To understand the main challenges, one must identify some important facts:

First: The KSA government has played a strong role by providing services, resulting in:

1. Government providing services that in other countries are provided by private sector companies.

2. Decrease in the share of the private sector within GDP (43 percent for KSA in 2016 compared to 58 percent top five European Union economies).

3. Perceived lower quality of services and/or higher costs of services.

4. Difficulty in the calculating cost centres within the government.

5. Government distancing itself from its legislative and regulatory role sometimes since it has been a service provider. Therefore, there is no need to organize and monitor itself. In some cases, the government plays a supervisory role in addition to its role as a service provider.

Second: Previous privatization efforts have been limited to certain sectors, though they have been focusing on privatizing those sectors with sufficient expertise and knowledge to implement the privatization process. Our current ambitions are that we need more effort to complete the privatization of more sectors.

Based on these two facts, the main challenges briefly are:

First: Limited experience of privatization within targeted sectors, as most of the experience are based on pure technical background, The Kingdom of Saudi Arabia has gone through multiple efforts of privatization and private sector engagement; however, these were limited to specific sectors that were mature enough and professionally run. Hence, necessary expertise, knowledge and skills related to the privatization of state-owned assets and activation of private sector engagement across the whole government are very low.

Second: Lack of a sufficient number of domestic private sector companies with the adequate experience and skills to take over privatized services, as they have not been involved in such services before since the government was the only available service providers for many sectors. This has not provided sufficient opportunity for private sector growth in these sectors. This is a challenge because there are fewer companies available for privatization and ultimately less benefits due to privatization.

Third: Insufficient general legislative frameworks that enable privatization processes and enhance its governance, vague procedures for obtaining approvals for the privatization process (in most sectors); and vague procedures for the preparation and project processes. This is a major challenge because insufficient preparation and execution of the privatization process will lead to reduced investor confidence and increase the failure rates of the privatization process or implements these processes in the wrong way. On the other hand, the privatization process intersects with many rules and regulations that may have obstacles or legislative gaps that could hinder the privatization process or hinder the optimization of the privatization process. These include corporate, bankruptcy, financing, competition and government procurement, commercial mortgage. This is a challenging aspect as most of these systems were designed in light of the role of the current government and the weakness of the private sector. For example, the government competition and procurement system is the government's largest channel for contracting with the private sector. In view of the nature of this system, the contracts that this system deals with contradict with the essence of the privatization processes especially (public-private partnership).

Fourth: Insufficient regulatory base developed for target sectors. Since the government has historically been operating the sectors, the need for frameworks and policies did not exist to govern relationships or regulate pricing, competition, or consumer protection. The current situation is not attractive to the participation of the private sector, as it is not interested in sectors where there's no clear regulations or directory of procedures that govern all the above-mentioned points, and that may stand in the way of reaping the full benefits of privatization.

Identification of main challenges is a reoccurring exercise and this list will be updated regularly.