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Industry official slams Saudi banks
'Backtracking from financing government projects resulted in delaying schemes' execution'.
- By Abdul Rahman Shaheen, Correspondent
- Published: 23:04 February 10, 2009
Riyadh: Fahd Al Hammadi, chairman of the Contractors Committee at the Riyadh Chamber of Commerce and Industry, has attributed the negative attitude of local banks in financing government projects for the delay in implementing these projects on a time-bound basis.
"Saudi banks' backtracking from financing these projects has resulted in delaying implementation of the projects by 20 to 30 per cent during the past few months. The Saudi private sector relies heavily on these projects, mainly the infrastructure ones," he told reporters after attending a meeting of the committee held here on Sunday.
The meeting discussed the major problems faced by the Saudi contracting sector following the reluctance of Saudi banks to fin-ance the projects.
Al Hammadi said that banks are wary of extending finance for ongoing infrastructure projects and this attitude was evident after reports about the global financial crisis started appearing a few months ago.
"The local banks have also raised interest rates up to 12 per cent for the financing of these projects despite a lowering in the rates worldwide to even less than three per cent. It is also to be noted that this finance was being extended on a guarantee letter from the Ministry of Finance," he said.
Al Hammadi urged the Saudi government to establish a fund or a bank with a capital of not less than 10 billion Saudi riyals (Dh9.79 billion) to finance contractors.
"The formation of such a bank or fund is the need of the hour to enhance liquidity and overcome the problems created by the banks in financing and thus hampering the smooth implementation of these projects," he said, while recalling there was a finance fund earlier under the Ministry of Finance called the Fund for Financing Contractors but it was abolished a few years ago.
"The meeting decided to approach the Minister of Finance, Dr Ebrahim Al Assaf, with a demand to open such a bank or fund on an urgent basis," he said.
Al Hammadi also drew attention to the decision of King Abdullah Bin Abdul Aziz to distribute compensation among the contractors, who have been badly affected by a huge rise in prices of building materials up to 40 per cent during the past year.
"The Royal Decree also mentions establishing such a fund," he said.
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