New law gives priority to preventive settlement and financial restructuring measures to resolve the difficulties facing debtors, rather than penalizing them.

Jojo Puthuparampil is a business news writer for Inc. Arabia.

Saudi Arabia plans to overhaul its bankruptcy laws and is seeking the public’s view on proposed changes, Arabian Business reported.

The Ministry of Commerce and Investment (MCI) has sought the opinion of businesses and public sector bodies on a proposed bankruptcy law and its implementation, it said on its website.

Plans to reform existing legislation and create a robust insolvency framework to support private sector growth are part of Saudi Arabia’s 2030 vision, which aims to support the country’s small and medium businesses (SME) sector among its many goals.

According to MCI, the topics under discussion include preventive settlement measures, financial reorganization, liquidation, procedures for small debtors, performed administrative liquidation and other bankruptcy procedures.

The draft bankruptcy law has 320 articles, according to Maher Othman, the bankruptcy system project manager at MCI.

It gives priority to preventive settlement and financial restructuring measures to resolve the difficulties facing debtors, rather than penalizing them.

It also aims to help troubled startups to restart their businesses, Othman told delegates at a workshop called to discuss and seek public opinion on the proposed changes.

The bankruptcy reform initiative is launched to enable defaulter projects to overcome financial difficulties so that they can continue or choose liquidation, Bader Al-Haddab, general supervisor of the Agency of Technical Affairs at MCI, was quoted as telling media persons.

“The move will preserve the rights of debtors and other stakeholders to enhance confidence in business and financial transactions,” he said.

Saudi’s Vision 2030 plan, apart from focussing on liberalizing Aramco, setting up a mega-fund to make investments, and restructuring the government, also aims to enhance opportunities for SMEs.

SMEs in the Kingdom are not yet major contributors to its GDP. The World Bank put SME contribution to the country’s GDP around 20%.

The plan seeks to increase access to formal sources of capital for small businesses – the Kingdom’s financial firms would be ‘encouraged’ to allocate up to 20% of their overall lending to SMEs by 2030.

This, though, would be a hard-sell as while public banks may fall in line with the plan, private sector banks would be perhaps a different kettle of fish.

SMEs will also have another avenue. The Saudi Stock Exchange, also known as Tadawul, has unveiled plans to establish an equity market targeting small and medium enterprises (SMEs) from the beginning of 2017.

Under Saudi Vision 2030, the government also plans to create a supply of talent with the skills to invigorate the SME sector. 

The Green Card-like system is one such initiative, as it will allow expat talent to look at the kingdom as a place where they can invest a large part of their working careers in.

The plan is expected to help reduce unemployment to 7% from 11.6%.