KSA NCP moves towards privatisation of Hajj and umrah sector

The National Center for Privatization & PPP (NCP), a newly-formed agency created to empower Saudi Arabia's private sector, alongside the Supervisory Committees (SCs) established to manage each privatisation sector, has set out the blueprint to ensure the efficient and strategic transfer of the kingdom's government assets to the private sector.

The NCP, established through the Council of Ministers Resolution on April 3, 2017, and the SCs are the first entities of their kind in the MENA region. They have been established to meet the core objectives of the privatisation effort: improving the efficiency and competitiveness of the national economy, thereby boosting the quality of life for the Saudi people through stimulation of the private sector, improving the overall business environment, increasing job opportunities for Saudi nationals, reinvigorating the kingdom's rich mineral resources sector, developing renewable energy capacity, investing in workforce and education development and diversifying the economy.

The KSA Council of Ministers announced the establishment of the SCs on August 1, and these were given a definitive mandate to function as executive facilitators for multiple sectors which are to be privatised over the next 10 years. NCP will serve as a permanent member of all SCs, providing strategic guidance and support as the committees move to enhance KSA's economy by recruiting private sector participation through asset privatisation and the formation of new public-private partnerships.

The role of each committee is to assess the technical, financial, legal and regulatory landscape and to establish a best practice blueprint for the privatisation of the targeted entities. The Ministry of Finance, a permanent member in all the SCs, will also play a crucial role in the privatisation process.

The sectors included in Vision 2030 under the Privatization Program are: environment, water and agriculture; transport; energy, industry and mineral resources; labour and social development; housing; education; health; municipalities, telecommunications and IT and the Hajj and umrah sectors.

NCP will formulate regulations, create privatisation frameworks and prepare robust processes that will serve as a blueprint for agencies and entities to follow that will ensure the efficient sale of Saudi assets and to drive the privatisation process forward. The first step in this process is to establish a world-class centre of excellence to facilitate and regulate the sale of state assets and entities. "NCP has adopted a wide-ranging governance policy that will enable government agencies and hold each accountable as we move forward with stimulating private investment and privatisation," said Turki A. Al Hokail, CEO of the NCP.

"We will facilitate the smooth transfer of assets by publishing a blueprint that will deepen communication channels between government agencies, citizens and the private sector locally, regionally and internationally and serve to guide investors and participating agencies and entities through the privatisation process.

"NCP was established with the purpose of setting policies, strategies, programmes, bylaws, plans and tools to achieve the privatisation projects objectives, thus suggesting the sectors and activities that may be privatised. The centre will also set necessary standards and frameworks for sectors targeted for privatisation, set principles which help the management of privatisation-related projects, develop requirements to establish entities where the private sector – from inside and outside the kingdom – may participate with government entities in the launched privatisation projects.

"NCP will work with the sectors targeted for privatisation to ensure their technical and financial readiness. The Center will work to assess the readiness of the macro economy of the privatisation programs and contribute to managing related risks. It will work with its counterparts to identify key performance indicators related to privatisation. In addition, NCP will be contributing to the training and qualification of human capital in the field of privatisation to guarantee leveraging their abilities and expertise to achieve development objectives.

"Effective governance means integrating a continuous evolution of improvement to keep pace with the rising accountability and transparency expected of government. NCP will serve as an agile, performance-oriented public organisation that will boost performance and increase investment opportunity in the kingdom."

It is anticipated that the privatisation process will increase the private sector's contribution to GDP from 40% to 65%.

Islamic finance instrumental to inclusive growth

Laurence Carter, Senior Director, World Bank Group, said that the world can learn from Malaysia as the global leader in Islamic finance in terms of having a facilitative framework and an attractive Islamic finance market.

"As of May 2016, 74% of all securities listed in Bursa Malaysia are shari'ah-compliant, while with infrastructure securities the ratio is 80%," he said in welcome remarks at Islamic Finance and Public-Private Partnerships (PPPs) for Infrastructure Development, a conference by Securities Commission Malaysia and the World Bank in Kuala Lumpur, Malaysia.

Carter added that Islamic finance can play a significant role in supporting inclusive growth. "Estimates, from a report jointly published by the Islamic Development Bank and the World Bank, suggest that shari'ah-compliant assets have grown exponentially in the past two decades, accumulating nearly US$1.9 trillion in assets and spreading across 50 Muslim and non-Muslim countries around the world. Ṣukūk were issued from non-Muslim-majority countries and experienced rapid growth. I would go so far as to say that the Sustainable Development Goals will not be achievable without further growth in Islamic finance," he said.

