March 24, 2006

THE SUPREME ECONOMIC COUNCIL ISSUES FIVE MAJOR MEASURES AMONGST WHICH THE PRIVATIZATION OF SAUDI ARABIAN AIRLINES WITHIN THREE YEARS. THE ESTABLISHMENT OF A NEW WATER COMPANY, THE SHARES OF WHICH WILL BE ISSUED FOR PUBLIC TRADING WITHIN FIVE YEARS. Secretary-General of the Supreme Economic Council Abdul Rahman Al-Tuwaijeri approved a series of economic measures, as part of Custodian of the Two Holy Mosques King Abdullah Ibn Abdul Aziz's ongoing economic reforms designed to boost economic growth, increase investments and bolster privatization. They are: 1) Approval of the executive program of privatization of Saudi Arabian Airlines; 2) Approval of the executive program of the expansion and rehabilitation of the complex of pilgrims terminals; 3) Approval of request by the Ministry of Health and the General Corporation of Technical Education and Vocational Training to establish a special fund for each organization, similar to the fund of university education; 4) Approval of rules organizing the private sector's participation in the water and sewage sector; 5) Approval of controls of application of governmental electronic dealings. Al-Tuwaijeri said that the measures would be submitted for legal approval. The Supreme Economic Council (SEC) on Tuesday approved plans for the privatization of Saudi Arabian Airlines (Saudia) and the refurbishment of Haj terminals at King Abdul Aziz Airport in Jeddah, said SEC Secretary General Abdul Rahman Al-Tuwaijri. The SEC also gave the green light for the establishment of funds for the Health Ministry and the General Organization of Technical Education and Vocational Training, similar to higher education fund. It also agreed to rules and regulations for the private sector participation in water and sanitary projects and e-government guidelines. Water and Electricity Minister Abdullah Ibn Abdul Rahman Al-Husayyen said that a new water company is being established, the shares of which will be issued for public trading within five years. Khaled Ibn Bakr, Director General of Saudi Arabian Airlines, said in an interview that the national carrier privatization plan is already under way. He also said that the company is not concerned about possible competition brought about by going private, because it is always improving its efficiency and productivity. Saudia has been on top of the list of government administrations to be privatized, said Ibn Bakr. Several years ago, the company was given directives to come up with a plan to go private, in collaboration with a number of international consultancies, as well as devising a blueprint. The board of directors approved the plan and it was submitted to the Supreme Economic Council and has been approved. He said that the program will be implemented in stages which included a considerable administrative and financial restructuring over the past few years, which had been instrumental in turning the company around toward profitability. The airline s profits grew exponentially over the past few years, to reach some SR500 million last year, said Bin Bakr. The numbers of passengers and amounts of cargo transported by the airline also grew considerably, which says a lot about the company s competitiveness. He also said that the airline is not too concerned about possible competition. In fact, we very much welcome competition, said Bin Bakr. Saudia enjoys 60 years of experience Competition encourages any organization to improve its performance and productivity, and we are more than ready to engage in that. He added that the airline already competes with other major carriers on an international level, and is increasing its market share every year. Other major decisions taken by the SEC were: approval to establish special funds by the Health Ministry and the General Organization for Technical Education and Vocational Training to promote their activities; and endorsement of the principles regulating the government's online operations. "The new decisions taken by the SEC will strengthen the economy, increase investment, boost privatization and ensure greater participation of the private sector in various economic activities," the Saudi Press Agency quoted Al-Tuwaijeri as saying. The government intends to divest control of state-run corporations and institutions with a total value of $800 billion within the next 10 years, according to Khalid Ibn Musaed Al-Saif, chairman of the international trade development committee at the Council of Saudi Chambers of Commerce and Industry. Saudi Arabian Airlines has already taken a series of steps for its privatization. The process is currently focused on transforming non-core units including catering, ground handling services and maintenance as well as the Prince Sultan Aviation Academy in Jeddah into commercial units and profit centers. Crown Prince Sultan Ibn Abdul Aziz, Deputy Prime Minister and Minister of Defense and Aviation and Chairman of the airline company, signed a contract on Oct. 8, 2000 to conduct studies on Saudia's privatization. According to Khaled Ibn Bakr, Director General of Saudia, the airline has completed two of the three phases of its privatization plan. The first phase included studies on the airline's financial, administrative, operational and organizational aspects as well as restructuring of its administration, finance and operation. Saudia posted a record revenue of SR14.6 billion last year, which is SR1 billion more than the figure of 2004, Ibn Bakr said, adding that it also achieved a net profit of SR500 million in 2005. Spelling out the national carrier's achievements over the past year, Ibn Bakr said Saudia transported more than 16.8 million passengers in 2005, with an increase of about one million passengers compared to 2004. It carried more than one million pilgrims from 84 international destinations to the Kingdom during this Hajj season. Saudi Arabian Airlines started out in 1945 with a single twin-engine Dakota DC-3 HZ-AAX given to King Abdul Aziz as a gift by the then US President Franklin D. Roosevelt. This was followed months later with the purchase of two more DC-3s, and these formed the nucleus of what in later years was to become one of the world's largest airlines. The sale of 30 percent of state-owned Saudi Telecom in an initial public offering at the end of 2002 represented the first big step in the government's ambitious plans in which some 20 major economic sectors will be opened up for private sector participation. The range of activities targeted includes water and drainage, desalination, air transport and aviation services, railways, roads, seaport services, postal services, municipal services such as cleaning and waste disposal and collection of revenues, building schools, printing of educational books and the management of social welfare organizations, health facilities including some hospitals, government-owned hotels and the future railway network. Water and Electricity Ministry has submitted a plan to privatize the water and sewage sector to the Supreme Economic Council for approval, Al-Madinah newspaper reported. The plan envisages establishing a national water company in cooperation with the private sector to provide better service. The company will be offered for floatation. The company's responsibilities would include producing underground water, distribution, sewage water treatment, improving bill collection and customer service in the main cities.