Saudi net foreign assets 'could be worth $600bn'
Riyadh, April 25, 2012
The combined net foreign assets of Saudi entities (including government, companies and individuals) are estimated to be around $600 billion at the end of 2011, a report said.
Recent data shows that the combined foreign assets of the Saudi economy grew rapidly in recent years to stand at $707 billion at the end of 2010. With Saudi entities and individuals owing $213 billion to foreigners, total net foreign assets stood at $494 billion at the end of 2010, the Jadwa Investment report said.
“We estimate that the kingdom’s net foreign assets rose to almost $600 billion at the end of 2011. This is very high and represents a core source of strength for the economy,” the report said.
The data, known as the international investment position, gives a full picture of the kingdom’s financial position versus the rest of the world. Produced by Sama, it shows the value and types of assets that are owned, and the liabilities owed, by all parts of the kingdom’s economy.
Data on the position of the government and the banks are reported on a monthly basis by Sama, but this is the first time that data has been issued which includes the private sector, said the report.
At the end of 2010, the kingdom’s net international investment position was equivalent to 110 percent of GDP. Of the 42 countries for which the international investment positions are published and easily accessible (primarily in Europe and Asia) only Hong Kong, Singapore, Taiwan and Switzerland had a higher net position.
The US and Euro zone both had negative net international investment positions, and Greece, Spain, Ireland and Portugal were among the five countries with the largest shortfall in foreign assets compared to foreign liabilities.
The four years of data that were released by Sama show a consistent improvement in the net international investment position, which climbed to $494 billion at end-2010 from $375 billion at the end of 2007. This was driven by higher oil revenues. For most of the period between 2007 and 2010, oil revenues were in excess of government spending, enabling a large build up of reserves in the form of foreign securities and bank deposits.
“No data is available on the makeup of the government’s holdings of foreign securities; we assume that the bulk is comprised of foreign government bonds,” Jadwa said.
A breakdown by the holder of assets and liabilities is not contained in the new data. However, it is possible to derive this from the data. Of the $707 billion of total foreign assets at the end of 2010, reserves totalled $445 billion, foreign assets of local banks were $51 billion and independent government organizations (such as the pension funds) deposits with foreign banks and investment in foreign securities amounted to $79 billion. “This leaves $132 billion, which we assume was the value of foreign assets held by the private sector (both businesses and individuals),” said the report.
Of the liabilities that the Kingdom had to the rest of the world at end-2010, $25 billion was accounted for by local banks and a further $3 billion by foreign institutions’ deposits at Sama. This leaves $185 billion, which we assume to be the amount the private sector owes to the rest of the world, it said. Although this figure is larger than private sector foreign assets, it is primarily direct investment by foreigners, which has been beneficial to the Saudi economy, Jadwa said. – TradeArabia News Service
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