Saudi industrial plans seek extra help
How many mega-projects can a crippled market handle? Saudi state bodies such as the Public Investment Fund are doing more to help the financing of projects but it might not be enough. Dominic O’Neill reports from Riyadh.
THE PROJECT OF steering a vast desert kingdom towards ultra-modernity and diverse, export-led industrialization gathers pace. In an era of sparse international credit, it is even more important but much more difficult to maintain the speed.
On Saudi Arabia’s side are estimated foreign assets of about $500 billion, the legacy of the commodity super-cycle and conservative asset management on the part of the central bank.
"Lower confidence in Saudi Arabia is a result of psychology rather than an actual lack of capital"
John Sfakianakis, Saudi British Bank
"Even if the oil price went down to $1 a barrel and stayed there, Saudi Arabia has capital reserves to have an expansionary budget for the next four years," says John Sfakianakis, chief economist at Saudi British Bank, an HSBC affiliate. This is fortunate. The 2009 budget projects a 16% increase in government spending to SAR475 billion ($126 billion) – the biggest budget in the Kingdom’s history. There is also an intensified focus on capital expenditure, which will increase by 36% to SAR225 billion. With lower defence allocations, the focus is on health and education.