Infrastructure Financing through Islamic
Finance in the Islamic Countries
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stated in the act. The hydrocarbon law enacted by Royal Decree No. 4703, p. 43 dated
03/04/1439 states that all hydrocarbon deposits, hydrocarbons and hydrocarbon resources
are the property of the State (KSA Regulation, 2018).
The Government Tenders and Procurement Law was enacted by Royal Decree No. M/58 dated
4th Ramadan 1427H/27/09/2006 to achieve
four key goals. First, to regulate the procedures of tenders and procurements carried out by
the government authorities and ensure they are not influenced by personal interests in order
to protect public funds. Second, achieving the maximum degree of economic efficiency in
government procurements and carrying out government projects at fair and competitive
prices. Third, promoting honesty and competition and ensuring the fair treatment of suppliers
and contractors in accordance with the principles of equal opportunities. Finally, guaranteeing
transparency in all stages of government tender and procurement procedures.
Chart 4.4.6 shows the status of the procurement regime discussed in Chapter 2 in Saudi Arabia
compared to different income groupings and the MENA region. While Saudi Arabia scores high
on procurement with a score of 71, which is the second best score after that of high-income
countries (77), the scores for preparation (34) and contract management (33) are the lowest
across all regions. Thus, there is a need to modify the law guiding the overall procurement
procedure in the Kingdom to attract more domestic and foreign investors in the infrastructure
sector.
Chart 4.4. 6: Procurement Regime of PPPs: Saudi Arabia (0-100 Highest)
Source: World Bank (2018f).
4.4.4.1. Laws and Regulation Related to Islamic Finance
Article 2 of Royal decree No.23 Dated 15/12/1957 forms the charter of the Saudi Arabian
Monetary Agency (SAMA). Recognizing SAMA as the central bank, the article forbids it from
engaging in business based on interest. The banking law enacted by Royal Decree No. M/5
dated 22/02/1386H (11/06/1966) governs the banking sector in Saudi Arabia. Although the
0
10
20
30
40
50
60
70
80
High income Upper-middle
income
Lower-middle
income
Low income Middle East
and North
Africa
OIC Members
(40)
Saudi Arabia
63
49
45
39
42 43
34
77
64
58
54
57 55
71
58 57
52
47 50 51
33
Index (0-100 Highest)
Preparation Procurement Contract management