Saudi Arabia’s Vision 2030 is the country’s blueprint for the post-oil era, leading the Kingdom towards economic diversification and a modern and diverse economy.

The planned IPO of Aramco may have grabbed all the headlines, but behind this colossal listing lies something which could prove to be even more transformational.

As the government aims to achieve its 2030 Vision goals, an important catalyst towards this effort is the transfer of ownership of property and business operations from the government to the private sector, better known as ‘privatisation’.

The Saudi Arabian government aims to raise around $200 billion through privatisation programmes in around 16 different sectors ranging from oil and airports to health care and education. So, as foreign investors continue to look towards the Saudi market, what does all this mean for the Kingdom?

The amounts raised from the proposed privatisations will be a boon to an economy whose principal source of export revenue is now much reduced.  And that revenue could kick-start other Vision programmes thus adding further momentum to the Vision project.

The planned privatisations may also bring benefits that a government entity, with all its many responsibilities finds it hard to deliver. These include improved efficiencies, enhanced service levels and increased choice.  One usual goal of privatisation is to achieve these benefits with less public subsidy or none at all in some instances.

However, comparative assessments between publicly and privately delivered services are often more difficult to make than may be commonly supposed.  This is especially the case where advantages and concessions that are not available to the public sector services provider have to be granted to the private sector operator.  For example, it may be part of the remit of the public sector to undertake unprofitable but essential public services. Because private sector businesses are ultimately profit focused, they are unlikely to be unwilling to take on these responsibilities unless they are adequately compensated for doing so.  In some instances, it may be found that they are unwilling to shoulder these responsibilities at all.

It can also be said that profit should not be a primary driver when it comes to the delivery of essential services.  Nor that it necessarily improve standards in certain sectors, such as healthcare, education and public transport.  There are examples that appear to both prove and disprove this point.

Perhaps the key question is whether any government can actually relinquish all responsibility for the delivery of essential public services.

One function of the regulatory framework applicable to the privatised business is to allow the government to adopt a more hands off role in relation to the provision of services without service levels being compromised.  Amongst other things, this will require the regulatory regime to strike a balance which   a) allows the private services operator to generate a reasonable profit to justify both its initial and continuing investment b) delivers minimum levels of service and c) keeps the cost for the consumer at affordable levels.  These will be key challenges for the Saudi government’s privatisation programme and how they play out may determine whether that programme delivers the benefits the government is seeking - or proves to be a Pandora’s Box.