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Saudi Arabia Explores Financing New Type for Logistics Sector

Saudi Arabia is currently conducting a technical study to provide public companies in the logistics services sector with new funding for “build to suit” warehouse construction projects. (Asharq Al-Awsat)
Saudi Arabia is currently conducting a technical study to provide public companies in the logistics services sector with new funding for “build to suit” warehouse construction projects. (Asharq Al-Awsat)
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Saudi Arabia Explores Financing New Type for Logistics Sector

Saudi Arabia is currently conducting a technical study to provide public companies in the logistics services sector with new funding for “build to suit” warehouse construction projects. (Asharq Al-Awsat)
Saudi Arabia is currently conducting a technical study to provide public companies in the logistics services sector with new funding for “build to suit” warehouse construction projects. (Asharq Al-Awsat)

Saudi Arabia is currently conducting a technical study to provide public companies in the logistics services sector with new funding for “build to suit” warehouse construction projects due to the high demand for this type of loan.

Specializing in providing commercial property lessees with an agreement with a developer or landowner to construct a new facility for rent, this type of financing allows for optimal use of the land and building. The lessee usually becomes the sole occupant and determines the design to meet business needs.

Sources said the Saudi Ministry of Transport and Logistics Services and the Saudi Industrial Development Fund have instructed the private sector to grant direct access to new funding for three nominated companies.

This decision follows a series of meetings held to discuss the mechanism, marking a step towards developing and enabling operating facilities in the sector.

Sources confirm that one facility has expressed interest in participating in a trial of the new funding, with two available opportunities currently under consideration.

The move aims to contribute to the development of the logistics services sector, which is experiencing a qualitative leap in Saudi Arabia, and to enable operating companies in the sector.

Prince Mohammed bin Salman, Crown Prince and Prime Minister, launched the National Strategy for Transport and Logistics Services in 2021, with the aim of positioning the Kingdom as a global logistics hub connecting three continents.

The strategy intends to upgrade all transportation services and bolster integration in the logistics services system and modern transportation patterns. This aims to support the Kingdom's comprehensive development process.

The strategy comprises a series of significant projects designed to facilitate the attainment of economic and social objectives, along with the implementation of efficient governance models to strengthen institutional operations within the system.

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Israel Central Bank Holds Rates

The Bank of Israel building in Jerusalem. Reuters
The Bank of Israel building in Jerusalem. Reuters
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Israel Central Bank Holds Rates

The Bank of Israel building in Jerusalem. Reuters
The Bank of Israel building in Jerusalem. Reuters

The Bank of Israel kept interest rates unchanged on Wednesday for a sixth straight meeting, but raised the prospect of future rate increases should armed conflict on two fronts push inflation up more than expected.
The central bank - also worried about Israel's investor risk premium which has risen since the Gaza war began on Oct. 7 last year - left its benchmark rate at 4.50%.
"In view of the continuing war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity," the central bank said in a statement.
Policymakers expressed worries over rising inflation stemming largely from supply constraints related to the war with Hamas in Gaza and accelerating fighting with Hezbollah in Lebanon, saying the increase in the pace of inflation is broad, Reuters reported.
Israel's annual inflation rate rose to 3.6% in August from 3.2% in the previous month, moving further above the government's 1%-3% target range after falling as low as 2.5% in February.
Bank of Israel Governor Amir Yaron told a news conference after the decision that the future direction of interest rates was "data dependent.”
Prior to the war, rates - which rose rapidly in 2022 and 2023 - were expected to decline this year. The central bank had reduced its key rate by 25 basis points in January but it has been on hold since due to the war, rising inflation pressures, a widening budget deficit and the higher risk premium.
Some investors have begun to speculate that inflation will continue to rise and possibly push the central bank to raising rates again.
"If inflation rises at a faster rate than we predicted ... we can definitely raise the interest rate," Yaron said, noting the inflation rate is expected to gain in near term.
Yaron said the current level of rates is believed to be restrictive enough to ultimately bring inflation back to within its target.
He added that in the current period Israel's uncertainty is far greater than what the US and European central banks - which have started to loosen policy - are experiencing.
The decision to hold rates steady came despite the bank's research department slashing its forecast for Israeli economic growth this year to 0.5% from a previous estimate of 1.5%.
The economy grew an annualized 0.7% in the second quarter, slowing markedly from a 17.2% pace in the first quarter.
All 14 analysts polled by Reuters had expected no rates move on Wednesday.
The central bank's researchers raised their inflation forecast for the coming year to 3.2% from 3.0%, while the interest rate is projected at its current 4.5% level, rather than 4.25% predicted in July.
The staff raised their expectation for Israel's 2024 budget deficit to 7.2% of gross domestic product from 6.6% due to the extra funds needed to finance the military conflicts. They see a 4.9% of GDP deficit in 2025.
"Approval of a responsible budget for 2025 is an essential component in strengthening the international markets’ trust and maintaining the economy’s robustness," Yaron said.
The budget's passage has been delayed due to political infighting.
The rates decision was initially slated for Monday but was moved to not coincide with the Oct. 7 anniversary of the start of the Gaza war.