A clear strategy by GCC governments to enforce financial centers in the region and remarkable movements from the financial sector to nurture domestic companies and attract international investments
Mr. Manaf A. Alhajeri, Markaz CEO, said, “The rentier model of our economy has prevailed for many years, affecting our risk appetite. However, technology, demographics and globalization changed our economies and sustainability has become more crucial to attract investments, especially in this region with a population of 422 million, 50% of which is below 25 years old, and with unemployment rate of 21%. These challenges have delayed the reforms pace.” Alhajeri’s statement was during his participation in a panel discussion at “Future Investment Initiative 2019, held in Riyadh on 29 October, about “Trading Places: What new financial centers are rising up around the world?” organized by Public Investment Fund.
Alhajeri stated, “Today, we witness a clear strategy by GCC countries towards enforcing the financial centers in the region as a key destination for foreign investments and towards nurturing domestic companies. These financial centers are on a sustained reform spree and have enacted various legislative changes to improve business environment and increase competitiveness of the economy. The process of institution building has accelerated in the region. Initiatives to remove business uncertainties, better the operating environment and incentivizing the private sector to play a greater role in the economy are undertaken. Market entry barriers in various sectors have been either relaxed or removed to enhance competitiveness. Kuwait offers licenses for 100 percent investment in many sectors such as infrastructure, tourism, information technology (IT) and housing under a 2014 law. In 2016, Saudi Arabia expanded the range of sectors where full foreign ownership is permitted by including retail and wholesale trade. Recently, UAE approved 100 percent ownership in 122 economic activities spread across 13 sectors such as renewable energy, e-commerce, construction and entertainment. To suit the current market needs and to actively encourage private sector participation, the existing Public-Private-Partnership (PPP) laws are being revamped. In Kuwait, an institution established to facilitate foreign investments - Kuwait Direct Investment Promotion Authority (KDIPA) has been at the forefront by organizing roadshows and workshops to facilitate foreign participation in the economy. The reform efforts are more visible in the capital markets domain. The recent upgradation of Kuwait and Saudi Arabian equity markets to various ‘Emerging Market’ indices bears testimony to the initiatives and reforms undertaken by the respective authorities.”
Alhajeri added, “GCC governments need to build upon the reform momentum and the progress they have already made in improving its business environment. Nourishing financial hubs, which provides the ecosystem of investors, savers, entrepreneurs and institutions, could encourage private sector to play a greater role and promote sustainable economic growth. Financial hubs aid in creating an independent regulatory environment that is fair and transparent, establish an impartial legal system that is sound and inspires confidence among foreign investors. It also improves access to international markets for trade and investment, promotes development of soft infrastructure, including market infrastructure, data management, telecommunications, skilled workforce, and hard infrastructure relating to connectivity, transport and accommodation.”
Alhajeri noted that considering the challenges in the region, the investments should not only be limited to international players, as the domestic investments will lead to societal inclusion and job creation. The financial sector has significant role, more than the international investors, in incubating the private sector companies, launching new investment tools and not limiting its transactions to the less risky listed companies for instance.”
He added that though the progress being made is commendable, perception of the GCC region among the international investors needs to be actively worked and the region needs to be better marketed through various investor forums. Alhajeri concluded that the way forward is to develop a National Investment Policy (NIP) based upon clear investment guidelines for various domestic institutions that could steer the economy towards a sustainable and inclusive one