Lebanese PM flags up Saudi investment potential, financial ties

Lebanese Prime Minister Saad Al-Hariri spoke of the pressing need to restore the nation’s finances at the conference in central London on Thursday. (AFP)
Updated 14 December 2018
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Lebanese PM flags up Saudi investment potential, financial ties

  • Saad Al-Hariri: We have prepared many agreements that we will be signing with Saudi Arabia as soon as we form an administration
  • Al-Hariri has been struggling to form a national unity government in Beirut since elections in May produced an inconclusive result

LONDON: Lebanese Prime Minister Saad Al-Hariri highlighted the potential for strong commercial and investment ties between Lebanon and Saudi Arabia at a conference in London on Thursday.
He described his relationship with Saudi Arabia as a good one: “I believe that the Saudi market is a good market for Lebanon.
“We have prepared many agreements that we will be signing with Saudi Arabia as soon as we form an administration. When we form a government, we will see Saudi Arabia taking some serious steps toward Lebanon.
Al-Hariri has been struggling to form a national unity government in Beirut since elections in May produced an inconclusive result.
But he hoped a new government would be unveiled before the end of the year or early 2019.
Al-Hariri said he recognized the need for urgent reforms to rebuild Lebanon after the civil wars of 1976-90, and clashes with Israel that left many areas pulverised in 2006. “We have to do things differently, we can’t go on as before,” he said.
He also spoke of the circumstances that Lebanon found itself after taking in 1.5 million Syrian refugees. There was a pressing need to restore the nation’s finances after several years of GDP growth of between 1 percent and 1.5 percent.
Al-Hariri added: “We can’t tell Gulf countries to come to Lebanon (to invest) at the same time as there are political parties (in Lebanon) cursing the hell out of the Gulf. We need to move away from the regional conflicts. Lebanon is too small to pay a price in these big conflicts. Big countries can afford it. We cannot.”
Creating employment was vital for Lebanese young people, and he said that the unemployment rate among refugees was 75 percent.
“We have to look outside of the box … where we can invest money, create jobs quickly.
“We want to prepare Lebanon as a platform for foreign companies to come and invest in, and make Lebanon a hub for them to take advantage of reconstruction in Syria, Iraq and even Libya.”
At a recent media briefing at the World Bank’s offices in Beirut, Lebanon’s economy was described as “unsustainable” by the bank’s vice president for the MENA region, Ferid BelHajj.
He said: “Lebanon has been defying gravity for quite some time”, and a day would come when “gravity materializes,” though he added that the central bank had a good buffer of foreign reserves. 
The IMF has called for “an immediate and substantial” fiscal adjustment to improve the sustainability of public debt, which stood at more than 150 percent of gross domestic product (GDP) at the end of 2017.
The World Bank has a $2.2 billion investment portfolio in Lebanon, but the lack of government means $1.1 billion of that amount — to be spent on jobs, health and transport projects — is still awaiting approval by Beirut before it can be used.
International donors meeting in Paris pledged more than $11 billion of investment for Lebanon, but they want to see reforms first.
At the Paris meeting Al-Hariri promised to reduce the budget deficit as a percentage of GDP by 5 percent over five years, Reuters reported.


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 23 April 2019
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.