SIDF s Role in Industrial Sector Development

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Rose Chase
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1 SIDF s Role in Industrial Sector Development of the Kingdom of Saudi Arabia

2 Large Land Area WHY INVEST IN SAUDI ARABIA? Rich in Natural Resources Prime Geographical Location Over 26 million people Access to 400 million consumers Extended Coast Line Developed Infrastructure Top Arab Performer in Forbes 2011 List 2

3 Established in 1974 ABOUT SIDF Capital grew from SR 500 million (J billion) to SR 20 billion (J 410 billion) Main objective is to support Industrial and manufacturing development through private sector participation Provides medium to long term loans Loans Provided for New, Expansion, Modernization & Relocation of Industrial Projects 3

4 Contd About SIDF Provides expert consultation to private sector Conducts Industrial Studies to keep a check on demand/supply balance 4

5 SIDF LENDING CRITERIA Provides loans to Sole Proprietorship, Partnership, Limited Liability Companies, and Joint Stock Companies Owners could be 100% local or 100% foreign or a mix Loan amount provided between 50% to a maximum of 75% of a project s cost depending on project location Minimum 25% of owners equity required Maximum Loan to single project SR 600 million (J billion) 5

6 Contd SIDF Lending Criteria Maximum SIDF loan exposure to a single borrower is SR 2 billion (J 41 billion) Loan repayment period from 5 years to 20 years depending on project s location and cash flows Loan disbursement based on incurred costs 6

7 Contd SIDF Lending Criteria Fund encourage investments in projects which: - introduce new technologies to the Kingdom - are environmental friendly - support local industry - create employment/training opportunities for local workforce - substitute imports - are export oriented - develop Kingdom s natural resources. 7

8 LOAN APPLICATION AND PROCESSING Basic information available on SIDF website ( Dedicated team of professionals to help investors before and after submission of Loan Application Minimum requirement to apply for a loan is Industrial Investment License and a Feasibility Study Industrial Investment License is issued by SAGIA 8

9 Contd LOAN APPLICATION AND PROCESSING The first stage of evaluation is pre-screening of application and the last stage is approval from the SIDF Board of Directors The project evaluation involves extensive technical, marketing & financial analysis The analysis helps in assessing the viability of the project and its contribution to the local economy The loan approval is followed up with continuous monitoring of project implementation and its performance till complete repayment of SIDF loan. 9

10 Contd LOAN APPLICATION AND PROCESSING SIDF FEES Evaluation Fee is charged only for approved applications Follow-up fees are charged on actual manhours spent on monitoring & providing services to the project till it is fully repaid. No pre-payment or late payment penalties 10

11 Contd LOAN APPLICATION AND PROCESSING LOAN SECURITY Mortgage on fixed assets as security of SIDF loan Requires personal and/or corporate guarantees of shareholders (except for a Joint Stock Company) SIDF loan approval facilitates an investor to avail supplemental borrowing from other financial institutions of the Kingdom 11

12 SIDF FINANCING ACTIVITY FOR LOCAL INDUSTRIAL PROJECTS By The End of The Fiscal Year 2011 Total Financed Projects 2,371 Total Approved Loans Amount SR Billion J 1.9 Trillion Number of Projects for which Loans are Fully Repaid 1,308 Percentage (out of total financed projects) 55% 12

13 Approved Loans as per Sectors: Number of Projects Loan Amount in Billion SR J Chemicals Engineering Products Consumer Products Other Construction Materials Cement Other Products Total 2, ,

14 PROJECTS PERCENTAGE DISTRIBUTION AS PER SECTORS (No. of Projects) Consumer Products; 27.1 (Approved Loan Amount) Engineering Products 21% Construction Materials; 16.2 Engineering Products; 28.9 Consumer Products 16% Cement; 1.3 Chemicals 40% Construction Material 11% Other Products; 1.9 Chemicals; 24.6 Other Products 2% Cement 10% 14

15 FINANCING DEVELOPMENT OF INDUSTRIAL CITIES INFRASTRUCTURE The Fund also extend loans to finance infrastructure development for the industrial cities owned by the private sector Financing includes projects for Factory Workers & Employees Housing, Logistic Support Services, Transportation Services and Warehousing Services. 15

16 FINANCING OF INDUSTRIAL SERVICE PROJECTS Natural gas distribution projects. Water desalination and sewage treatment projects. Industrial and medical waste treatment projects. Food and medicine sterilization projects Desalination projects targeting industrial cities 16

17 SME s FINANCING GUARANTEE PROGRAM (Kafalah) Kafalah Program commenced activity in January It aims to cover the risks of financers (commercial banks) partially in order to encourage them to finance viable small and medium scale projects. AMOUNTS GUARANTEED BY THE PROGRAM Kafalah Program guarantee 80% of loans extended by banks. Maximum Guarantee amount up to SR 1.6 million (J 32.8 million) 17

18 KAFALAH PROGRAM ACHIEVEMNTS FROM 2006 TO THE END OF 2011 No. of Guarantees 3,000 No. of Beneficiary Projects 2,000 Financing Amount Guarantees Amount SR 3 Billion (J 61.5 Billion) SR1.4 Billion (J 28.7 Billion) 18

SIDF RELATIONSHIP WITH JAPANESE COMPANIES Saudi Arabia & Japan enjoys long history of friendship. Japan is Saudi Arabia s one of the largest trading partners.

19 SIDF RELATIONSHIP WITH JAPANESE COMPANIES Saudi Arabia & Japan enjoys long history of friendship. Japan is Saudi Arabia s one of the largest trading partners. First Japanese owned manufacturing company funded by SIDF in its first year of inception (1974). SIDF has financed 20 projects involving ownership of more than 30 Japanese companies with investment of over SR 1 billion (J 21 billion) 19

20 SIDF Loans with Foreign Shareholding All World Japanese No. of Projects Approved Loan Amount SR 38 Billion J 779 Billion SR 1.04 Billion J 21.3 Billion The ownership of these 20 projects includes more than 30 Japanese Companies 20

21 Japanese Owners in SIDF Projects Sumitomo Metal Industries Sumitomo Shoji C. Itoh Company Teijin Company Limited Hino Motors Company Nippon Kokan Company Nichimen Company Marubeni Corporation Okura Company Okura Company Kobe Steel Company Limited Ain Company Ltd. Azuma Shokai Company Daikin Kogyo Company Limited Mitsubishi Heavy Ind. T. Chatani & Company Unicharm Corporation Fujikura Limited Marubeni Metals Corporation Seiren Company Limited Arabian Industrial Development Company Mitsui & Company Limited Nippon Steel Corporation Sankyo Company Limited Yamanouchi Pharmaceutical T&K Toka Corporation Japan Arabia Methanol Ueno Company Limited Kubota Corporation J-Power System Corporation Toyobo Company Limited Itochu Corporation 21

Key Economic Data. Saudi Economy from Regional & Global Perspective. Administrative Reform to Enhance Economic Activities. Saudi Exports & Imports.

2011 Key Economic Data. Saudi Economy from Regional & Global Perspective. Administrative Reform to Enhance Economic Activities. Saudi Exports & Imports. The 2011 Saudi Budget Why Invest in Saudi Arabia?