RIYADH/SAUDI ARABIA – The merit of Saudi Arabia’s new bankruptcy lay, part of efforts to help the kingdom attract investors, should become clearer in about a year after courts handle initials cases, a World Bank representative and senior government official told Reuters.
A lack of modern bankruptcy regulation had created difficulties for struggling companies seeking to restructure debt with creditors since the 2009 global financial crisis and the ore recent dip in oil prices.
Legislation introduced in 2018 is part of broader efforts to overhaul the economy of the world’s top oil exporter to entice foreign investment, create jobs for young Saudis and diversify into non-oil industries.
“They have started on insolvency”, said Simeon Djankov, World Bank senior research director and founder of the Doing Business report, which on Thursday ranked Saudi Arabia’s business climate the most improved over the previous year.
“The law has been passed, secondary legislation was already passed. Now we need to see whether the courts actually understand how to implement it”.
Djankow said only three cases had been settled and around a dozen others are currently in the courts. Several dozen more, expected to be resolved over the next year, should provide enough evidence to evaluate the law’s success, he added.
The two main open cases involve conglomerates Saad Group, owned by indebted billionaire Maan al-Sanea, and Ahmad Hamad Algosaibi and Brothers (AHAB), which defaulted on about $22 billion in combined debt in 2009.
Resolving insolvency was an area of improvement for Saudi Arabia, climbing 30 places to 62nd in the World Bank report which showed sharp improvement in other Gulf countries and a lag in Latin America.
Eiman al-Mutairi, who heads Arabia’s National Competitiveness Center, said she expects further advances next year as the bankruptcy law and other reforms come fully on line, including a building code law and planned amendments to licensing regimes.
“Are we there yet? No. Do we want to do more? Absolutely”, said Mutairi, who is one of the highest-ranking women in the Saudi government.
She attributed the jump in Saudi Arabia’s standing to authorities’ efforts to cater their reforms to the private sector’s concerns.
“Maybe we’ve worked with investors many years ago but sometime we just don’t listen to them”, she said. “Let’s face it: we did not listen to the investors’.
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