Written by Gérard Al-Fil, Dubai

S&P analysts justify their upgrade, garnished with a «stable» outlook, by citing the progress being made in transforming the oil-rich state into an economy focused on services and future technologies with its total population of 34 million people. The report also praises the government for cutting back on some megaprojects, which will have a positive impact on the budget.

Factories and jobs for Saudis

In particular, the alleged $500 billion planned future city of Neom (an acronym of Neo and Mustaqbal (Arabic for future)) in the northwest of the country has been delayed, and the project has been scaled down to prioritize, as Finance Minister Mohamed Al-Jadan said, «factories and jobs for Saudis.» Vision 2030 is the master plan of the de facto ruler, Crown Prince Bin Salman, while his father, King Salman, remains the official monarch of the kingdom. 

 Improved payment practices called for

«We forecast strong credit growth of around 10%, driven primarily by corporate loans for Vision 2030 projects,» says credit analyst Zahabia Gupta at S&P Global in Dubai. One of these projects is the King Salman International Airport under construction in Riyadh. According to the business plan, this airport is expected to become the world's largest civil aviation hub by 2050, capable of handling 185 million passengers per year.

The OPEC state of Saudi Arabia is the world's second-largest crude oil producer, with 11.12 million barrels per day, just behind the USA (21.91 million). One barrel corresponds to 159 liters of oil.

Nevertheless, foreign companies quietly push for more transparent payment terms for recipients and urge better payment practices in the Gulf state. The Riyadh Metro for example, which opened in January, was co-built by the American Bechtel Group and Salini Impregilo of Italy, among others. According to Gulf News, Dubai, the consortium has repeatedly fought for billions in outstanding receivables in recent years.

According to credit insurer Allianz Trade, this is not an individual case. «Payment default is widespread in Saudi Arabia. There are no legal regulations for late payments, and default interest is prohibited.» Furthermore, insolvency law is only weakly codified, says Allianz Trade on its website covering economic research.