Saudi may begin privatising postal system by 2017

Saudi Arabia is likely to start privatising its postal system by early next year, telecommunications minister Mohammed al-Suwaiyal has said, in a test case for a series of state asset sales.

Under economic reforms announced this week, the kingdom aims to privatise companies and services in many areas, from health care to housing and municipal government, to boost efficiency and ease pressure on state finances in an era of cheap oil.

Saudi Postal Corp, with over 10,000 staff, will be one of the first to be offered to investors. Suwaiyal said that in preparation, the government was looking at a plan to create a postal holding company which would own subsidiaries operating services such as mail, courier delivery, e-commerce and financial remittances.

Authorities are studying issues such as how much of Saudi Postal would be sold and whether the stake would be offered to the public in an initial public offer of shares or to local or foreign strategic investors, he said.

“I cannot set a time frame but I expect by the start of 2017 the picture will be clear and execution starts.”

The government hopes privatisation will allow the state to cease financial support for Saudi Postal – annual government subsidies to it are projected to fall to zero by 2020 from SAR2bn ($533m) now – while boosting its performance, so that its revenues rise to SAR2.75bn in 2020 from SAR1.02bn in the latest year.

“Currently Saudi Postal depends on subsidies from the state. Privatisation will empower it.”