Saudi bankruptcy law positive for investor sentiment: BMI

The bankruptcy law recently approved by Saudi Arabia’s cabinet indicates the government’s commitment to improving the Kingdom’s business environment, in a bid to attract foreign investment, BMI Research said on Wednesday.

“The move is crucial to facilitate technology transfer and infrastructure development, which are key tenets of Saudi Arabia’s economic transformation,” the research agency said in a report.

Earlier this week, the Saudi government approved the country’s first bankruptcy law, which had been sanctioned by the Shura Council in December.

The cabinet is yet to confirm when the law will be enforced, but BMI said it sees few obstacles to its implementation.

“We believe that, by signaling the government’s commitment to economic reform and by facilitating administrative procedures, the law will be positive for investor sentiment,” the report said.

“This underpins our view that the slump in the Purchasing Managers’ Index (PMI) seen in January 2018 will prove short-lived, largely reflecting the introduction of a 5 percent value-added tax (VAT).”

According to BMI Research, other factors that would impact investor sentiment in 2018 include the results of the major economic and social reforms that the government has undertaken such as the listing of 5 percent of Saudi Aramco and issuing driving license to women.

“We believe that these structural reforms will largely determine the pace of transformation in the Kingdom, strongly impacting investor sentiment,” it said.

The research firm sees the Kingdom’s recent anti-corruption campaign having a negative impact on investor sentiment over the coming months.