Carter explained that the World Bank Group’s involvement in Islamic finance is directly linked to the bank’s objectives of reducing poverty, promoting financial sector development, broadening financial inclusion, and building financial sector stability in client countries. In recent years, the World Bank Group has stepped up its support of Islamic finance:

- Provides advisory services to support regulators, central banks and policy makers, for example, on Islamic banking supervision;

- Deploys Islamic financial instruments, including equity and financial/investment products that are adapted to the requirements of Islamic financing. "For example, International Finance Corporation (IFC)’s Treasury has issued three sukuks; the first one in 2004 in the Malaysian market, as a RM500 million Wawasan Islamic Bond; a second one in 2009, in the GCC region, as a US$100 million Hilal Sukuk; and more recently in 2014, a US$100 million Wakala Sukuk, with a five-year maturity through Nasdaq Dubai.

- Offers political risk insurance for critical projects funded through Islamic financing structures.

- Helps to develop global standards for Islamic finance transactions; such as via the Islamic Finance Services Board Core Principles for Regulation and Supervision of Islamic Banks.

When it comes to PPP, Carter cited the Queen Alia International Airport in Jordan, a project which was signed in 2007. "It involved rehabilitating the existing airport, constructing a new terminal with a capacity of 12 million passengers per year, and operating the airport over a 25-year concession. "This project is considered the first Middle-East PPP using conventional and Islamic finance. The Islamic structure of this project was a US$100 million Istisna’a (الإستصناع) combined with a forward lease under the ijarah structure. The success of the partnership led to further funding in 2014, arranged by the Islamic Development Bank and IFC, with commercial banks," he said.

The World Bank Group has also been promoting knowledge of Islamic finance to raise awareness and promote the worldwide use of shari'ah-compliant financing instruments. Notably, last year the Islamic Development Bank and the World Bank published the first Global Report on Islamic Finance, which details the prospects for the global Islamic finance industry and its potential to help reduce worldwide income inequality, enhance sharing prosperity, and achieve the Sustainable Development Goals.

An upcoming Report on Mobilizing Islamic Finance for Public-Private Partnerships, also in partnership with the Islamic Development Bank, is being finalised, Carter said, and will be released later this year. The research in this report is meant to raise awareness on how to best mobilise shari'ah-compliant capital toward infrastructure PPPs, focusing on experiences gathered in the use of Islamic finance in PPPs; the legal and regulatory instruments that are conducive or unfavourable to sharī'ah-compliant investments; and the structures used in recently-concluded projects by means of Islamic finance.

"The report will include a concrete set of recommendations to mainstream the mobilisation of Islamic finance into sustainable infrastructure projects," he said.

Public-private partnerships are the way to go in socioeconomic development

Source: Islamic Development Bank. Participants at the event.

The Islamic Development Bank’s first Public-Private Partnership Forum has called for more public-private partnerships (PPP) to handle the challenges of socioeconomic development in the bank’s member countries.

Dr Bandar Hajjar, President of the Islamic Development Bank Group, said that the group is putting every resource available at the disposal of its 57 member countries so they can gain experience in building successful partnerships between the public and private sectors in every field, especially with the gap between the two in the funding they provide for these partnerships.

“We all know that laws and regulations alone are no guarantee for a successful partnership,” said Dr Hajjar. “Both parties must work hard to create successful, ties that actually work. Each one of the two sectors have multifaceted administrative, economic, judicial, legal, and social aspects that need to intertwine and hook up at just the right points, and all stakeholders must share a common understanding of the principles of transparency, disclosure, accountability, and equal rights, as well
as a clear determination of responsibilities for the efficient use of resources, boosting competitiveness, finding new sources of funding, expanding projects, creating new job opportunities, and solidifying economic stability in our member countries.”

At the forum, water desalination and housing came up as the two sectors set to see the strongest interest from PPPs, particularly in KSA's Kingdom Vision 2030. Challenges for PPPs that were identified included inadequate funding. Participants also stressed that these partnerships need support at the highest levels of government to succeed, as well as teams of specialists in place that are dedicated only to this model. Also, universally recognised procedures and contracts need to be adopted, so as to encourage funding and attract the global talent which will ultimately build capabilities and expertise in the private sectors of respective member states.

