Saudi denies delaying $200bn project, vows future spending
Saudi Arabia has not shelved a $200 billion plan with SoftBank Group Corp to build the world’s biggest solar-power-generation project, as the Wall Street Journal reported on Sunday, citing Saudi government officials.
SoftBank Chief Executive Masayoshi Son had announced in March a plan to invest in creating the world’s biggest solar power project in Saudi Arabia, a project expected to have the capacity to produce up to 200 gigawatts (GW) by 2030.
“No one is actively working on the project, and instead, the Saudi kingdom is working up a broader, more practical strategy to boost renewable energy, to be announced in late October, the WSJ reported, according to Reuters.
The PIF has described the report, describing it as “inaccurate”.
“The Public Investment Fund continues to work with the SoftBank Vision Fund, and other parties, on a number of large-scale, multi-billion dollar projects relating to the solar industry, which will be announced in due course,” a fund spokesperson told Saudi Press Agency.
Regardless, the kingdom is on a determined path to invest and attract cash inflows into an economy where new foreign direct investment only reached $1.4 billion in 2017.
Saudi did little, over the years, to revamp its commercial law because state-led investments dominated the oil industry and other private sector development endeavors.
Saudi Arabia’s first comprehensive reform of its bankruptcy law went into effect last month, paving the way for companies experiencing legal disputes with state or private entities to obtain relief from creditors, seek recourse to arbitration, and choose the right course whether to restructure, liquidate, or resolve the conflict.
“…the driving force behind (Vision 2030) remains the tangible and impactful modifications done to local laws and regulations that drive investment,” Bruce McAlister, a general counsel for industrial conglomerate GE, told Reuters, citing the bankruptcy law, new laws on government-private sector partnerships, and rules allowing 100% foreign ownership of trading firms.
Specialized commercial courts and appeal chambers were established last year, giving, for instance, a 9-year-old impasse over a $22 billion in debts left by collapsed Saad Group and Ahmad Hamad al-Gosaibi & Bros Co a chance of being resolved..
Tim Callen, International Monetary Fund mission chief to Saudi Arabia, said its forecast for non-oil economic growth to accelerate from 1.1% in 2017 to over 3% in early 2020 was based partly on the legal reforms.
“The country received 163 applications to enforce foreign judgments worth $667 million last year,” said Reuters.
“Among several successful applications in recent months, a Riyadh court enforced a U.S. ruling for a Saudi tourism firm to pay $3.8 million, and a Jeddah court ordered a Saudi miner to pay a Chinese firm $10.1 million,” Reuters reported the Justice Ministry as saying without naming the firms.
Robust spending 2019
Boosted by Brent oil prices reaching near $83, Saudi Arabia plans to increase spending next year more than initially forecast as authorities take advantage of higher oil prices to spur economic growth and reduce unemployment, reported Gulf Insider.
Public spending is expected to reach $295 billion in 2019, $27bn more than the government had projected last year, Finance Minister Mohammed Al-Jadaan said last Sunday. Authorities expect spending to rise to $316 billion by 2021, he said, citing initial estimates.
Al-Jadaan said: “We wanted to make sure that the economy grows and the private sector is enabled and therefore creates jobs for our youth.”
The government expects GDP to expand 2.1% this year after contracting 0.9% in 2017, and revenues to rise to $271 billion in 2020 and $264 billion in 2019, from $238 billion in 2018.
The budget deficit is seen narrowing to 3.7% of GDP in 2021 from 5% this year, but public debt is projected to increase to 25% of GDP from 20% in 2018.
The kingdom has posted budget deficits totaling more than $260 billion since the 2014 crash in oil prices, according to the Saudi Press Agency (SPA).
Saudi said on Sunday it expects to balance its budget by 2023, as oil prices rebound and the deficit-hit kingdom looks to diversify revenue.
“The deficit is expected to continue to decline gradually over the medium term… until it reaches the fiscal balance by 2023,” said Saad Alshahrani, head of the finance ministry’s fiscal policy department, in a statement carried by the official Saudi Press Agency.
Saudi Energy Minister Khalid Al-Falih told reporters in Algiers on Sept. 23 that demand for Saudi crude in October could range from 10.5 million to 10.6 million barrels a day.
The Saudi economy took a turn for the better in the first half of 2018, as revenues jumped 67%, mainly due to a rise in oil prices, according to SPA, however public spending rose 34% for the same period, according to official figures.