Infrastructure Financing through Islamic
Finance in the Islamic Countries
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around a 20% stake on the stock market in January 2003 and raised close to $4 billion. An
additional 10 percent was later offered to the private sector.
Increasingly, seeking to deliver much-needed world class infrastructure to its people, the Saudi
Arabian government has recently implemented several policies to develop and finance its
infrastructure. These policies and initiatives, in coherence with the vision 2030 announced in
2016 (NTP, 2016), are highlighted to ensure that it meets the ever-growing needs of its people
while not dipping further into its sovereign wealth reserves which took a severe battering
following the oil price crash in 2014 (Gelil et al, 2017). Vision 2030 incorporated several
procedures and laws during the last few years that relate to the infrastructure sector. Some of
the initiatives were to enhance the role of the private sector, including adjusting an agenda for
a 15-year privatization of Saudi Arabia's government-driven economy, utilizing private sector
finance as a basic instrument, and using concession-based procurement models such as Public
Private Partnership (PPP) project contracts to deliver major infrastructure projects. To enable
implementation, the National Transformation Program (NTP) was initiated as the principal
device for financial diversification and the National Centre for Privatization (NCP) was created
by the Ministry of Economy and Planning.
As part of Vision 2030, the NCP was established to improve the role of privatization strategy
and PPPs in the Kingdom of Saudi Arabia. A key feature of Vision 2030 is the Fiscal Balance
Program and the increase in the role of the private sector in the economy. Although the
Program intends to balance the budget and increases the role of the private sector, the
government’s operational expenditures are projected to grow at a rate of 3.3% and capital
expenditures will grow at a rate of 4.3% during 2018-2020. While the role of the government
in infrastructure development is expected to be dominant in the future, Vision 2030 plans to
increase the role of the private sector with the NCP playing a key role in implementing this
goal.
In terms of infrastructure, the plan is to create, among other things, a regional logistics core
within the Kingdom of Saudi Arabia with linked domestic and cross-border infrastructure. In
particular, the plan intends to amplify the private sector cost contribution for the development
and operation of both port projects (increasing from 30 percent to 70 percent) and rail
projects (increasing from 5 percent to 50 percent). As part of this drive, the Saudi government
has allocated an additional 5.5 percent of spending to infrastructure in its 2018 budget.
In order to further increase the role of the private sector, additional infrastructure sectors
were identified for privatization, which included civil aviation and healthcare. For example, the
General Authority for Civil Aviation (GACA) announced that it would privatize the
management and operations of all 27 airports within the Kingdom by 2020, beginning with
King Khalid International Airport (KKIA) in Riyadh in 2016.64 Other than privatization, NCP
also plans to take the initiative of developing new projects using PPP. The targets of NCP will
be to increase project financing using PPP in the future from zero projects in 2016 to 14
projects with expected investment targets of SAR 24-39 billion in 2020.
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