More than 300 government figures and private-sector business leaders from the member countries participated in the forum, set to be the first of many that are scheduled to be held successively in member states.

The IsDB launched the forums after the major changes witnessed in the economies of many of the bank’s member states, mostly due to weak oil prices, at a time of immense pressure for infrastructure projects to continue in member countries especially now that the traditional model of the government-funded infrastructure projects has proven to be inadequate, with the huge disparities between national budgets and the funds actually needed to keep projects on track.

DED and Dubai Islamic Bank launch shari'ah-compliant credit card

Source: DED.

 

The Department of Economic Development (DED) in Dubai and Dubai Islamic Bank (DIB), the largest Islamic bank in the UAE, have launched of the Consumer Card in the UAE. DIB boasts today one of the largest retail bases in the UAE with over 1.5 million customers and 90 branches across the country.

The co-branded credit card is dedicated to protecting the rights of consumers and providing them with savings on their daily purchases. The card is an addition to the partnership initiatives being launched by DED along with the private sector and to the ongoing efforts to enhance the shopping experience in Dubai, and across the UAE.

Developed and designed in line with the spending habits and distinct needs of consumers in the UAE, the shari'ah-compliant card is issued in partnership with Visa and carries no hidden charges. It has two variants, the Rewards Consumer Card and the Platinum Consumer Card.

While enabling customers to make savings on everyday spends, the Consumer Card also carries a host of discounts at over 450 outlets across the country. It offers up to 4% cashback across a number of outlets including supermarket or hypermarket, for all automobile servicing, on Etisalat and Du bills, Salik and Nol recharges, fuel purchases, utility bills and cinema tickets. Card users will be able to receive up to AED1,000 cashback per month on their spends across the UAE.

The card was launched today at the Mall of the Emirates in the presence of His Excellency Sami Al Qamzi, Director General of DED, Dr. Adnan Chilwan, Group Chief Executive Officer at Dubai Islamic Bank, and in addition to senior managers from the organisations.

Mohammed Ali Rashed Lootah, Executive Director of the Commercial Compliance & Consumer Protection (CCCP) sector in DED, said the card highlights the effectiveness of public-private partnerships in bringing added value to businesses and consumers. "The Consumer Card is part of the initiatives of the Department of Economic Development to promote trust and partnership between retailers and consumers. Dubai is a global shopping and entertainment destination and we focus on making the shopping experience in the emirate as convenient and rewarding as possible," he said.

Sanjay Malhotra, Chief of Consumer Banking, at DIB said: "Domestic spending remains today the backbone of the UAE economy and we are keen to invest our expertise and resources in developing payment solutions that are favourable to spurring further growth. As one of the most innovative banks in the market today, we are pleased to offer our client base attractive payment solutions and savings on their daily purchases. Moving forward, we will continue to leverage our partnerships to present a unique banking experience while adhering to the highest standards of service excellence.
"While the market already offers benefits on credit cards, we have focused on areas where customers spend their money regularly thus maximising their gain. With this in mind, we have developed the Consumer Card as a low-cost, high-value proposition in order to appeal to a larger number of customers and allow them to enjoy unique benefits."

Ihab Ayoub, General Manager MENA at Visa, said: "The Consumer Card – a major step in this direction – will help in spreading further awareness about the benefits of electronic payments and the related cardholder rewards through a wide network of customers. Providing consumers with a safe and convenient way to pay is one of Visa's main priorities, and our participation in this initiative is aligned with our ongoing efforts to promote financial literacy on the ways to save, spend and budget responsibly.

"We are confident that through a partnership of public and private sectors, the "Consumer Card" initiative will support the UAE's efforts to be a leader in developing innovative payment technologies, and drive its transformation into a cashless society."

Ahmed Al Zaabi, Senior Manager - Consumer Awareness, at DED said: "The Commercial Compliance & Consumer Protection sector constantly seeks to strengthen the relationship between the merchant and the consumer, and improve awareness among consumers on their rights and responsibilities. We also focus on regulating the market and launch programmes that protect businesses. The Consumer Card is part of our efforts to raise the quality of services provided to customers and enhance their satisfaction and happiness. Our partnership with Dubai Islamic Bank and the advantages it brings to consumers and traders will strengthen economic activity in the UAE."

Interested?

Ask the DIB Call Centre about the Consumer Card at +971 4609 2222.