals to the private sector.”

The report said the recent declines in oil prices have bruised the fiscal positions of Gulf states. Each country has responded with cost-cutting and diversification strategies – and privatisation should form an integral part of these economic transformation plans, according to Oliver Wyman.

Youssef said: “Our analysis suggests that the privatisation of 25 percent of government-owned assets, or equivalent to a quarter of government entities, is an achievable target for GCC governments over a 15-year period.

“Selling assets has the potential to raise the aggregate GCC GDP by US$100 billion, and would shift 300,000 public sector jobs of GCC nationals to the private sector.”

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