Minister of Finance Mohammed Al-Jadaan stated clearly that it is possible that businessmen and the private sector may lose money or even become bankrupt as a consequence of the austerity measures that are currently taking place.

His statement indicates the importance of working to face and correct the situation rather than being afraid of its consequences. He said: “Going bankrupt is not shameful. We are not ashamed of being bankrupt because of austerity measures. What matters is protecting people through measures in addition to providing them with legal protection.”

The minister’s statement can be understood in many ways. We can assume that his statement is meant to prepare national companies, especially since he directed his comments to all businessmen and highlighted the possible consequences for companies. Moreover, he highlighted the fact that the government will not intervene when companies are bankrupt and that they will have to face the situation without seeking government support.

Although this statement relates to the financial difficulties faced by two major Saudi contracting companies, it contains the message that what is coming might be harder and tougher and that not all companies will be able to face these changes and may go bankrupt.

Foreign investors and companies are aware of the risks involved in investing in Saudi Arabia. What makes this worse is the other part of the minister’s statement regarding the absence of measures to help companies that are bankrupt. As a result, it is only logical if investors look to other countries. The Kingdom seeks to increase private sector support for gross-domestic production (GDP) from 40 percent to 65 percent, and increase direct foreign investments from 3.8 percent to 5.7 percent. Lastly, it seeks to increase the involvement of small and medium projects in the GDP from 20 percent to 35 percent.

If we agree with the minister that being bankrupt is not shameful, then it is important for legislative bodies to start working on what the minister has admitted to be missing, i.e., bankruptcy protection measures. This would make foreign investors more confident because they would feel reassured that there are measures and laws that protect them, their creditors and agents.

The possibility of being bankrupt and the absence of bankruptcy measures are factors that affect the choices that investors have in the market they want to invest in. The absence of bankruptcy measures and laws limit the ability of companies to recover from any financial woes they might face.