SR271bn projects: Banks compete for finance deals

A group of local and global banking and financial institutions have engaged in a fierce competition to win the funding of energy and mining projects worth SR271 billion expected to be awarded in 2014, local media said quoting experts.
Power and energy projects are worth SR140 billion while mining projects will cost SR131 billion amid government’s sincere support to the exploitation of mining resources meant to boost economic and industrial development in the Kingdom, Al-Riyadh daily said quoting the experts.
This fierce competition comes on the back of liquidity abundance and low loans-to-deposits (LTDs) ratio, which led the banking and financial institutions to lower profit margins seeking to gain the biggest portion of funding deals, the experts said.
However, this trend may not continue for long amid estimations that the ratio of LTD grew by 7 basis points (bp) in the third quarter of the current year, they said.
Foreign investors are eager to get investment opportunities in mineral resources in the Kingdom through foreign direct investment (FDI) system, which contains all privileges enjoyed by the national companies.
The system reportedly allows a foreign investor to own properties for practicing the licensed activity to which the sponsorship of the investor and non-Saudi employees will be referred.
According to the experts, the Kingdom’s new mining system contains measures aimed to curb production costs and ease limitations imposed on investors whereby an investor could get 20 percent discount of his tax obligations, a matter that will attract more investments on mining resources in the Kingdom.
Despite the fact that gold prices fell to a record level compared to the last five years reaching $1,255 an ounce, it however remains profitable for gold mining firms, which even opted to expand into other precious minerals such as copper, zinc, bauxite and phosphates, and convert them into multiple manufacturing products with high standards competitive at global markets, the experts pointed out.
They said development of the mining sector occupies a prominent position in Saudi Arabia’s program of diversification away from hydrocarbons.