Country risk in Saudi Arabia is low with an OECD country credit grade of 2 and investment grade credit ratings from all three major private rating agencies. This suggests a low likelihood that it will be unable and/or unwilling to meet its external debt obligations in a systemic sense. Though individual debtors and sub-sovereign entities can and do default.
The World Bank’s ease of doing business gauge—which attempts to measure regulation and red tape relevant to a domestic small to mid-sized firm—ranks Saudi Arabia’s business climate 92 out of 190 economies. Saudi Arabia outperforms most of region on most indicators, but trading across borders, resolving insolvencies and starting a business is difficult. In addition, foreigners may find it difficult to collect on their debts. The Euler Hermes survey found that late payment is common practice and late interest cannot be charged in Saudi Arabia. The legal system is also slow, costly and unpredictable.
Saudi Arabia scores in the top half of most governance indicators. The monarchy controls the government and most laws are based on Islamic principles, often limiting freedom of expression. Not surprisingly, Saudi Arabia scores very poorly on ‘voice and accountability’. Political risk in Saudi Arabia is low to moderate.
The risk of expropriation in Saudi Arabia is moderate. The Saudi Board of Grievances has jurisdiction over commercial disputes between the government and private contractors. The Board also reviews foreign awards and court decisions. This review process can take years, and outcomes are unpredictable, making it difficult for foreign investors to seek recourse against the state. Further some disputes don’t make it to court and are instead argued by intra ministerial administrative bodies. The US investment guide notes no recorded instance of expropriation, but they state that some SMEs have had their investment licences cancelled without justification.