Yoshie wrote:
**** Compare Iran and Venezuela:
Iran: "The World Bank reports that the government consumed 14 percent
of GDP in 2003. In the same year, according to the International
Monetary Fund's Government Financial Statistics CDÂROM, Iran received
53.83 percent of its total revenues from state-owned enterprises and
government ownership of property.
Actually, state ownership prevails throughout much of the Middle East,
including Saudi Arabia. You really need to conduct a more class-based
analysis in order to make judgements as to the "progressive" character of a
state.
Financial Times, March 26, 1998
Without a lead from those who control the oil wealth and political power of
the region, it is unlikely that any political decisions will be made which
will shake-up investment patterns. Private sector investment is therefore
unlikely to take off unless state ownership is reduced through privatisation.
The downside of state control has slowly dawned on the region's
decision-makers. When the lossmaking state-owned Saudi Arabian Airlines
failed to find $ 4.5bn for new aircraft it had to approach international
capital markets, which demanded a sovereign guarantee. This from a country
whose stock market capitalisation stands at $ 58bn.
Privatisation of utilities would require a widespread overhaul of pricing,
billing and service provision before foreign investors would consider
seeking a share.
Scale is everything. Saudi Arabia is reckoned by its senior officials to
need $ 116.8bn over 23 years to build new power stations. It will find such
ambitions hard to realise without adopting private sector
build-operate-transfer (BOT) schemes, which will chip away at state control.
It has been left to the smaller states to spearhead moves towards
attracting a real private sector role through privatisation. Even so, this
process has been extremely limited.
Qatar has now awarded 60 per cent of the contract to build an aluminium
smelter to Norsk Hydro. This ground-breaking deal marks the first time any
Gulf state has allowed a foreign joint-venture partner, in this case with
the state-owned Qatar General Petroleum Corporation, to hold a majority stake.
Despite acceptance elsewhere - notably in Oman and Bahrain - of foreign
majority stakeholding, theory has yet to become reality. Oman has secured
substantial project finance for state-led investments and infrastructure
projects, as well as being home to the region's sole private sector power
plant, the 90MW al-Manah power station. But the government withdrew the
privatisation of the Salalah Water and Sewage Company because of
difficulties over agreeing an accurate sale price - the value of the
company being skewed by subsidies and widespread non-payment of bills.
Bahrain has changed its law to allow 100 per cent foreign ownership of
companies. It has also drawn-up a favourable tax regime and currency
regulations to attract investors. But privatisation has yet to follow, with
the future sale of Bahrain Telecommunications Company (Batelco) a long way off.
Abu Dhabi stands out for having instituted a series of initial public
offerings, despite not having a stock exchange on which to trade them. This
year eight IPOs are planned in sectors ranging from banking, gas
distribution and satellite television.
However, the absence of a stock exchange - the only Gulf Co-operation
Council state without such a facility - has deterred private sector share
issues within the UAE states, and led to unauthorised trading in shares in
markets renowned for insider dealing and price manipulation.
Kuwait's commitment to the privatisation of state utilities has emerged
from the process of disposing of state assets acquired during the early
1980s. The government is expected to establish a new authority to launch
moves towards privatisation in the telecommunications sector following the
expected ratification of a new investment law next month.
The Kuwait government has so far sold shares in 16 companies and now has
plans to offer 50 per cent of Kuwait Airlines to the public. It will sell
its shares in a total seven companies during 1998, ranging from a
cattle-rearing operation to banking and cement manufacture.
