Ratings boost for Saudi reform program

Structural reforms could empower Saudi citizens and make Saudi Arabia more attractive to investors over the medium term, ratings agency S&P said. (Reuters)
Updated 22 November 2017
0

Ratings boost for Saudi reform program

LONDON: Political reforms in Saudi Arabia have potentially lifted the country’s appeal to investors, as well as widening opportunities for Saudi citizens, according to a report out today from New York-based credit ratings agency Standard & Poor’s.
With that in mind, the agency said its ratings on KSA debt were unchanged at ‘A-/A-2’ , and the outlook remained ‘stable’.
The stable outlook was based on S&P’s expectation that the Saudi authorities would continue to take steps to consolidate public finances and maintain government liquid assets close to 100 percent of GDP over the next two years.
The agency said: “We think the risks emanating from recent shifts in Saudi Arabia’s political power structures and societal norms, alongside various regional stresses, are balanced by the possibility that these structural reforms could empower Saudi citizens and make Saudi Arabia more attractive to investors over the medium term.”
S&P said it could lower its ratings in the event of further deterioration in Saudi Arabia’s public finances. “Fiscal weakening could entail prolonged double-digit central government deficits as a percentage of GDP, a quicker drawdown of fiscal assets, or an unexpected materialization of contingent liabilities,” it said.
KSA’s debt ratings could also come under pressure if the agency observed a “significant” increase in domestic or regional political instability “as a result of the increasing centralization of power.”
Conversely, the agency could raise its ratings if Saudi Arabia’s economic growth prospects improved markedly beyond S&P’s current assumptions.
Last week, S&P said that despite uncertainties within GCC countries, capital market issuance of bonds and other debt instruments had climbed rapidly, with corporate and infrastructure capital market activity forecast to more than double from 2016 in 2017.
S&P Global Ratings said it saw an emerging trend in budget-constrained governments increasingly looking to their government-related entities to tap capital markets for corporate and project bonds to complement record sovereign debt issuance.
It added that the Qatar trade embargo had resulted in downgrades of one or more notches and negative CreditWatch placements or outlooks on all rated corporates in that country.


‘Saudi Inc’ author says no shows won’t dent KSA investment appeal

Updated 9 min 51 sec ago
0

‘Saudi Inc’ author says no shows won’t dent KSA investment appeal

  • Ellen Wald said there was an element of symbolism in the decision by some executives not to attend the Future Investment Initiative
  • Wald also said that the absence of many big name investors from the US and Europe might hand an advantage to other potential business partners

RIYADH: An American expert on US-Saudi business affairs believes that the withdrawal of some senior business leaders from the investment conference that opens in Riyadh today does not reflect the Kingdom’s commercial attractions.
Ellen Wald, president of the Transversal Consulting think-tank and author of the recent book “Saudi Inc,” told Arab News that there was an element of symbolism in the decision by some executives not to attend the Future Investment Initiative in the Saudi capital, and that many business people were still looking to do business there.
“I think the big pull out of CEOs is not really reflective of the corporate interest in the Kingdom because we see them sending their next level of executives along. So to some degree it (the CEO pullout) is symbolic. I think what they experience here this week will have an effect,” she said.
Wald also said that the absence of many big name investors from the US and Europe might hand an advantage to potential business partners in other parts of the world.
“In terms of attracting foreign investment, Saudi Arabia could have strategic leverage with Russia and China, and a unique opportunity to work on cutting edge technolgies,” she said.
Wald was speaking at an event organized by the King Abdullah Petroleum Studies and Research Center to discuss her book. She said that Saudi Arabia had a greater need for technology and know-how than for cash investment.
“With regard to foreign investment, it is not about extracting money, but about extracting expertise. The Saudi model has been to hire outside industrial talent, for example the Public Investment Fund and its cinema partner AMC. They are buying expertise in the same way that the Saudis bought in expertise with Aramco, all those years ago. Eventually they (PIF) will buy the cinemas out or bring in somebody else to run them,” she added.