Saudi Postal plans new distribution centers with view to privatization

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The head of Saudi Arabia’s government-owned postal service said on Wednesday the institution was setting up new distribution centers as part of a privatization process he indicated could take several years.

The kingdom is launching a privatization drive in many sectors as part of wider economic reforms aimed at boosting efficiency and easing pressure on state finances in an era of cheap oil.

Saudi Postal Corp, which has more than 10,000 employees, sent a request for proposals to local banks in January. Telecommunications minister Mohammed al-Suwaiyal last year said that its privatization was likely to start by early 2017.

Officials announced on Wednesday that Saudi Postal was transferring its central distribution centers to the kingdom’s three international airports in Riyadh, Jeddah and Dammam in an effort to improve efficiency and performance.

The centers are expected to be operational within 24 to 36 months, they said.

Saudi Postal’s president, Mohammed al-Abdul Jabbar, described the centers as “fundamental” to the privatization process.

“If we look at the privatization program, you will find processing centers among the primary projects,” he told reporters.

“The transformation process is composed of several stages. Part of it is to prepare the institution and its abilities in anticipation of privatization.”

Abdul Jabbar said that other steps might take until 2025 to be completed, implying that different parts of the institution could be sold off at different times.

The government hopes that privatization will allow the state to cease financial support for Saudi Postal.

Annual government subsidies to the business are projected to fall to zero by 2020 from 2 billion riyals ($533 million) now, while boosting performance to lift its revenue to 2.75 billion riyals in 2020 from 1.02 billion riyals in 2015.

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