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Analysis of Privatization Best Practices for Delivery of Public Service: the Case of Saudi Arabia

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Analysis of Privatization Best Practices for Delivery of Public Service: the Case of Saudi Arabia Analysis of Privatization Best Practices for Delivery of Public Service: The Case of Saudi Arabia By Awwadh M. Almutairi A Thesis Submitted to the Department of Public Policy and Administration California State University, Bakersfield In Partial Fulfillment for the Degree of Masters of Public Administration Fall 2017 Copyright By Awwadh Almutairi 2017 A Program PrClll<JSII Analysb of Privatization Bcol Pructices for Delivery oll'ubllc Service: The Caoe of Saudi Arabia By Awwldh M. Abnutairi c.;.. .............. Chandra C<lmmuri, Pb.D. Acknowledgments First of all, I would like to privilege the succeed of this thesis to the grace of GOD. I would like to extend my acknowledgment to my Mother for her support during my journey through her motivational expressions. My deep thanks to my wife and Daughter for unforgettable supports to complete the adventure successfully. My warm respect and appreciation to Dr. Thomas Martinez for his collaboration during my time in the program. And I couldn’t forget the role of Dr. Sun and Commuri for their guidance and support. Abstract Privatization has increasingly gained prominence as one of the engines for economic growth and development. In fact, the success of this process in some nations has prompted others to consider implementing it because of its benefit in stimulating economic growth. Countries, including Saudi Arabia, have already laid down operational privatization programs in an attempt to encourage their economic growth and development. The purpose of this study was to conduct a comprehensive assessment of the Saudi Arabia privatization program by proposing the challenges that the policymakers are likely to experience in an attempt to integrate a successful privatization program. Specifically, the study explored the best-suited model for privatization, it examined the adoption of a healthcare system, as well as, look into the factors promoting economic growth via privatization. The study also highlights the factors that are likely to make privatization fail based on post-privatization experience, also known as the common stumbles. The investigation determined that the availability of appropriate technology, skilled human capital, and other human resources play a central role in the successful implementation of a privatization effort. Having a robust legal framework is key to successfully executing privatization programs. Privatization laws provide authority to the government agencies make clarification about the right of the investors, both foreign and domestic to participate in the privatization effort. Other laws, including capital markets and corporation’s laws, support such privatization laws. Keywords: Privatization, Saudi Arabia, Legal Framework, Technology, Economic Growth. Table of Contents Chapter One: Introduction .............................................................................................................. 1 Background ................................................................................................................................. 2 Statement of the Problem ............................................................................................................ 3 Purpose of the Study ................................................................................................................... 3 Importance of Study .................................................................................................................... 4 Chapter Two: Review of Literatures ............................................................................................... 5 Definition of Privatization .......................................................................................................... 5 Synthetic Definition of Privatization .......................................................................................... 6 Historical Background of Privatization ...................................................................................... 6 Objectives of Privatization .......................................................................................................... 7 Forms of Privatization............................................................................................................... 10 Theories of Privatization ........................................................................................................... 12 Best worldwide Practices of Privatization ................................................................................ 15 Best-Succeeded Model of Privatization .................................................................................... 17 Unsuccessful Experiences of Privatization ............................................................................... 19 Economic Growth and Privatization ......................................................................................... 21 National Center for Privatization .............................................................................................. 23 Saudi Arabia in the Contexts of Privatization ........................................................................... 24 Chapter Three: Program Proposal ................................................................................................. 30 The Best-Suited Model of Privatization ................................................................................... 30 Factors Promote Economic Growth Via Privatization.............................................................. 36 Avoid Common Stumbles ......................................................................................................... 38 Chapter Four: Conclusion and Recommendation ......................................................................... 41 Implementation Recommendations: ......................................................................................... 42 Research Recommendation:...................................................................................................... 45 References ..................................................................................................................................... 47 Appendix ....................................................................................................................................... 51 Institutional Review Board (IRB) Letter .................................................................................. 51 ASSESS THE BEST PRACTICES OF PRIVATIZATION OF PUBLIC SERVICE 1 Chapter One: Introduction Privatization is increasingly gaining prominence as one of the tools for promoting robust economic growth and development. Nations, including Saudi Arabia have laid down an operational privatization program in an attempt to stimulate its economic growth and development. As an economic growth and development method, privatization refers to a method used to transfer functions and assets from the public to the private sector. The economic policy makers in Saudi Arabia believe that privatization when properly integrated with the vision 2020 is likely to play a central role in the country’s quest for growth. The fact that many nations are currently espousing privatization as an economic development strategy confirms its effectiveness in initiating fundamental structural change through formalization and establishment of property rights that directly influences positive economic growth. In this 21st century, characterized by a free market economy, growth and development largely depends on well-defined property rights where individuals are able to make decisions that positively affect their personal interests. Modern market economies are known to generate growth because widespread formal property rights allow massive low-cost exchange, hence promoting not only specialization but also greater productivity. In addition to creating stronger incentives, that fosters productivity; privatization also enhances efficiency, encourages wider ownership, offers fiscal relief, and escalates credit availability for the private sector. In Saudi Arabia, the need for privatization is driven by the economic woes that the country has been experiencing. The economists and policy makers have recommended the need to privatize the public sector to enable the country regain its original economic glory. As AlArabiya (2017) explains, realizing the Saudi’s vision 2030 reforms plan is anchored on the success of the ten programs that have been identified as the main driver of sustainable economic ASSESS THE BEST PRACTICES OF PRIVATIZATION OF PUBLIC SERVICE 2 growth and development. The privatization of the public sector has been identified as among the programs likely to drive the country towards realization of the vision 2030. It not only enhances the effectiveness and efficiency of the private sector in providing healthcare, municipal, and educational services but also boosts the effectiveness and efficiency of the transport sector. This program proposal conducts an elaborate assessment of the privatization program for Saudi Arabia. It looks into the best succeeded model for privatization, unsuccessful experiences of privatization, the economic growth and privatization, the national center of privatization, social issues and privatizing the social sector, the current system of health care and higher education, and the factors fostering economic growth via privatization. Background The main reason for privatization in Saudi Arabia is to reform the economy and strengthens its performance. The need to privatize
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