HSBC to advise Saudi on privatising management of school buildings

Saudi Arabia has hired HSBC as financial advisor for its plans to privatise construction and management of school buildings, as it seeks to cut state spending in an era of low oil prices, a Saudi executive told Reuters on Tuesday.

Tatweer Buildings Co, a state-owned firm affiliated with the Ministry of Education, aims to begin offering public-private partnerships for educational buildings this year, said Fahad al-Hammad, the company’s chief executive.

The projects will be worth more than SAR45bn ($12bn), he added. International law firm King & Spalding will be legal advisor.

“We aim to boost private sector participation in providing educational buildings, which is a model implemented worldwide,” Hammad said on the sidelines of an investment conference at the ministry.

“This will minimise government burdens, as the private sector will take over building, maintenance and operation.”

Tatweer will propose five models for the partnerships, including 20- to 30-year build-maintain-transfer arrangements for public school construction, and 15- to 20-year lease-leaseback contracts for buildings.

It will also make unused public education buildings available for private schools, transform urban facilities into mixed-use spaces, and provide incentives for private school development in planned communities.

In economic reform plans announced last year, Saudi Arabia said it would seek ways for investors to deliver services currently provided by the government, listing education and health care as sectors ripe for investment.

The plan budgeted SAR11m to encourage the private sector to invest in public education and SAR240m to attract private investment to finance school construction.

Authorities also said they hoped to increase the percentage of students in non-government higher education to 15 per cent from 6 per cent by 2020, a major cost-cutting initiative in a country where public education is provided free of cost.