Saudi Arabia’s new bankruptcy law faces key court test

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RIYAD (Reuters) – The merit of Saudi Arabia’s new bankruptcy law, which is part of efforts to help the kingdom attract investors, is expected to become clearer in about a year after courts have dealt with the first cases, said a representative of the World Bank and a senior government official told Reuters.

FILE PHOTO: Saudi Arabia’s Crown Prince Mohammed bin Salman speaks during talks with Russian President Vladimir Putin in Riyadh, Saudi Arabia, October 14, 2019. Alexander Zemlianichenko / Pool via REUTERS / File Photo

The lack of modern bankruptcy regulations had created difficulties for struggling companies seeking to restructure their debt with their creditors since the global financial crisis of 2009 and the more recent drop in oil prices.

The legislation introduced in 2018 is part of broader efforts to reform the economy of the world’s largest oil exporter to attract foreign investment, create jobs for young Saudis and diversify into non-petroleum industries.

“They started insolvency,” said Simeon Djankov, senior research director at the World Bank and founder of the Doing Business report, which on Thursday ranked Saudi Arabia’s business climate the most improved compared to the previous year. .

“The law has been passed, secondary legislation has already been passed. Now we have to see if the courts really understand how to implement it. “

Djankov said only three cases have been settled and a dozen more are currently before the courts. Several dozen more, expected to be resolved over the next year, should provide enough evidence to assess the law’s success, he added.

The two main open cases concern conglomerates Saad Group, owned by indebted billionaire Maan al-Sanea, and Ahmad Hamad Algosaibi and Brothers (AHAB), which defaulted on around $ 22 billion in combined debt in 2009.

Insolvency resolution was an area of ​​improvement for Saudi Arabia, climbing 30 places to 62nd place in the World Bank report which showed marked improvement in other Gulf countries and lagging behind in Latin America.

Eiman al-Mutairi, who heads Saudi Arabia’s National Competitiveness Center, said she expects further progress next year as the bankruptcy law and other reforms are fully implemented. implementation, including a building code law and planned changes to licensing regimes.

“Are we there already? No. Do we want to do more? Absolutely,” said Mutairi, who is one of the most senior women in the Saudi government. “I hope this is just the beginning. . “

She attributed the increase in Saudi Arabia’s status to the authorities’ efforts to tailor their reforms to private sector concerns.

“Maybe we worked with investors many years ago, but sometimes we just don’t listen to them,” she said. “Let’s face it: we haven’t listened to the investor.

Reporting by Stephen Kalin, editing by William Maclean


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