Saudi Arabia

Country risk

Country risk in Saudi Arabia is low. The OECD country credit rating is 2 and the country has investment grade ratings from all three major private rating agencies. This suggests that there is a low likelihood of the country being unable/unwilling to meet its external debt obligations. That said, individual debtors and sub-sovereign entities can and do default.

The World Bank’s ease of doing business gauge ranks Saudi Arabia’s business climate 62nd out of 190 economies. In recent years, Saudi Arabia has made wide-ranging reforms, including establishing a one-stop shop for company incorporation that makes it easier to start a business. Saudi Arabia outperforms the Middle East region on most doing business indicators, except for resolving insolvencies. Foreigners may find it difficult to collect on their debts. Euler Hermes indicate 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 and has a track record of solid fiscal and economic management. That said, Saudi Arabia scores lowly on measures of voice and accountability. The monarchy controls the government and most laws are based on Islamic principles, often limiting freedom of expression.

Political risk in Saudi Arabia is low to moderate, and includes risks related to escalation of regional geopolitical tensions that can hinder oil production and trade.

The risk of expropriation in Saudi Arabia is moderate. The US investment climate statements note that generally 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 to ensure they comply with Sharia law. This review process can be lengthy, and outcomes are unpredictable. Further, some disputes are handled through intra-ministerial administrative bodies and processes in Saudi Arabia instead of a court. The US is not aware of any cases of expropriation of foreign investment without adequate compensation, but some SMEs have had their investment licences cancelled without justification, causing them to forfeit their investments.