Saudi Arabia’s approval of a new bankruptcy law has been welcomed as an important part of the kingdom’s reform agenda aimed at increasing the role of the private sector in its national economy.

The law, which was passed last week, has seven main goals that are geared towards increasing foreign and private sector investments in the kingdom, according to the Saudi Ministry of Commerce and Investment website. They are:

  1. Enabling a bankrupt debtor to resume activity
  2. Adequate consideration of the rights of creditors
  3. Regulated selling of bankruptcy assets and the distribution of proceeds fairly to creditors
  4. Reducing the cost of bankruptcy procedures and increasing their effectiveness
  5. Liquidation for the debtor and the facilitation of proceedings of small debtors
  6. Strengthening confidence in financial transactions and the credit market
  7. Raising the Kingdom's ranking in the settlement of bankruptcies

“Firstly, bankruptcy law is a big opportunity to really learn how the Saudi industries are performing,” Alexander Yatsenko, CEO at International Innovational Investment Center told Zawya by email.

“Secondly, the fact that Saudi is busy with the bankruptcy law is a sign of the recession-proof practice booming in rough times,” he added.

Last year, the Saudi economy shrunk for the first time since 2009, contracting by 0.5 percent as the government reined in public spending and implemented austerity measures, allowing it to narrow its fiscal deficit. (Read more here).

However, the kingdom reversed some of its austerity measures earlier this year by ordering new allowances to public sector employees. It also announced plans to increase government spending in 2018 to a record $261 billon, heeding advice from the International Monetary Fund regarding the dangers of imposing austerity too severely. (Read more here).

 

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(Reporting by Nada Al Rifai; Editing by Michael Fahy)

(nada.rifai@thomsonreuters.com)

 

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