A package of new laws drafted by Saudi Arabia as part of its Vision 2030 will attract more private investment and enhance the credit quality of the Kingdom's infrastructure deals, Moody's Investors Service said Tuesday in a new report.
The new laws, which will exempt infrastructure investors from certain existing Saudi laws and ease real estate ownership restrictions among other things, will improve credit quality by making Saudi public sector actions and legal processes more transparent and predictable.
“While the new laws will boost investment in established sectors like power and water, they will be especially beneficial for transactions in new sectors such as social infrastructure because they will reduce uncertainty for creditors,” said Analyst Kunal Govindia, a Moody's Assistant Vice President.
Saudi’s push to make investment more attractive for private companies is a key pillar of its Vision 2030 plan, which also aims to diversify the economy away from natural resources.
On the other hand, the agency said the attack on Saudi Arabia’s oil facilities was “credit negative” and the production disruption significant.
But it said it didn’t expect this to have a long-lasting effect on Saudi Aramco’s financial profile, citing the company’s robust balance sheet and strong liquidity buffers.
In this context, asset management industry in Gulf Cooperation Council (GCC) countries is set for steady growth over the next decade, helped by the region's diversification away from oil and encouragement of foreign investment, Moody's said in another report published Tuesday.
According to the report, GCC asset managers primarily focus on traditional asset classes, with real estate the main alternative class.
“The sector is concentrated in local markets, creating capacity constraints and limiting growth.”
Although the regulatory environment is improving, several jurisdictions will need to adopt more rigorous supervision to compete with Western markets, it added.
Moody's estimates that GCC investment managers had $260 billion of assets under management (AUM) as of December 2018.
The largest market is Saudi Arabia, accounting for slightly less than half of regional AUM, followed by Kuwait, Bahrain, United Arab Emirates.