 Saudi
Arabia Trade and Project Financing
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PROJECTS
& TRADE FINANCE FACILITIES
Riyadh – Saudi Arabia. |
Author - U.S. Department of Commerce
Source:
STAT-USA on the Internet
US Department of Commerce
(202) 482-1986
Brief Description of Banking System
The Saudi Arabian Monetary Agency (SAMA), the Saudi central bank,
regulates and controls the Saudi banking sector. Financing is
available to Saudi and non-Saudi businessmen and entities.
Offshore banking and trust operations do not exist in Saudi
Arabia, and there is no legislation that permits the
establishment of these operations. The securities market is still not highly developed, but
continues to mature. The trading volume is moving upward as is
the number of new mutual funds. Banks are the sole entities that
may act as stockbrokers for publicly traded shares or for joint
stock companies. The most significant recent development is
SAMA's approval to allow foreigners to buy and trade shares of
Saudi companies within a closed-end fund listed in the United
Kingdom. The major development in the banking sector in 1997 was the
merger of two of the 12 local banks. The United Saudi Commercial
Bank and the Saudi Cairo Bank merged into the new United Saudi
Bank. The profits of Saudi Arabia's 11 commercial banks
continued to rise in 1997, up 12 percent from the $1.32 billion
earned in 1996. For the third year, the Al-Rajhi Banking and
Investment Corporation had the highest net profits, $346 million.
At the end of 1997, the cumulative size of the banks' balance
sheets had grown by 6.5 percent over year-end 1996 to $101.8
billion. The net foreign assets of the commercial banks stood at
$14.3 billion at year-end 1997, marking a decrease from the
year-end 1996 level of $18 billion. Foreign assets of the banks were
probably repatriated in 1997 to satisfy growth in domestic loan
demand. Eight of the commercial banks are joint venture banks.
The major foreign partners in the Saudi joint venture banks are
Citibank, Arab Bank Ltd., Banque Indosuez, HSBC Holdings, and ABN
Amro. Commercial banks operating in Saudi Arabia ranked by total
assets: The National Commercial Bank
Riyad Bank
Saudi American Bank
Al-Rajhi Banking and Investment Corporation
Arab National Bank
Saudi British Bank
Saudi French Bank
United Saudi Bank
Saudi Hollandi Bank
Saudi Investment Bank
Bank Al-Jazira Foreign Exchange Controls Affecting Trading
Saudi Arabia imposes no foreign exchange restrictions on capital
receipts or payments by residents or nonresidents, beyond a
prohibition against transactions with Israel. Although
officially linked to the IMF's Special Drawing Rights, Saudi
Arabia in practice pegs its currency, the riyal, to the U.S.
dollar. Saudi Arabia last devalued the riyal in June 1986 when it set the
official selling rate at SR 3.7450 = $1. The Saudi Arabian
Monetary Agency and all residents may freely and without license
buy, hold, sell, import, and export gold, with the exception of
gold of 14 karats or less. General Financing Availability and Terms of Payment
Saudi policies facilitate the free flow of financial resources.
Credit from the commercial banks is allocated on market terms,
and foreign investors can obtain credit on the local market. The
private sector has access to a variety of credit instruments. Soft financing is available from specialized credit institutions:
the Saudi Agricultural Bank, the Saudi Credit Bank, the Public
Investment Fund, the Saudi Industrial Development Fund, and the
Real Estate Development Fund. The Saudi banking system is well capitalized and well
provisioned. The Embassy is not aware of any
"cross-shareholding" or "stable shareholder" arrangements being
used by private firms to restrict foreign investment through
mergers and acquisitions. Nor is the Embassy aware of any laws or regulations which
specifically authorize private firms to adopt articles of
incorporation/association which limit or prohibit foreign
investment, participation, or control. Foreign participation in
the Saudi Arabian Standards Organization (SASO) is not possible. Types of Export Financing and Insurance Available to U.S.
Exporters, Including Bilateral, Multilateral and Local Sources
The U.S. Export-Import Bank and other U.S. export credit agencies
have been involved in Saudi Arabia supporting trade with private
Saudi companies. The Government of Saudi Arabia may use the
facilities of these export credit agencies to support major
infrastructure projects. The Islamic Development Bank fosters the economic development and
social progress of member countries and Muslim communities. It
participates in equity capital and grants loans for productive
projects and enterprises, besides providing financial assistance
to member countries in other forms for economic and social
development. Types of Project Financing Available, Including Facilities
Available from Multilateral Institutions and Types of Projects
Supported
Project financing is available in the Kingdom from longer-term
loans by the local commercial banks and Saudi specialized credit
institutions such as the Saudi Industrial Development Fund or the
Public Investment Fund. The Saudi Government does not receive
project financing from multilateral institutions such as the
World Bank. The Saudi Government is considering the possibility
of project finance arrangement for the Shuaiba electric power
plant; but no final decisions have been made.
The U.S. Export-Import Bank has not, so far, engaged in any project finance
activities in Saudi Arabia. List of Banks with Correspondent U.S. Banking Arrangement
Because of their ownership structure, Saudi American Bank
(Citibank) and Saudi Investment Bank (Chase Manhattan) have
direct correspondent relationships with U.S. banks. The Embassy
assumes that the other Saudi banks also have correspondent
relationships with the U.S. institutions, whether the home office
in the United States or branches in Europe or Bahrain.
Also See
The Saudi Business Center
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